Who Will Drive... ...The World Economy?

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Yet the real driver of European growth will be technology. "Europe in its innovative drive is where the U.S. was three or four years ago," said Lipp. True, the technology stocks on markets like Germany's Neuer Markt and France's Nouveau Marche have been taken down hard recently in the global stock swoon, but Lipp calculates that 75% of these companies still have solid business models. He reported that American executives were also voting with their feet, and sizing up bargain-price European tech firms for acquisitions.

Courtis disagreed with Lipp's general optimism, arguing that leading economic indicators--such as order-book backlogs and consumer sentiment--don't bode well for Europe. "Everything we look at that tells us where the economy is going to be in six months in the U.S. started to roll over in June, July and August," said Courtis. "In October, November and December, they started rolling over in Europe." He predicted a significant Continental slowdown in the second quarter, with the European central bank waiting too long to cut rates. "They are going to get caught behind the curve," he warned.

But even if you doubt Lipp's 3.5% prediction, there's reason to think the Continent will handle a slowdown with relative grace. "Europe won't have the same kind of adjustment pressures that we have in the U.S.," said Hormats. That's because Europeans, in contrast to debt-addicted Americans, are light on stock investments and still have substantial savings they can tap during lean times.

On the other hand, Asia expert Courtis saw little hope for Japan. The Tokyo government still seemed committed to spending its way into recovery, even though all the evidence decreed that pump priming wasn't a viable solution. "In the past 30 months, they spent $1.4 trillion, and they got a little growth," Courtis observed. "If you spend the equivalent of the gross national product of France and only get 2% growth, there have to be some real problems." A big one associated with the spending policy is that Japanese government debt by the end of 2001 will amount to around 150% of the country's total economic output, according to Courtis. (U.S. gross federal debt, by contrast, is about half the gdp.) Average Japanese consumers, meanwhile, are still under pressure. Their home value has fallen, their stock portfolio is a disaster, and their life insurer may be about to go bust. In other words, Japanese consumers are not looking to spend. Japan's demographics will help neither consumption patterns nor the search for bold new economic solutions. "In 10 years, Japan will make Florida look juvenile," said Courtis. "Revolutions are made by young people."

In the developing nations of Asia and Latin America, which depend on foreign capital, there is apprehension about how President Bush would respond to any of the financial crises that are bubbling just below the surface of those regions. Moises Naim, editor of the monthly Foreign Policy and a former Venezuelan Trade and Industry Minister, joked that the attitude in Davos was best summed up by someone who didn't come. "Fidel Castro said he just hoped Bush would not turn out to be as stupid as he seems," said Naim. In addition to Bush's mandate problems, a sharply divided U.S. Congress could make it difficult for Washington to intervene quickly if, say, Argentina's economy crumpled again. "The fear is not of a slowdown, but that a slowdown will become worse because of slow thinking," said Naim. It doesn't help that some of Bush's closest advisers are critics of the International Monetary Fund--though Naim doubted that the U.S. would stand aside and countenance any financial contagion from a regional economic crash.

Which country presents the biggest threat to stability? Russia, in the view of Stanford University's Joseph Stiglitz, who was Bill Clinton's chairman of the Council of Economic Advisers. He summed up the danger: "Small economy. Big country. With nuclear weapons." Over roughly a decade, he said, the number of Russians living below the poverty line has swelled to more than 50% of the population. The rich, meanwhile, still prefer paying bribes to paying their taxes. The 7% growth Russia saw in 2000 came off a severely contracted economic base and was mostly the result of the world spike in oil prices. And Russia did not use the oil boom as an opportunity to invest in its collapsing infrastructure, and it may well fail to pay its foreign debts if prices drop further. "How long it takes before a crisis breaks out depends on oil prices," said Stiglitz. With Courtis predicting that the price will fall past $20 per bbl.--good news, on the other hand, for the U.S. and Europe--the margin between world prosperity and a deep trough seems slim indeed.