Issue date: June 24, 1998

Arjay Miller: Four problems we are leaving our children

It was in 1983 on the morning after a television show called "The Day After" about a nuclear attack that wiped out Kansas City. The normally optimistic Mr. Miller was taking an unusually dark view of where the world was going.

Fifteen years later, he reviewed what he had said then, and brought it up to date. Here are some of his more recent thoughts.

Over-population

"I thought that over-population was our No. 1 problem then, and I still think so," he says. "Then the world population doubled every 41 years. It's slowed up; now it doubles every 46 years. It's still higher in Africa: every 25 years."

We see effects of the population explosion in the degradation of the environment, disappearing forests and wetlands, and now global warming, Mr. Miller says. "These are easier to deal with if you don't have so many people burning so much fuel."

While governments are doing little to curb population growth, Mr. Miller is glad the Packard Foundation, now one of the three largest in the country, has made population its No. 1 priority. "They are spending $3 million a year now and plan to ramp up to $70 million a year," he says.

The nuclear threat

The world's false sense of security about nuclear weapons got a sharp jolt when India and Pakistan conducted nuclear tests last month. "It's just terribly, terribly scary," says Mr. Miller.

Not only do the recent tests enlarge the number of countries that have bombs, it will encourage others to follow suit, he says. Economic sanctions will hit Pakistan much harder than India because Pakistan is so much smaller and poorer. However, "Pakistan has a lot of natural allies in the rest of the Muslim world, and there will be a tendency for them to back their brothers in Pakistan."

With the end of the Cold War, the United States and Russia are not pointing missiles at each other, but each still has tens of thousands of them, Mr. Miller says. In addition, there are rogue states with nuclear capability, and a black market. "Yet our Congress is not ratifying treaties to destroy nuclear bombs."

Mr. Miller urges more attention to this issue. "You don't need a lot of these bombs to cause a lot of problems. I think we all have to agree to cut these things way, way back," he says. "We're missing a chance. We're spending all this time debating impeachment and Starr and so forth, and the world's problems are just being forgotten."

International and national debt

The Asian monetary crisis just emphasizes that international debt remains a horrendous problem, Mr. Miller says. "We probably will muddle through; the U.S. economy is strong enough we probably can survive."

With their currencies way down, the Asian countries will try to export more, he notes. "Our trade deficit is $250 billion per year. That's way too high, but our economy is strong enough we could probably absorb some more.

"The real key is Japan," Mr. Miller says, noting that Japan has no external debt but is in a real recession. "I hope Japan will follow an expansionist domestic policy. It should not only export more, but import more. If they try to export their way out of the problem, they will just complicate the problems.

"I also hope Congress will approve money for the International Monetary Fund (to help the Asian currencies,)" he adds.

"On the U.S. side, we finally have a balanced budget. That's the good news," Mr. Miller says. "But if you do your bookkeeping right, we do not have a balanced budget. We're spending money that should be going into funding Social Security. In the last 15 years the unfunded Social Security has gone from $7 trillion to $11 trillion, and people over 65 are increasing at twice the rate of the working class from 20 to 60."

Mr. Miller hopes that both Republicans and Democrats will step up to the problem. "I think there will be a commission and we may finally solve the Social Security problem," he says, adding, "We still have a big unfunded debt to Medicare."

With these debts hanging over us, Mr. Miller opposes any idea of a tax cut now. "We should not cut taxes until we fulfill our obligation to our elder citizens," he says.

'Misery Index'

In 1983, what Mr. Miller calls the "Misery Index" -- inflation plus unemployment -- was fairly high, as unemployment hovered near 9 percent, and workers faced the uncertainty of being replaced by automation. Now it's low, as the economy steams on. "Most everybody was mistaken. Both unemployment and inflation are far lower than I thought they would be," says Mr. Miller.

Looking back, he says: "We did not recognize the tremendous cost reduction that would be possible through the technological revolution and the application of computers. It has permitted industry to reduce their costs so much that they could hold low prices and at the same time make high profits. And high profits, in turn, led to high stock prices in the last few years.

"And these high stock prices have made people feel good and buy automobiles and houses and durable goods, which have led to high employment and low unemployment. So we are in a happy state."

But he sees clouds on the horizon. "In my opinion, it can't stay this good forever," he warns. "The business cycle has not been repealed, the tide doesn't come in all the time, and the expectations that people have cannot be realized."

Specifically, Mr. Miller warns that the stock market can't keep rising at the present rate. Stocks are overpriced compared to earnings, there's always the possibility of an external shock like the oil price rise of 1973, and global competition is heating up. "Global competition is getting tougher -- really tough," he says.

Mr. Miller still believes what he said in 1983: "Normally I'm an optimist. But when I think about all these problems our generation has left unsolved to the next one, I find it difficult to be an optimist."



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