II. Broad Trends in the U.S. Position in the World Economy

At the end of World War II, the United States was the dominant industrial producer in the world. With industrial capacity destroyed or crippled in most other industrial nations, the U.S. produced ap¬ proximately 60% of the world output of manufactures in 1950, and its Gross National Product (GNP) was 61% of the total of what are presently (1979) called OECD countries. This was a transitory situation. During the 1950s the European economies recovered and rebuilt capacity, ultimately competing with the U.S. in world mar¬ kets. Japan entered the competition in a major way in the 1960s, and in the 1970s several developing countries became significant in terms of aggregate output and trade in manufacturers.
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Critical Issues & Decisions
Since World War II, Europe, Japan and the LDCs have grown faster than the U.S. in real GDP and industrial output, both aggre¬ gate and per capita. This has resulted in a shrinking U.S. share of world output and exports and a closing of productivity differ¬ entials.
As its competitors' capacity grew faster than that of the U.S., real depreciation of the dollar was required to keep trade and current account balances in line. This depreciation was delayed by monetary arrangements under the Bretton Woods agreements, which resisted change in the dollar exchange rate.Thus, instead of a gradual real appreciation, a small appreciation appeared in the late 1960s, con¬ tributing to a growing trade imbalance. Once the Bretton Woods system broke down, a significant real depreciation of the dollar occurred during the 1970s, helping to restore balance in trade among the industrial countries.
By 1980, the U.S. has moved from a position of dominance to a position of equality or symmetry among groups of industrial countries. It share of OECD real GNP is now 39%, and its share of world industrial production is about 35%, compared with 35% as early as 1963. The U.S. share of world exports of manufacturers has fallen from 29% in 1953 to 17% in 1963 and 13% in 1976. The weighted real exchange rate of the U.S. (in index terms, 1975 = 100) has depreciated from around 83 in 1961 to 1 16 in 1979.
In this section of the paper we look at comparative trends in production, then at competitiveness and trade, and finally at ex¬ change rates. These data show the rise of competition for the U.S. and interdependence since the 1940s.
A. Measures of Trends in Output
Real GDP per Capita and per Worker— U .S. real Gross Domestic Product (GDP) and real GDP per capita have grown more slowly than those of the other major industrial countries since World War