Outlook: American peak, Japanese trough

SOMETHING unprecedented in post-war economic history is about to happen, possibly this week, but certainly within the next month or two. Before long the unemployment rate in the United States is going to fall lower than the rate in Japan. For the first time in living memory, the land of opportunity and insecurity is about to offer its inhabitants better job prospects than the land of lifetime employment.

This week's employment report from the US is likely to show a further decline in the unemployment rate to 4.3 per cent. At the present turbo- charged pace of economic growth in the US, this will fall even lower. Meanwhile the latest figures show that unemployment in Japan has soared from 3.5 per cent of the workforce - already very high by historical standards - to 4.1 per cent, and is heading firmly upward. It will only take another month, two at most, for these trends to cross. There could scarcely be a more telling symbol of the growing economic strength of the US and weakness of Japan.

Certainly it would be easy to cite this milestone as evidence not just of the triumph of the Anglo-Saxon over the Asian model of capitalism, but also of its superiority. Indeed, it is positively satisfying to do so, given how much the red-blooded, free-market variety had fallen out of fashion with trendy pundits who spied advantages in Japanese long-termism.

However, a little bit of caution is needed. Part of the explanation for the stellar combination of rapid growth, low unemployment and low inflation in the US is just that the economy is at that transient stage of the business cycle when everything goes well for a little while. It would be foolish to assume the US has achieved the holy grail of economic policy - abolition of the business cycle. The next stage is for inflation to grow, and then as interest rates are tightened to counter these pressures, for growth to slow and unemployment to climb.

On the other hand, there is almost certainly also some truth in the "new paradigm" model of the US economy. Some of the long-awaited fruits of new technologies are at last being harvested and the economy's growth potential probably has increased compared with the 1970s and 1980s. It is at times like these, when the economic environment is changing rapidly, that free-wheeling and entrepreneurial variants of capitalism are likely to perform best - while those built on tradition and fixed relationships will suffer by comparison.