Posted on 09/24/2002 5:40:44 PM PDT by knighthawk
Ten years ago, America's number one economic guru, MIT's Lester Thurow, wrote a book, Head to Head, which argued that the 21st century would involve the world's three economic superpowers, the United States, Japan and the emerging colossus of Europe, in direct competition in critical emerging industries. His surprise prediction -- the first rule of guru-ism is to surprise -- was that of the three, Europe was best placed to excel in the new, knowledge-based industries of the future, in which success requires co-operation among labour, capital, governments, university researchers, even rival firms. The U. S. economy was too competitive and cowboyish for that, Japan's a little too controlled. But Europe, with its tradition of corporatism and its publicly financed intellectual infrastructure, was just right.
For most of the 1990s, as the United States left its rivals in the dust, that prediction looked pretty lame. But economic times change. In the 1970s, remember, the United States had been in decline, and Germany and Japan, today's G7 economic basket cases, had vied for Number One. But with the advent of the tech boom, in which, it turned out, cowboy capitalism was just what was needed, the three countries' economic fortunes reversed completely and the United States was top growth dog again.
For anyone who still doubts that the economic world can turn upside down, consider the U.K., widely regarded as heading toward third-world status in the 1970s, but now, even continental observers concede, an economic engine for Europe, though they look down their noses at its decaying public services. And now, with Japan languishing in recession, with the great stock market bubble having burst and with the United States continuing in the doldrums, are we about to see Thurow's prediction come true? Is Europe's hour finally at hand?
If success requires the kind of political conversion the United Kingdom went through under Mrs. Thatcher, probably not. After this spring's crushing victory by Jacques Chirac, the newspapers here -- I am spending the academic year in France -- have all been talking in terms of la vague bleue, the blue, i.e., conservative, wave, that supposedly is sweeping European politics.
Or at least was sweeping it, for last week Sweden re-elected its socialist government, while on Sunday Germany kept its Green-Social Democratic coalition in power, if only by 11 seats.
Nixon did go to China. Maybe a re-elected Gerhard Schroeder will undertake the fundamental reform of Germany's overregulated labour markets that most observers think is required if his country is to return to the top of the economic growth charts.
But Mr. Schroeder, whose party actually finished second in the popular vote, is even more beholden to his Green allies than he was in his first term, even if his distancing himself from the U.S. policy on Iraq did deny the former Communists party status in Parliament and the potential swing votes in a coalition. Still, the Social Democrats got their most lopsided support in the eastern part of the country, and it's hard to imagine the former East Germany pushing hard for U.S.-style labour markets.
There's also room for doubt about how far even nominally right-wing governments will go in undertaking reform. In last spring's French election, Jacques Chirac promised a Mike Harris-like 30% cut in income taxes over five years. The first 5% installment did come in short order, but now the government of Prime Minister Jean-Pierre Raffarin is talking delay.
Leaks in advance of this week's budget suggest the government does plan to cut public sector employment -- by exactly 1,619 people. A columnist in Le Figaro calculates that if, as some estimates have it, the French public sector is about 500,000 employees too big -- it employs one in four French workers -- then at this pace it will take some 300 years to get it down to the right size. It's true that time scales are elongated in this part of the world -- a local town recently held its 472nd consecutive annual fall fair -- but that would take gradualism to an extreme.
Contentment with the status quo may change. Last week's collapse of France Telecom, which leaves every French taxpayer holding an extra 4,000 euros or so of debt, has reduced confidence in the public sector -- just the opposite effect that the telecoms collapse had in North America, which suggests maybe the problem isn't public or private, but telecoms.
And it's always possible, of course, that the world will come to Europe without Europe changing. If the United States was institutionally suited to the frenetic innovation that characterized the tech revolution, maybe Europe's labour-market regulations are tailor-made for whatever is coming next. Maybe. But you wouldn't want to bet the house on it.
Lester Thurow sees Europe as halfway between the United States and Japan. Canadians think of themselves as halfway between the United States and Europe. If Europe does gain economically on the United States, that will encourage fans of big government in Canada to try to take back some of what they have lost in recent years. But for now that remains a big "if".
No, that's Hawaii. Gotta go the other way to get to Europe.
Canadians think of themselves as halfway between the United States and Europe.
Well, compasses DO go kerflunky when you get near the magnetic North Pole.
They'd be better off using GPS.
Just the same, somebody needs to hand them a map.
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