Europe, for its part, is finally beginning to recognize the problems with its macro-economic institutions, particularly a stability pact that restricts the use of fiscal policy and a central bank that focuses only on inflation, not on jobs or growth. But there is a good chance that institutional reforms will not come fast enough to lift the economy in 2005.
China -- and Asia more generally -- represents the bright spot on the horizon. It may be too soon to be sure, but prospects for taming the excessive exuberance of a year ago appear good, bringing economic growth rates to sustainable levels that would be the envy of most other countries.
By contrast, the world's other major economies will probably not begin performing up to potential in the next twelve months. They are all caught between the problems of the present and the mistakes of the past: in Europe, between institutions designed to avoid inflation when the problem is growth and employment; in America, between massive household and government debt and the demands of fiscal and monetary policy; and everywhere, between America's failure to use the world's scarce natural resources wisely and its failure to achieve peace and stability in the Middle East.
Joseph E. Stiglitz, a Nobel laureate in economics, is Professor of Economics at Columbia University. His most recent book is The Roaring Nineties: A New History of the World's Most Prosperous Decade.
Copyright: Project Syndicate
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