Dallas Fed takes stock in America
For immediate release: April 11, 2002
DALLAS—The vitality and resilience of the U.S. economy have been key to America's current rebound from the recession and the September 11 tragedy, according to the Federal Reserve Bank of Dallas' 2001 annual report essay.
In "Taking Stock in America: Resiliency, Redundancy and Recovery in the U.S. Economy," Senior Vice President and Chief Economist W. Michael Cox and co-author Richard Alm evaluate the economy's central role in these difficult times.
"Our ability to handle adversity stems from several economic strengths that most of us take for granted. Size adds to stability and durability. Diversification, redundancy and decentralization help keep the system functioning even when key sectors are under stress," the essay says.
"The U.S. economy provides the resources and know-how to increase our security and safety, areas of greater concern now," Cox and Alm write.
Diversification, decentralization and redundancy make it increasingly difficult to cripple the economy. In 1947, three sectors—manufacturing, retail trade and agriculture—made up nearly half of the U.S. economy, according to the authors. Today they generate only a quarter of output, and new industries such as computers and biotechnology have expanded the economic pie. These new industries have been essential to providing the protection of redundancy through overlapping and competing systems. When industries such as travel were hard-hit after the terrorist attacks, diversification and decentralization helped keep economy afloat.
Additionally, the economy continues to recover faster with each challenge. If history plays out, the current recovery time should be relatively brief. In the past quarter century, the economy has been in recession less than 10 percent of the time, compared with 40 percent of the time from 1879 to the start of World War II and 20 percent since 1953.
Cox and Alm conclude that the terrorists' attempt to destroy America's system of democratic capitalism won't succeed. "America is too big, its people too free, its economy too strong and too flexible—in short, too resilient."
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