A view from the other side (London Times):
Anatole Kaletsky says the boom in America is not just a bubble
As good as Wall Street ever gets
Viewed from an angst-ridden, jobless, squabbling Europe, the news from America seems too good to be true. Full employment, no inflation, a balanced budget, unchallenged global dominance in business, culture and defence, a President enjoying near-record popular confidence - such Utopian conditions might have been believable in the innocent 1950s, but things just can't be as good as this, not in this day and age.
And then there is that crazy stock market. Wall Street has more than doubled in three years; indeed, the Dow Jones reached a record high in early trading only yesterday. People are getting rich simply by sitting back and watching the ticker. Families are paying for their children's education by cashing in a hundred Microsoft shares they bought them at birth. Of course, share prices in Europe have risen almost as strongly, but most Europeans don't own any shares. That, surely, is America's Achilles' heel. The bubble will soon burst, leaving America in ruins - or so many Europeans believe.
Such cynicism seems plausible enough from across the Atlantic. But returning to America after a longish absence, as I did last week, I found the flawless statistics and euphoric financial markets easier to understand. America has changed beyond recognition in the past five years. The country seems to have become more efficient and yet more relaxed. Civil servants and even immigration officers seem more civil. Even taxidrivers have changed. In New York I could not find a single taxi driver to complain about the state of the economy or maintain that the country was going to hell.
These are, of course, just casual impressions. But the contrast between today's relaxed, efficient America and the tense, unstable country of the early 1990s may reflect deeper undercurrents. Three forces - technological creativity, social fluidity and expansionary economic policy - seem to reinforce one another to put Americans firmly in command.
The ubiquity of computer technology and communications, combined with the availability of venture capital and the willingness to take risks, have stimulated all kinds of new services, ways of working and forms of business organisation and employment creation that are hardly yet apparent in Europe. Experts have talked for years about the "second industrial revolution", but the predicted benefits have not appeared. The first effects of new technology were often to reduce productivity, as workers wasted their time on computer games or lost themselves on the Internet. New technology also undermined customer services. Banks blamed their failures on computer errors; telephone calls were trapped in voicemail services which Americans have dubbed "voice-jails". The statistical evidence on new technology was negative - the huge investment in computers, especially in service industries, was failing to deliver. Today, however, it seems that America may finally have entered the second, more benign, phase of the industrial revolution. New technology is raising productivity, and creating new products, services and approaches to business.
Computers, e-mail and the Internet have created the "home office", which has been as important as venture capital industry in fuelling America's explosion of individual enterprise. The proliferation of new cable channels, and, more recently, of Internet sites, may also be placing a higher value on knowledge and intelligence. I was astonished last week to find a leading commercial cable channel running an hour-long debate about the interactions of the media, government regulation and American culture. This could have graced any highbrow public television station in Britain, France or Germany, apart from the fact that it was financed by ads for preparations against haemorrhoids.
Technology has not been the only force powering America's economic boom. Changes in social conditions and macroeconomic policy have played an equally vital part.
Scarcely observed in Europe, but much discussed in America, the economic expansion has led to a major improvement in income distribution and social conditions. Poor, unskilled and previously marginalised Americans have been sucked into the labour market by an insatiable demand for workers. Wages have started to rise rapidly at the bottom end of the scale. This has contributed to declining crime rates and a palpably reduced fear of crime. The improvement in social conditions may even be behind the dramatic fall in teenage pregnancies in the past few years.
Secondly, the long period of full employment has made Americans far more willing to embrace economic change. Workers can contemplate leaving low-paid jobs to acquire new skills or start their own businesses. Employers face little criticism if controlling costs and increasing productivity means cutting employment. There is no embarrassment in closing a failing factory, since for every business that closes another one seems to start up. As Newt Gingrich, the Speaker of the House of Representatives, noted when I saw him last Wednesday, the American economy created more new jobs (and also lost more old ones) in the past three months than the European Union did in the past decade. Until Europe shifts to a policy of permanent full employment its chances of emulating America's entrepreneurial revolution seem remote.
Sooner or later the Americans may become overconfident and decide again that the world owes them a living, as they did in the late 1960s. The seeds for the next great inflation, economic crisis and financial collapse will then have been sown. But that is unlikely to happen for many years. Until then, Europe would do better to imitate America's so-called bubble than hope for it to burst.
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