CIGARS & HILLENBRANDY

The Dinner Party: The elites in London go off the record about where the economy is headed. (Irwin M. Stelzer, 06/03/2003, Weekly Standard)

I WAS FORTUNATE last week in being able to gather round the dinner table in my London flat a group of economists, media folk, geopoliticians, and foreign policy types to review where the world is, and where it is going. Whereas the heads of state convened in Evian today are bound by the stilted scripts prepared by their sherpas, my dinner companions, protected by the Chatham House rules (that forbid naming names) always in force in my home, could be completely candid. [...]

Talk then turned to the world's other leading economies. Japan is so deeply mired in recession and so resistant to reform that no extended comment was deemed necessary. Until the government gets the banks to write off the loans that everyone knows will never be repaid, they won't be in a position to make the new loans that might spur new investment and economic growth.

Germany is considered a basket case, its economy shrinking and its population declining to the point where it will be "economically irrelevant," in the words of one observer, within the next several decades. All of which is made worse by a soaring euro that is reducing the international competitiveness of Germany's already high-cost industries.

France is somewhat better off, partly because the one-size-fits-all interest rate set by the European Central Bank suits it better than it does Germany, partly because the exchange rates prevailing when the euro was adopted were more favorable to France than to Germany, and partly because the French simply ignore many of the growth-strangling rules that the more orderly Germans obey to the letter. In short, France's black economy provides a source of flexibility and growth not enjoyed by its German allies.

Finally, there's the United Kingdom. The consensus view is that the chancellor has got it wrong. His optimistic forecast ignores the noticeable slowdown in consumer demand, and the productivity-draining effects of the massive increase in taxes and the swelling of the public sector. Indeed, all of the jobs growth in the British economy now comes in the public sector, and consists of piling administrators on top of already-useless administrators.

Worse still is the effect that the new European constitution will have on Britain. The bureaucracy's ability to ensnare Britain in red tape will increase as the European court puts flesh on the bones of the constitution and its call for "worker dignity," stronger unions, and an enlarged welfare state. The U.K. economy will pay the price, and soon--or such was the view offered as the pudding was served.

And so to bed.

It continues to boggle the mind, that we all know what the rest of the West must do to revive and preserve itself, but know they won't. Posted by Orrin Judd at June 3, 2003 08:05 AM