The Best Business of 1998

BEST USE OF ECONOMIC THEORY Amartya Sen, winner of this year's Nobel Prize for economics, has spent a career exploring the causes of famine and poverty. His writings indicate that most famines are the result not of food shortages but of economic deprivation in parts of society. And he shows that democracies--even desperately poor ones like India--rarely suffer famines.WORST USE OF ECONOMIC THEORY A year ago, Myron Scholes and Robert Merton were darlings of the financial world. Both had parlayed their Nobel Prizes in economics into partnerships in Long-Term Capital Management, a U.S. hedge fund favored by superrich investors. Fallout from Russia's financial crisis exposed real-life flaws in their theories and led to LTCM's near-collapse. The U.S. Federal Reserve stepped in and organized a rescue to prevent a panic in the global financial system.BEST NEWS FOR GLOBAL INVESTORS A planned pan-European bourse will make it possible to trade, in one place, stocks listed on the London, Frankfurt, Paris and other major European markets.WORST NEWS FOR GLOBAL INVESTORS The Hong Kong government's $15.2 billion intervention in the local stock exchange in August succeeded in propping up prices and frightening off short-sellers. But it has created uncertainty about true share values and badly tarnished the territory's reputation as a bastion of free-market forces.BEST NEWS FOR WORLD TRADE China continues to insist that it will not give into the temptation of devaluing its currency. Though such a move would lift China's exports, it would also trigger a crippling new round of currency adjustments elsewhere in Asia.WORST NEWS FOR WORLD TRADE A bizarre dispute between the U.S. and the European Union over the latter's curbs on Latin American banana imports threatened to ignite a trade war among the world's leading economic powers.BEST IMF BAILOUT The $41 billion aid package put together in November for Brazil seems likely to preserve stability--as long as the government fulfills promises to reduce its budget deficit.WORST IMF BAILOUT Despite compelling evidence that Russia was not getting its fiscal house in order, the IMF continued to send billions of dollars its way. That largesse exacerbated Russia's crash in the summer, and much of the money simply flowed into well-connected Russians' overseas bank accounts.PAGE 1|
There was more than just Monica
Nothing could touch Saving Private Ryan
Tom Wolfe returned as the novelist in full
France's World Cup of joy brimmed over
Seinfeld's sayonara was much ado about nothing
No prizes for guessing The Big One
A noble winner--and a pair of Nobel losers
Saving Suriname ... and the swordfishBEST PERFORMANCE BY A CURRENCY IN A SUPPORTING ROLE In volatile times, one might think the lira would be among the first currencies to hit the skids. But even the rise of a government led by a former communist failed to dent Italy's money. With Rome a founding member of the Economic and Monetary Union, the lira will effectively merge into the new euro at the end of this year. In the meantime, it's as hard as a deutsche mark.WORST PERFORMANCE IN A DRAMATIC ROLE The Indonesian rupiah seemed poised for recovery when President Suharto gave way to B.J. Habibie in May. But political instability and an unfocused economic policy continue to wrack both the country and its currency. The rupiah has picked itself off the floor, but is still down 67% against the dollar compared with its level in August 1997.BEST MERGER Among this year's wave of super-mega-mergers, the union of Daimler and Chrysler is one of the few that make genuine commercial sense and are not just attempts to cash in on a soaring stock market.WORST MERGER Union Bank of Switzerland's marriage with the Swiss Bank Corp. created too much internal overlap. Worse, SBC did not realize the extent of its partner's exposure to derivatives. Losses related to LTCM's woes cost the new financial giant more than $700 million and forced the resignation of its chairman, Mathis Cabiallavetta.BEST MOVE BY FERDINAND PIECH Volkswagen's chief has engineered a remarkable recovery for the world's fourth largest automaker, capped by the February launch in the U.S. of a revamped Beetle. The head-turner helped draw thousands into VW showrooms, boosting sales in the first 10 months of the year by 65%. By November Beetlemania had swept Europe as well. The only bump in the road: VW can't produce enough of the cute little bugs to meet demand.WORST MOVE BY FERDINAND PIECH In March Piech boldly outbid German competitor BMW for the Rolls-Royce brand. By July he learned that BMW's aerospace partner, aircraft-engine maker Rolls-Royce plc, had title to the marque and would sell it only to BMW. For his $790 million, Piech gets only Rolls' outdated factory, the right to make Rolls cars up to 2002 and the renowned marque's second brand, Bentley.|2
There was more than just Monica
Nothing could touch Saving Private Ryan
Tom Wolfe returned as the novelist in full
France's World Cup of joy brimmed over
Seinfeld's sayonara was much ado about nothing
No prizes for guessing The Big One
A noble winner--and a pair of Nobel losers
Saving Suriname ... and the swordfish