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To: calgal who wrote (7857)	1/5/2003 12:44:23 AM
From: calgal	Respond to of 306849

REVIEW & OUTLOOK Economy of the Year It just keeps growing and growing. *URL:http://www.opinionjournal.com/editorial/feature.html?id=110002861 Sunday, January 5, 2003 12:01 a.m. EST The year 2002 ended, if you go by the tone of the evening news, with the U.S. economy dragging through a prolonged slump. Except that it's not true. Growth in at least the first three quarters of last year was 3%, and nothing about the last quarter suggests a dramatic fall-off. Surely the most underreported story of the past year has been the economy's amazing resilience in the face of terrorism, war uncertainties, corporate scandals, the telecom meltdown and a vast loss of paper wealth by investors in technology companies. Maybe Time magazine should have made the economy its "Person of the Year." Much has been made of the Dow suffering through its third year in a row without a net gain--a feat, we're reminded repeatedly, not seen since the Great Depression. Of course there's a big difference between stock prices that are flat and low and those that are flat and high. Today's Dow is still nearly 2,000 points higher than when Alan Greenspan uttered the words "irrational exuberance." For that matter, stocks are up eightfold since 1982, when President Reagan initiated the long boom with policies resembling those now being championed again by the Bush Administration. Look more deeply and you notice a surprising amount of optimism priced into stocks. We aren't the first to note that, given the depth of the earnings recession in corporate America, investors at current prices seem to be exhibiting a considerable degree of patient trust that earnings will soon return. Various numbers are given for the amount of wealth lost in the tech meltdown, with $7 trillion the current favorite. Yet you could walk down Wall Street through the worst of it without being hit in the head by a falling stockbroker. Meanwhile, as the Enron, Tyco and other prosecutions proceed, investors seem to have concluded that the scandals were cases of individual greed, not systemic business corruption. That $7 trillion in paper wealth was created and whisked away in a matter of few months in late 1999 and early 2000, hardly long enough for anyone to reorganize his lifestyle and financial obligations around an illusion that he had struck a gusher of dynastic wealth. Given the noisy implosion of WorldCom, Enron and various dot-coms, it's also worth noting that a lion's share of the evaporation was accounted for by a handful of very large companies, such as Microsoft, Intel and Cisco, which alone saw more than a trillion dollars in market capitalization wiped out in the tech correction. More remarkable still, these companies did what critics are always whining that nobody does: They ran their businesses without paying undue attention to the wild gyrations of their stock prices. Now they're sitting on tens of billions of dollars in conservatively stockpiled cash. Not only have they survived the bust in style but these companies continue to thrive as technology leaders and crown jewels of the U.S. economy. In turn, the U.S. economy remains the main engine (along with the Chinese growth machine) striving to keep the rest of the world's head above water. Looking ahead, economic policy may also be improving. The White House says it is preparing pro-growth tax cuts, free-trade talks are gaining speed after last year's U.S. steel tariff blunder, and a GOP Congress is unlikely to lay on many new regulations. With any luck, and a decisive war victory, 2003 is poised to be a year of accelerating growth. Historians may find the last three years merely a pause in the economic renaissance of the past 20 years, in which globalization, the collapse of the Soviet empire, the Internet and biotech revolutions, and the conversion of China to Adam Smith all played big roles. All of these trends are still in play, notwithstanding the worst efforts of Osama bin Laden. Left out of this dynamic, growing world have been the Arab nations and the northern half of the Korean peninsula, but the New Year offers reasons for optimism on that score as well.