Don't look now, but the U.S. global economic and technological leadership of the past decade appears to be evaporating fast. While Wall Street focuses on the endless plunge in the euro (since its launch, it has fallen 22% against the dollar), keener eyes watching Europe see that productivity is beginning to rise, government budgets are poised to move into surplus-funds territory, corporations are restructuring, economic growth rates are nosing up to 4%, and the wireless revolution appears to be advancing apace. The American complacency, if not hubris, of recent years is misplaced. If it continues, it could be destructive.
Consider productivity. U.S. manufacturing productivity boomed along in the fourth quarter of 1999 at a 6.8% year-to-year rate. In Germany, however, manufacturing productivity also rose to 5.6%, and in Britain 5%. Manufacturing productivity has been growing for some time, as Europe moves into its own version of the New Economy. The spurt of robust growth is generating enough money in tax revenues to end Europe's chronic budget deficits. And envious Continental governments are sure to follow Britain's recent example of auctioning off of its third-generation cellular spectrum for $30 billion. If these surpluses are used to cut taxes and reward entrepreneurial activity, Europe could really boom.
Europe's wireless lead over the U.S. is already substantial. It is clear that the mobile net is the next big thing, and that much of the innovation is coming from European companies. The failure to settle on a single digital-phone standard in the U.S. is hurting. In Europe, where anyone can use a cell phone to call anywhere, anytime, a mobile Net culture is growing fast. Downloading information from the Web on cell phones is becoming common.
Not just in Europe, but also in Japan: After a decade of economic sleepwalking, Japan is showing serious signs of renewal. Companies are hiring workers again, operating rates are rising, and people are out shopping. The rate of growth in manufacturing productivity is even higher than America's: 6.9% for the final quarter of 1999. More important still, new stock exchanges are financing a slew of Internet startups. NTT-DoCoMo has millions of people using small handsets to dial directly into the Internet.
This is wonderful news for the global economy. For too long, the U.S. has been the world's sole locomotive, buying up vast quantities of imports from everywhere. With America's trade account deficit now a record and perhaps dangerous 4.5% of gross domestic product, the time is ripe for Europe and Japan to pull their weight. But these regions' resurgence could prove problematic for some U.S. companies. The coming decade could look a lot more like the 1970s and early '80s--when the U.S. felt threatened by international competition. Who's preparing for that?