The New Atlantic Economy

Le Defi Americain (The American Challenge) by Jean-Jacques Servan-Schreiber and Japan As Number One by Ezra Vogel were defining political commentaries of their time. The first warned in the 1970s that Europe was being overwhelmed by America. The second warned in the 1980s that the U.S. was being overtaken by Japan. As the 1990s come to an end, it is clear that neither is true. Europe is surprisingly resurgent, Asia is unexpectedly weak, and America is convincingly renewed. Predictions of a Pacific Century, with the U.S. closely linked to Asia, are proving to be wrong. The fulcrum of world power is shifting from the Pacific Rim to the Atlantic Basin. A new Atlantic Economy is being created based on converging corporations, similar economic policies, and shared cultural values. As Asia turns a fretful face toward market capitalism, a Euro-American era appears increasingly likely to dominate the early 21st century.

How did this surprising turn of events come about? The fast, high-tech, high-growth pace set by the U.S. in the '90s polarized the global economy. Asia could not sustain it. Japan stalled, and a volatile mix of hot capital, cronyism, and plummeting prices caused emerging nations to crash and burn. Europe, by contrast, thrived. Although it suffers slow-growth restructuring pains akin to the U.S. a decade ago, Europe is regaining its competitive spirit. Increasingly, Europe and America are treated as a single economic society by corporations, techies, investors, and job-hopping executives.

The commonalities and convergences abound. Although European intellectual elites may wince, the Anglo-Saxonization of the Continent's business culture, with its focus on shareholder value, flexibility, and transparency has turned Europe's stodgy companies into a herd of ferocious competitors. Leaping across the Atlantic, they are buying, merging, or linking up with American rivals. DaimlerChrysler. BP Amoco. Bertelsmann-America Online. Vodafone-AirTouch. While politicians in Washington and Brussels bicker over bananas, CEOs like Daimler's Jurgen Schrempp and Chrysler's Robert Eaton are throwing lines across the sea.

America's obsession with technology is also playing to European strengths. Nokia zigged when Motorola zagged in the switch from analog to digital cell phones and grabbed the lead. Even Europe's retrograde instincts for regulation helped. By mandating one digital standard for the Continent, Europe created a huge base for Nokia and Ericsson. Along the technological frontier, the U.S. has the Internet, but Europe holds the commanding heights in individual mobile communications.

The final equalizer is the euro. Having a single currency uniting a region that neatly parallels the U.S. in population, gross domestic product, trade, publicly listed companies (9,000 plus), technology, and, with time, capital markets, could make Europe the mirror image of America. A euro that trades closely with the dollar allows global investors to evaluate all listed companies in the Atlantic Economy at the same time with the same criteria.

History teaches that nations and regions can rise and fall in the flick of a decade. In this fading century, Europe, America, and Asia have run the cycle many times, tripping up on their own hubris, then regrouping to come back. Today, Asia, rocked by crisis, is still in shock. Japan, like most of Asia, appears torn between reforming and opening its economy or closing it further to the volatility of market capitalism. The right combination of capital regulation, foreign investment, and favorable terms of trade could reignite Asia once again.

Until then, the emerging Atlantic Economy will set the pace for the world economy. Last year, when CEOs and political leaders gathered for the World Economic Forum at Davos, Switzerland, Americans were seen as walking tall. This year, Europeans will be doing a bit of strutting of their own. Together, they are waltzing into the future.