Engines of Prosperity
US stock markets hit new highs. Washington cuts taxes. Dollar strengthens. Asian Tigers burn less brightly as Thai currency tumbles. German central bank may tighten credit. Hints Netherlands, Spain, Portugal, Ireland should do same. France raises business taxes. European Union weakens Boeing merger to save Airbus.
What's going on?
Can the US economy - in the doldrums through the 1970s to 1982 - now have sprinted so far ahead of Europe and East Asia?
Yes. But not forever. When Clinton administration officials openly bragged to world leaders at the Denver economic summit in June, their behavior was unseemly - but their facts accurate.
America's major industries downsized before Europe's did. They weren't stuck in the competitiveness-blunting government coziness that afflicted Japan's and South Korea's industries. And the US government got a head start on downsizing and decentralizing its welfare state.
One other factor in America's surge is often overlooked: The post-World War II baby boom started immediately in the US, but was both later arriving and smaller in magnitude in Western Europe and Pacific Asia.
It may be argued that youth revolution disruptions hit North America, Europe, and Asia at about the same time in the 1960s. But, in fact, the US demographic boom, at maturity, has contributed to increased productivity, and to the technological and financial innovation that are driving American competitiveness.
Europeans can take consolation from several factors. Squeezing into the common currency phase of European union has slowed economies and heightened unemployment. But following Britain's lead, Netherlands, Germany, Finland, Spain, Portugal, and Ireland have returned to growth. The advent of Blair-style business-supporting social democrats should eventually help Continental governments follow Washington's lead in reforming welfare states.
Meanwhile, Japanese industry is gradually ridding itself of bureaucratic fetters. The Asian Tigers will likely emerge from current financial tremors in better shape for a new growth spurt.
Lest this economic laundry list seem Panglossian, we should hasten to say that much needs to be done to ensure that expanding world trade continues to spread prosperity for posterity. As the US-EU showdown over Boeing made clear, the major powers need better dispute-resolution machinery to tackle global antitrust cases. Internet information flow needs protection from government meddling. And governments must do much more to protect the global environment as their societies taste the benefits of economic growth.