Memo To: Dave Smick, publisher, The International Economy
From: Jude Wanniski
Re: Avoiding the Japanese Disease
Your magazine continues to amaze me, David, when it comes to assembling as many cuckoo economic ideas as it does about the world economy, issue after issue. It is must-reading in our shop, for that very reason, for if ever you run across some economists who know what they are talking about, you will put us out of business. My special congratulations to you and your capable editor, Owen Ullman, for being so timely in your approach to the important issues. Your January/February issue, for example, was here just in time for the lead article on Japan to offer a banquet of cuckoo ideas to a Bush Administration now trying to figure out what to do about that perpetually sick economy.
To that end, you have assembled 19 of the usual suspects, beginning with Peter Peterson of the Blackstone Group, who has been worried sick about the U.S. current-account surplus for more than 20 years. Why you would bother with this old hack is beyond me. When he began his crusade against the U.S. trade deficits, Japan was high on the hog, with Peterson worried that it would soon own the whole world with its trade surpluses. Now our trade deficits are larger than ever, and you guys ask Peterson’s opinion on whether we will follow Japan down the road to ruin, with Japan having even greater surpluses than it did 20 years ago! And what does he say? We may stumble, he says, because of the “melancholy combination of our savings rate and the gargantuan, unprecedented current-account deficits.”
Then there is C. Fred Bergsten, Peterson’s henchman at the Institute for International Economics, the think tank for the Evil Empire. You surely remember, Dave, that Fred was the fellow who talked Nixon’s Treasury Secretary John Connally into devaluing the dollar in 1971, to combat the Japanese trade surplus! The inflation spawned by floating the dollar has ravaged the world economy, but here is Fred, 30 years later, worried sick that “the United States is under intense pressure because it must attract net capital inflows of well over one billion dollars per day to finance the current-account deficit.” Since you began publishing, Dave, I think Bergsten has missed only one issue where he did not make a similar pronouncement.
What takes the cake, though, is the general theme offered by your eminentoes that because the United States has a much more vibrant political system, we will figure out how to get out of our current problems much more easily. That is, we are smarter than the Japanese. Bergsten, the chief operating officer of the Evil Empire, makes that point. So does Richard Cooper of Harvard, who was Bergsten’s sidekick in the Carter Administration, which they destroyed with their insistence on an ever-cheaper dollar to fix our trade deficit with Japan. Here is Cooper telling your readers that “The United States, like Japan, made a serious fiscal mistake in the early 1980s, which took over a decade to correct,” but by gosh we did it, by electing a President named Clinton who raised taxes and solved all our problems. We read that President Clinton is leading all comers in the polling of New York City denizens on their preference for Mayor. Maybe we should export him to Tokyo, where he can run for prime minister and raise taxes left and right! That will solve the Japanese problem, and, if we can charge Japan for his services, it will help us finance the current-account deficit that so worries Bergsten. What a deal that would be!