China Syndrome

The world economy is at a crossroads. Continental Europe is stuck, emitting only faint signals of revival. Little surprise--no region can ever grow under the gravity of declining populations, 35-hour workweeks and scant entrepreneurs, especially those of the immigrant variety. Japan looks a bit better if you believe the Nikkei's 23% bump this year foreshadows better days. The Land of the Rising Sun has shown us false dawns before. Still, I think we'll finally begin to see GDP growth of 2% or more coming from Japan. That would be good news. The U.S. is clearly the strongest of the G-8 member nations, clipping along at a 3% growth rates or better. This should continue during 2001. But our economy is still underperforming to its potential. Evidence is the 2:1 gap that now exists between GDP growth rates and those astonishing 6% to 7% productivity growth rates that have been recorded this year. Of course, if you're a bull you'll argue that the GDP/productivity gap is a mere lag effect. GDP will catch up to productivity. It always does. By this logic, you chould expect 2004 to be a wildly good year and invest accordingly. Others wonder about that. Yes, GDP has always caught up to productivity before. …