MIDWEST ENJOYS ECONOMIC REVIVAL

MIDWEST ENJOYS ECONOMIC REVIVAL

The balance of economic power in the United States seems to be shifting ever so slightly toward the Midwest, good news to this long-suffering part of the country.

But don't count your money before it's in the bank. This region has been denied before, and it could well be denied again. It could shoot itself in the foot.The lower dollar is helping to give a boost to exports and creating a revival in manufacturing.

The Midwest is still the manufacturing and tradeable goods part of the U.S. economy, said Barry Bosworth, an economist at the Brookings Institution in Washington. Imports are more common on the two coasts where a lot more people gain from them, boosting their standard of living from them. The Midwest benefits a lot from an improved trade position.

Further, said Mr. Bosworth, the Midwest is not a center of the defense industry. If Congress follows through and targets the defense budget as the main area for spending cuts, other regions will suffer relatively more.

The Midwest was put on its knees by the 1982 recession and the Reagan administration's strong-dollar policies, complete with high-interest rates,

from 1982 through 1985.

Only in the last year has it finally joined the other regions of the country in enjoying the fruits of the economic expansion.

Robert Dederick, chief economist at Northern Trust Co., said the Midwest should grow faster than the rest of the country for the next several years. It will be an export-led revival, he said.

But Mr. Dederick reminds that the Midwest is not totally divorced from the rest of the country. If consumer spending slows on both coasts and in the South, he said, there will be less of a market in the United States for the consumer durable goods that this region produces in abundance.

And, he adds, consumer spending appears to be going to slow down.

The next big worry is that just as the Midwest gets going good, there will be a recession. In Mr. Dederick's view, the business cycle hasn't been repealed as yet and an economic downturn is likely within three years.

This appears to be conventional wisdom among many economists. The Midwest, simply because it's the center of manufacturing, seems to lag behind the rest of the country no matter what happens.

But Mr. Bosworth doesn't think this is necessarily the case. Recessions do not occur naturally, but by excesses such as runaway inflation, he said. Recessions of the last couple of decades usually have been engineered by policy-makers in Washington to end these excesses in the economy.

The danger of runaway inflation does not seem immediate with so much excess capacity around the world. This gives the monetary authorities tremendous room in which to work, Mr. Bosworth said.