The Blog

America Leads the World, Again

No other country is capable of leading the world out of the economic doldrums. The United States will have to do the job.

12:00 AM, May 6, 2003 • By IRWIN M. STELZER
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Nor is relief to come from what may be the world's fastest growing economy, China. It seems likely that post-SARS China will grow at a rate of about 7 percent. But that growth will be export-led. China's currency, the renminbi, is tied to the dollar and is now conceded by all economists to be seriously undervalued. Add to that China's low labor costs, and you have a country able to penetrate American and other markets, but not likely to soon provide much of an increased market for goods produced in the rest of the world.

So it is left to the United States to give the world a boost. Our consumers continue to do their part. After taking a breather in February (weather) and March (war), their confidence soared in April and they resumed their visits to malls and purchases of homes. But businesses remain on the sidelines, some afflicted by excess capacity, others by a lack of pricing power, still others by fears of a weak jobs market--the unemployment rate rose to 6 percent last month. They worry that these factors will eventually drive consumers away and continue the slide in manufacturing activity, new orders, and new construction reported late last week. Those clouds may be dissipating. Low inventories; recent earnings reports that beat expectations; lower oil prices; rising free cash flow; and last month's share-price recovery might just persuade America's gloomy CEOs to dust off long-postponed investment plans. The rest of the world had better hope that proves to be the case.

Irwin M. Stelzer is director of regulatory studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.