Engines & Search Engines

Defying fears, the US economy chugs on. What other engines will join itin pulling world out of slowdown?

Bill gates's net worth - on paper - exceeds the GDP of the bottom 6 of the top 53 national economies in the world. So, when Mr. Gates speaks at the annual schmooze of world leaders - political, business, and economic - at Davos, Switzerland, the power elite listen up.

It was no accident that the most quoted jest at the Davos World Economic Forum was a suggestion by US Deputy Treasury Secretary Larry Summers that the Brazilian currency be renamed "real.com" so it would rise meteorically instead of sinking.

As Archimedes might say: Give me a dotcom and I will lift the world.

But could he? Can we? Aren't we getting carried away by another bubble?

Can the computer and its Internet search engines really refuel the economic growth "engines" that traditionally lever the world out of recessions or stagnation?

If so, where are those engines? How are they doing?

Let's try to answer, in order.

Can high tech speed recoveries?

A strong argument can be made for a lot of yes answers to this question:

Yes, the internet is speeding the spread of the information explosion. Yes, that helps educate eager workers in Asia and elsewhere who have been dispirited by events of the past two years.

Yes, it also helps spread democratic aspirations from people who already determine their governments to people whose regimes control them.

Yes, it helps investment capital find its way to areas where it can be usefully productive. (Well, often but not always.)

Yes, it helps speed trade.

Yes, it can help manufacturers customize products for customers on the assembly line. It can cut waste in inventories sent to the wrong places or warehoused too long. It can help workers find new jobs more quickly, thus fitting work forces as well as products to world needs.

And yes, it is a rebuke to the worldview that the global economy is doomed by vast overproduction.

Tell that to the billions of individuals who still await an efficient small stove, a motorcycle, a power tiller, a roof that will last, piped clean water, a satellite dish window to the outside world - even an inexpensive computer with bundled net connections for information and learning.

But isn't it a fad, a bubble?

We have argued in the past that there are lots of bubbles in the froth that surrounds each new technology. But the winners, sound ideas solidly executed, form a growing base of each new revolution in the way humans turn ideas into useful services and products. Icarus stocks may plunge; good ideas will not.

Can this help laggards?

In the past half century, the US helped pull Europe and Japan up from war-ravaged economies. Then, in business cycle crises, various leaders helped rescue fallen regional economies. Japan and Europe used their state of the art industries to help expand world trade, with all its benefits.

True, there were occasional long periods of stagnation. Cold war waste didn't help. Oil crises added to 1970s "stagflation" caused by deadening economic controls, welfare state costs, and initially low-skilled baby boomers flooding the job market.

Then the US pioneered some of the excesses that were to trouble Asia in the late '90s: bad loans by banks, wasteful overbuilding, a commodity bust (oil in the US; oil and minerals in today's developing world).

But, despite handwringing, many regions are seeing light at the end of the tunnel. Thailand, Korea, Malaysia, and Singapore seem to have passed the low point and started up, aided by their embrace of the high-tech, telecom era. They may now be the engine that rescues stagnant Japan.

Europe, moving confidently in its "euro era," is benefiting from the belt tightening it did to unite currencies. It enjoys low inflation, low interest rates. If its center-left governments can make their welfare states more cost efficient, they will begin to conquer their high unemployment rates.

Europe, in turn, can then absorb more imports from developing nations, thus aiding their recoveries. That should answer the US plea that its consumers not bear the entire burden of being importers of last resort.

Problems remain. Europe's threat of a banana import wall and the US threat of a steel wall help few and harm many. But overall leaders are finding sensible trade answers. And trade.com is part of it - not a joke.