The Global Overview: It was good to see the pessimists proved so wrong

This has been the year when the new economy has rescued the old one. A year ago the pundits were pretty unanimous. The UK would be lucky to escape recession, the eurozone (and the euro itself) would climb strongly, and US growth would slow.

Wrong, wrong, wrong. The surge in economic activity in the new industries, mostly but not entirely Internet-related, overwhelmed the forecasts of a year ago. Those countries where the new economy was allowed to run ahead accordingly did much better than expected, while those which inhibited its growth lagged behind.

So from a British perspective, and even more from an American perspective, if 1999 has been a year of surprises, those surprises have been markedly favourable.

The UK economy had a slow first quarter but at no stage did growth halt. Then in the second half, itstormed ahead again, driven not only by strong consumer demand here but also, surprise, surprise, by very strong exports. For the year as a whole, growth looks like being close to 2 per cent, not far below the 2.2 per cent the year before.

The export recovery was not supposed to happen until sterling weakened against the euro. But of course that did not happen either: sterling continued to stick around $1.60 and as the dollar rose against the euro, it pulled the pound along with it. I could not find one single forecast last year which suggested that the euro would hit parity with the dollar during 1999.

The principal reason for the euro's weakness has been the relatively slow growth of the eurozone. In the last three months the French economy has taken off smartly and, at 2.6 per cent, will be the fastest growing of the large European countries in 1999. But growth in both Germany and Italy has disappointed, at around 1.2 per cent, and coupled with uncertainty about German economic policy, this has helped the euro lose 15 per cent of its value during the year.

The US, by contrast, stormed on. The final growth tally may even be above 4 per cent, though since so much of the growth is coming from hi-tech industries, measuring what is happening is especially difficult.

This US experience was matched in other English-speaking economies like Australia and Canada, both of which grew at around 4 per cent. It is almost as though there was a conspiracy that English-speaking countries would grow swiftly, while non-English-speaking would not. This works even in the eurozone. The fastest growing countries were either English-speaking (like the fastest growing of all, Ireland), or ones where the language is widely spoken, like Sweden and the Netherlands.

Elsewhere, the tally was mixed. Japan continued to disappoint: it will, thanks to a large injection of public money, show a little growth this year. But that has been at the cost of a fiscal deficit of more than 10 per cent of GDP, something that is clearly not sustainable for very long. The latest figures even suggest that the country may be heading back into recession yet again.

But elsewhere in east Asia the picture has brightened. With the exception of Indonesia, most of the region's economies staged a decent recovery from what had, for most people, been their first experience of recession in living memory. China seems so far to have avoided the recession that many people outside had predicted for 1999.

So two related features - the hi-tech economy and speaking English - turned out to be more important factors in driving growth than the forecasters expected. They are related in the sense that the Internet is still largely an English-language phenomenon, so countries where English is widely spoken tended to create more economic activity, and hence created more commercial winners. The clearest winners were, of course, the Internet stocks, but many of the other firms in the telecommunications area also shot ahead. In December, Nokia, the world's largest maker of mobile phones, became Europe's most valuable company.

If there were clear winners in the corporate world there were also clear losers. Any commercial activity that could be challenged by the Net found itself under pressure. In Britain the most notable casualty has been High Street retailers like Marks & Spencer.

In Continental Europe sectors like motor manufacturing have been squeezed as the ability to compare prices across national boundaries has been transformed by the twin impact of the Internet and the euro. The structural response to such pressure (except that it was presented as a response to opportunity) was a boom in Continental take-overs and mergers.

In the US, any company in an "old" industry that has not established a credible Internet strategy finds itself in danger of seeing its business run away to competitors it did not know existed.

The unexpected scale of the success of the world economy during the last year - and in particular that of the English-speaking part of it - inevitably leads to concerns that such success might prove to be ephemeral. Several of the dogs that might have barked a warning did not do so. For example, there was no general resurgence of inflation anywhere in the developed world, despite falling unemployment rolls in the US and here.

The US was able to finance its widening current account deficit, now approaching 4 per cent of GDP, and US families were prepared to become net dis-savers. In Britain similar pressures emerged, though in more muted form. The current account went back into modest deficit and household savings rates halved. But it proved easy to finance the external deficit and people were happy enough to pare back savings, particularly since they saw their house prices moving up.

So 1999 was a year of success for most of the world economy - a year that in general turned out better than most of us has expected. Most of the dangers were successfully avoided, while the opportunities were seized with great vigour. It is good to be proved wrong in such an encouraging way.

Arts and Entertainment

Film Leonardo DiCaprio hunts Tom Hardy

Arts and Entertainment
And now for something completely different: the ‘Sin City’ episode of ‘Casualty’
TV
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment

ebooksNow available in paperback
Arts and Entertainment

ebooks
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES

ES Rentals

    Independent Dating
    and  

    By clicking 'Search' you
    are agreeing to our
    Terms of Use.

    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
    Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

    Satya Nadella: The man to clean up for Windows?

    While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
    A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

    A Very British Coup, part two

    New novel in pipeline as Jeremy Corbyn's rise inspires sequel
    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Philae lander data show comets could have brought 'building blocks of life' to Earth

    Icy dust layer holds organic compounds similar to those found in living organisms
    What turns someone into a conspiracy theorist? Study to look at why some are more 'receptive' to such theories

    What turns someone into a conspiracy theorist?

    Study to look at why some are more 'receptive' to such theories
    Chinese web dissenters using coded language to dodge censorship filters and vent frustration at government

    Are you a 50-center?

    Decoding the Chinese web dissenters
    The Beatles film Help, released 50 years ago, signalled the birth of the 'metrosexual' man

    Help signalled birth of 'metrosexual' man

    The Beatles' moptop haircuts and dandified fashion introduced a new style for the modern Englishman, says Martin King
    Hollywood's new diet: Has LA stolen New York's crown as the ultimate foodie trend-setter?

    Hollywood's new diet trends

    Has LA stolen New York's crown as the ultimate foodie trend-setter?
    6 best recipe files

    6 best recipe files

    Get organised like a Bake Off champion and put all your show-stopping recipes in one place
    Ashes 2015: Steven Finn goes from being unselectable to simply unplayable

    Finn goes from being unselectable to simply unplayable

    Middlesex bowler claims Ashes hat-trick of Clarke, Voges and Marsh
    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    Mullah Omar, creator of the Taliban, is dead... again

    I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
    Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

    Margaret Atwood on climate change

    The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years