Wanted: A Global Partner

The description of the twentieth century as the American century was rarely if ever more appropriate than during the century's final decade. For seven bountiful years, the U.S. economy outperformed that of the European Union (EU) by a substantial margin. Even the productivity gap, which the continental European economies had done so much to narrow over the previous three decades, began to widen once again in the United States' favor. Militarily, the United States was even more obviously in a league of its own. To the bemusement of outside observers, the United States appeared determined to prepare for every imaginable contingency, not to mention some that, in European eyes at least, were scarcely imaginable. More mundanely, but still more significantly for those most immediately affected, the United States demonstrated in Bosnia, Dayton, and Kosovo that it can do things that even its most advanced allies cannot.

In this brave, new, unipolar world, rhetoric and reality easily intermingled. The United States ruled; the Anglo-Saxon model worked; Rhineland capitalism was doomed. Davos annually became the earthly tabernacle of a new cult whose high priests are English-speaking generators of wealth rather than the endearingly homespun prime ministers who come now to learn more than to guide. Guidance is something that, in the final analysis, only Alan Greenspan can claim to do. As for the EU, horror of horrors--its sluggish economy, its fumbling efforts to create a monetary union, its incurably rigid labor markets, its endless wrangling over arcane constitutional issues, its corrupt bureaucracy, its painfully slow expansion eastward, and its inability to police southeastern Europe have conspired to undermine the belief of all but the most faithful in a partnership of equals. Genuflection, it sometimes seems, has become the norm for Europeans, Japanese, and other erstwhile competitors wanting to make their way in Washington. Grovelling has become a profitable line of business for European journalists and broadcasters.

Although flattery may get the flatterer everywhere, it rarely gets the flattered anywhere. The economic lead that the United States enjoys over its nearest rivals is real enough. It is not, however, as big or as sustainable as it has often been made to appear. The rhetoric of success has in fact become a problem, inhibiting a balanced appreciation of the basis of the U.S. lead and thwarting any willingness to implement the changes in attitudes and practices that success itself entails.

Where Europe Stands

The U.S. gross domestic product (GDP) undoubtedly grew faster than the EU GDP in the mid- to late-1990s. In the long run, however, this trend will probably have little significance. The EU has grown faster during some periods and the United States has grown faster in others. The jury is still out on whether or not the new economy has created the basis for consistently higher growth rates in one jurisdiction or the other. Even if the foundation exists, nothing suggests that Europeans suffer from incurable defects permanently inhibiting them from tapping into its extra dynamism. On the contrary, evidence is growing that Europeans have already adjusted to the new economy further and faster than early estimates suggested. They start, after all, from a very high skill base. Productivity per employee per hour worked is now higher in France and some of the smaller EU economies than in the United States. Furthermore, notoriously low-productivity economies, such as the United Kingdom, have begun to show signs of catching up with their partners.

More importantly, the political revolution embodied in the European integration process has accelerated rather than slowed during the last ten years. The implementation of the Maastricht-based commitment to the Economic and Monetary Union has induced structural reforms of public finances and financial markets which might not have otherwise occurred as rapidly or effectively. Meanwhile, the single market program has continued to chip away at the vested interests and purblind mentality of protected national operators. Last, but by no means least, the European Council in March 2000 in Lisbon...