The US is down, but it is far from out
THERE is nothing better for the soul than a visit to New York. London is the greatest City on earth; but the Big Apple comes a close second.
America has suffered even more badly than Britain from the crisis: a greater number of homes have been repossessed, millions have lost their jobs and vast wealth has been destroyed, especially in property. But while the scars were apparent wherever I looked and whenever I talked to anybody in New York yesterday – from financiers to hotel porters – the city’s energy, determination and drive have not gone away.
Nobody expects the boom days to return. Equally, however, unlike in London, you won’t find anybody endorsing the absurd idea that the only alternative to bubblenomics is a return to 1970s-style management of decline. Parts of London’s establishment have convinced themselves that the UK should now be content to retrench in the face of growing competition from Asia, even in financial services. New York’s authorities, by contrast, want nothing more than a return to growth – backed up with better and more sustainable policies.
The US is having the same, largely sterile and often demagogic debates as we are about banker bonuses and the causes of the crisis. On balance, however, the American discussion is more edified: everybody accepts that years of cheap money from the Fed- fuelled risk-taking and caused massive errors of judgment. By contrast, the Bank of England’s role in the crisis is usually ignored. There is also some recognition in the US that politicians of all parties were wrong to put massive pressure on mortgage lenders to extend loans to those who couldn’t afford them, in the name of social justice and increasing homeownership rates. These policies underpinned the sub-prime debacle, not something you would have learnt watching the BBC.
This is not to say that America isn’t facing massive problems. The long-term prospects for its public finances may be even worse than ours: the federal government is presiding over exploding entitlement programmes and an unfunded pension system. Americans still save too little, consume too much compared to what they produce, and remain subsidised by the dollar, the world’s dominant currency. All of this will have to change; the US must learn to live within its means. Yet America always reinvents itself; and this time will be no different, even if its political establishment, like ours, doesn’t seem to realise the extent of the challenge.
So if you need reinvigorating, go to New York, have a few meetings, observe the locals, talk to people, breathe in the air. It will work a treat.
WALSH’S WORLD
HERE are a few more points I gleaned from Willie Walsh, BA’s CEO, with whom I have been flying on his inaugural London City-JFK business-only service. The airline, which will make another loss this year, will bid for BMI if Lufthansa were to put it up for sale. Walsh still wants BA’s stake in any merger with Iberia to be at least 53 per cent. Last but not least, he is threatening to cut short-haul services and replace them with long-haul routes if Heathrow’s expansion is blocked; and will shift traffic to other countries, such as Spain. His target: the anti-Heathrow Tories. Sparks are about to fly. [email protected]