[FOUNTAIN]The pull of gravityThe celebrated economist C. Fred Bergsten, director of the Institute of International Economics, said that the bubble in the U.S. equity market and in the information technology field has burst. Mr. Bergsten said that the remaining bubble to burst will be the value of the U.S. dollar. The U.S. economy has boomed over the past 10 years but this year deficits in the current account balance will likely reach $500 billion. Theoretically, the value of the U.S. dollar must drop. But the U.S. economy attracted 6 percent of worldwide savings, and the value of the dollar soared as it is.
An article in the New York Times that quoted Mr. Bergsten was titled "The Law of Gravity," which meant that it is high time that the dollar be devalued. The original law of gravity, of course, was developed by Sir Isaac Newton 337 years ago, supposedly when he saw an apple drop from a tree. The same principle applies to economics: If something has a reason to drop, it will. The U.S. economy has ignored that fact for the past 10 years.
Last week, the U.S. government reported figures on the destitute and their annual income during 2001. The number of people in poverty in the United States increased for the first time in eight years and earnings of the middle class decreased for the first time since 1991. About 32.9 million people accounting for 11.7 percent of the entire population were classified as poor. That figure increased by 0.4 percentage point compared with 2000. Last year, a family of four was classified as destitute if its annual earnings were below $18,104. The authorities decided that the stagnation of the U.S. economy, which started in March 2001, has increased the number of poor Americans.
The gap between earnings of various classes is expanding. Last year, the average real income of the U.S. middle class was $42,000, down 2.2 percent compared with 2000. But the average annual earnings of the top 5 percent were $260,464, and it had increased by $1,000 compared with the previous year. The aggregate earnings of the top 5 percent accounted for half of the entire earnings of Americans. In the previous year, their earnings accounted for 45 percent. The earnings of the bottom 5 percent accounted for only 3.5 percent of the entire earnings, which decreased by 0.5 percentage point compared with the previous year. Experts say the income gap in the United States is the highest since World War II. This law of gravity does not apply in the United States alone. Everything declines when times get tough.
The writer is an editorial writer of the JoongAng Ilbo.
by Sohn Byoung-soo