The phone rings. You are at home, but getting ready to head out to your weekly tennis game in the Virginia suburbs. You are thinking perhaps about your spin serve, a wicked slice that moves left to right so fast that you have left some of Washington's biggest names tripping over their feet and cursing. Sure, you can leave the stock market wheezing with one word about higher interest rates, but...if only they could see what you can do to anyone foolish enough to line up inside against that serve! You are 72 years old, and your tennis game is still one of your great pleasures, and surely you have been looking forward to this match all week. But the phone is ringing, and because you are chairman of the Federal Reserve Board, you answer. "This is the Treasury operator," says the voice. "Please stand by."
The phone rings. "Whoopee!" you think. "The phone is ringing!" O.K., you really should calm down about this phone-ringing stuff, but you are the Deputy Secretary of the Treasury, and this past year, for all its chaos and tumult, has been about the most exciting you could imagine. It's the holiday season, and you are eager to get to your family and all that, but boy, this holding the world economy by the hand is even better than advertised. The phone rings. Maybe it will be like this summer, when your mom picked up in your house on Cape Cod and found Fed Chairman Alan Greenspan on one line and worried Russian reformer Anatoli Chubais on the other. Oh, how she thrilled over that! The phone rings, and because you are the Deputy Secretary (and happen to be one of the few rocket-scientist economists not trying to create a black box to make deviously complex trades on Wall Street), you pick up the receiver. "This is the Treasury operator," the woman on the line says, and though she doesn't say it, what she could say now that she has you all connected is: "The committee to save the world is now in session."
Does the world need saving? Just ask the folks in Russia, who saw their economy strangled last August by an outflow of confidence that was as fast as it was lethal. Ask Latin American countries, whose economies were concussed by the Russian shock waves even though the two regions have few direct economic links. Or ask the thousands of ethnic Chinese who fled Indonesia last summer after impoverished locals concluded that Chinese businessmen had magnified their misery by shipping cash out of the country in search of stability.
Although the U.S. economy has been nothing but sunshine, it has been a terrifying year in world markets: famed financier George Soros lost $2 billion in Russia last summer; a hedge fund blessed with two Nobel prizewinners blew up in an afternoon, nearly taking Wall Street with it; and Brazil's currency, the real, sambaed and swayed and then swooned. In the past 18 months 40% of the world's economies have been tugged from robust growth into recession or depression.
So far, the U.S. has dodged these bullets, but the danger to its economy is far from over. The tremendous appetite of American consumers for imports--an appetite whetted by stock-market wealth--has provided some support for Asia and Latin America. Yet the tiniest perturbation could send the whole economy tumbling, and there are perturbations all over the place. Brazil is just hanging on, which means so is the rest of Latin America. Europe, which suffers from high unemployment, is slowing. And Asia's comeback is predicated on Japan's getting its troubled economy into gear.
In late-night phone calls, in marathon meetings and over bagels, orange juice and quiche, these three men--Robert Rubin, Alan Greenspan and Larry Summers--are working to stop what has become a plague of economic panic. Their biggest shield is an astonishingly robust U.S. economy. Growth at year's end was north of 5%--double what economists had expected--and unemployment is at a 28-year low. By fighting off one collapse after another--and defending their economic policy from political meddling--the three men have so far protected American growth, making investors deliriously, perhaps delusionally, happy in the process.
It has meant some very difficult decisions. In some of the nations devastated by the crisis, there is a growing anti-U.S. backlash, and politicians such as Malaysian Prime Minister Mahathir Mohamad complain that Rubin, Greenspan and Summers--and their henchmen at the International Monetary Fund--have turned nations like Malaysia and Russia into leper colonies by isolating them from global capital and making life hellish in order to protect U.S. growth. The three admit they've made hard choices--and they'll even cop to some mistakes--but they still believe that a strong U.S. economy is the last, best hope for the world.