Global Austerity: War on Inflation Curbs World-Wide Growth Too Much, Some Say --- Central Banks Are Criticized For Keeping Rates High, Depressing Job Markets --- The U.S. Is in the Best Shape
AuthorAffiliation Staff Reporter of The Wall Street Journal</br></br>But why can't it? A small but growing chorus of critics is beginning to question the mainstream view and ask whether economic policy makers aren't waging the wrong war.</br></br>Bruised by two decades of inflation and deficits, officials here and in other industrialized countries are keeping tight rein on budget and monetary policies; they are determined not to repeat past mistakes. In the process, some fear, they may also be throttling the chances of job-creating expansion around the world. This new wave of government austerity, critics argue, saps potential growth in many mature industrial economies even as those in Asia and elsewhere are soaring, heralding a historic shift in economic power.</br></br>The fast-growth gang extends beyond the usual cliques of liberal economists and supply-side enthusiasts. And it extends beyond Clinton-administration officials with their eyes on the November election. Included are people from across the political spectrum, both here and abroad, plus a growing number of corporate bosses. They contend that the world economy has changed fundamentally, and they complain that central bankers, led by the Federal Reserve, respond too slowly. Low unemployment won't trigger higher prices as it once did, they say; instead, global competition and corporate restructuring will keep prices down, while productivity gains will let growth flourish.</br></br>Above all, the critics want central bankers to relax their tight-money policies. "We have to be willing to take more risks" for faster growth, says Dana Mead, chief executive of Tenneco Inc., the Houston energy giant. "We can't afford not to." Jerry Jasinowski, president of the National Association of Manufacturers, says a recent survey finds an overwhelming majority of manufacturing executives calling for lower rates. High rates "are choking off growth," he says. "We need a more pro-growth policy coming from Washington." John F. Welch, General Electric Co.'s chief executive, says the economy can safely grow faster than its current 2% rate, "and we ought to let it."