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Spanning the Globe

Is America really positioned for continued global economic dominance? You bet.

12:00 AM, May 17, 2005 • By IRWIN M. STELZER
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DON'T BE MISLED by the collapse of GM and Ford's credit ratings and market shares--or the impending bankruptcy of Delta Airlines--or America's trade and budget deficits. Or even by the turmoil in America's financial markets, so worrying that Timothy Geithner, president of the New York Federal Reserve Bank, felt it necessary to assure investors, "The U.S. financial system seems less vulnerable to financial specific shocks."

Of course, as reassurances go, this one was more than a little diluted by Geithner's accompanying warning, "Changes in the structure of the financial system and an increase in product complexity could make a crisis more difficult to manage and perhaps more damaging." Now there's something for Fed chairman Alan Greenspan's successor to think about.

So those who want to worry about the American economy have enough to keep them awake at night. But take a longer-run view of the nation's economic prospects, and tossing and turning will give way to a George W. Bush-style solid 10 hours of restful sleep.

Not that the president is exactly at the top of his form when it comes to economics. Even his most ardent supporters moan at the incompetence of his team, especially the crew at the Treasury. They deplore the extent to which Karl Rove's political machine now determines and dominates economic policy-making. Not all great political kingmakers make great economic policymakers.

Little surprise, then, that Bush has so badly botched his efforts to "reform" the Social Security system. First, he declared it to be in "crisis," only to retreat from that claim when the numbers proved it difficult to sustain. Then he called for personal accounts, only to find that earnings on such accounts might be too low to make them attractive. Finally, he was forced to concede that his plan will involve a major reduction in what middle-income and high-earners have been led to believe they will receive from an unreformed system. The president promised to spend his political capital; instead, he seems to have squandered it.

All interesting stuff, but all less relevant than the fact that only the most jaundiced observer can deny that developments in the U.S. and world economies are such that America's preeminence is assured for decades to come.

Start with Europe. The continent's leading economies are bedeviled by double-digit unemployment that is a result of rigid labor markets and excessive regulation. Their leaders' solution? More rigidity, more regulation, and an attack on what Franz Müntefering, head of Germany's Social Democratic party, calls the "growing power of capital" in the hands of foreign investors, or "locusts."

As if to show that there is no regulation too ludicrous for adoption, Spain's stock market regulators now require all company directors to disclose related-party transactions with anyone with whom they have "affectionate relationships," interpreted to mean lovers. Spain's gossip columnists are set to become avid readers of corporate annual reports.

Then there is Great Britain. Not to be outdone by Spanish regulators, the town council of Blackpool last week granted a 48-hour week to the 228 donkeys that carry children for rides along the town's beaches. The rules state that the donkeys may work only from 10:00 A.M. to 7:00 P.M., with one hour off for lunch, and Fridays off, on which day their hooves, ears, teeth, and coats will be inspected by veterinarians to make certain that the donkeys are fit for work. "We want them to be happy and healthy," said a spokeswoman for the town council, naturally sympathetic to the hard-working asses.

More seriously, the Labour government's stated attempt to find a third way between America's free market capitalism and Europe's corporatism has been abandoned in favor of a lurch towards a high-tax, increasingly regulated economy that is already producing consumer angst, stock market jitters, and depressed businessmen.

The European Union obligingly provided Britain with a final push down the road towards stagnation when the European Parliament voted by a substantial majority (378 to 262) to require Britain to join its E.U. partners in restricting the work week to 48 hours. France already has a full-time enforcement unit out and about to sniff out any workers who dare put in more than 35 hours per week. The Spanish member of parliament who proposed to lock the United Kingdom into the European Union's downward spiral boasted, "We are starting our long march toward a social Europe." It promises to be an unpleasant stroll for Europe's army of unemployed workers.