Greenspan gets credit in Europe for `miracle'

PARIS -- On the eve of the Republican Party convention, admiring European analysts are hailing what they call America's economic "miracle," but several of them insist the main credit should go to Federal Reserve Chairman Alan Greenspan, not to President Clinton.

Greenspan is being widely praised in European political and business circles for, in the words of the London Times, "consistently astonishing" the rest of the world since 1992 by presiding over an economy that has maintained expansion and high employment without inflation.

The result, said the newspaper, was an "American miracle ...comparable to the golden age (of postwar growth) 30 years ago."

Paris-based German economist Theo Arnheim discounted deregulation, lower taxation and retraining of the work force as decisive factors in America's recent upsurge.

"All such developments are significant in the longer term," he explained.

"But in the relatively short period in which the U.S. economy has dramatically outpaced its rivals, the essential credit must go to the judgment and competence shown by Greenspan in creating the necessary conditions for growth by encouraging demand."

To such transatlantic experts as one-time French economics minister Alain Madelin, the Fed chairman's performance has been all the more sparkling because it contrasts sharply with Europe's inability to shake off the global slump of the early `90s recession.

He noted that the United States is the only major industrial nation enjoying economic growth and stability comparable to the great postwar surge of the 1950s and 1960s.

"We should have been studying U.S. policies much more closely," the French centrist politician said.

In particular, he declared, Greenspan has demonstrated skill in adjusting interest rates. Similar aptitude has not been displayed by many, if any, of his European counterparts, according to Madelin.

British economic analyst Anatole Kaletsky, writing in the London Times, echoed this view. "Greenspan ... has achieved something that was widely dismissed as impossible a few years ago: he has revived the art of fine-tuning which seemed to have been lost after the global inflationary crises of the 1970s," he wrote.

The Federal Reserve chief has used "dozens" of small alterations in interest rates to manage demand in the economy with "remarkable precision," he wrote. The result was "low inflation and high employment," he stressed.

"The United States now has a far higher proportion of its population in gainful employment" than any other Western industrial economy, Kaletsky pointed out.

During the Clinton presidency, America has created more than 10 million jobs despite the down-sizing of many of its biggest companies, he observed. However, in most of Western Europe, unemployment is higher than it was four years ago.

Clinton's main contribution to the U.S. economic comeback was to appoint to the Fed a group of "able and pragmatic" economists under Greenspan's leadership, according to Kaletsky.

These officials understand what European authorities -- and especially Germany's "excessively monetarist" central bank, the Bundesbank -- "have forgotten: that governments and central banks must do more than control inflation; they must also manage demand in order to create jobs and spur growth," he emphasized.

Ironically, according to the British analyst, Greenspan's "one serious blunder" since becoming Fed chairman in 1987 was his failure to tune monetary policy sufficiently to overcome the negative economic impact of the 1991 Gulf War.

He noted that, although this lapse triggered "only the briefest and least damaging of (American) recessions, it was bad enough to help George Bush lose the presidency."

Copyright 1996
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