Pouring oil on troubled economists
Geore Bush has got my fingerprints. It did not take him, or rather his genial representatives at Dulles airport, long. What took the time was a two-hour wait in the passport queue to reach him. A number of us aliens will have something to say next time a US official or economist lectures us on the need for structural reform and greater flexibility in Europe.
I imagine the Chancellor of the Exchequer had an easier passage through passport control, and I have no idea whether his fingerprints were taken too, just in case he might despair of ever winning approval for his ambitious schemes for relieving poor countries of their debt, and be tempted to take up terrorism instead.
For James D Wolfensohn, the president of the World Bank and one of the stars of last weekend's annual meetings of the World Bank and International Monetary Fund (IMF) in Washington, terrorism and poverty are closely connected. 'Recent research suggests that a lack of economic opportunity, and the resulting competition for resources, lies at the root of most conflicts over the last 30 years, more than ethnic, political and ideological issues,' says Wolfensohn.
The retiring president adds: 'T'his research supports the intuitive idea that if people have jobs, and if they have hope, they are less likely to turn to violence.'
Gordon Brown did not get nearly as far as he would have liked last week with his 'debt initiatives'. It was not just recalcitrant Germans who were the problem. An official involved commented: 'The US won't budge. Apart from anything else, the IMF itself has a financing problem, and is not going to sell gold to finance the Chancellor's debt-relief plans.'
We shall see. Group of Seven finance ministers referred the various proposals for further study. The Bush administration is more interested in debt relief for Iraq, where unemployment is said to be well over 50 per cent, and evidence that the US/UK invasion has created a breeding ground for terror becomes stronger by the day.
Although he did not get far on debt, the Chancellor was widely praised for his handling of the IMF's key policy committee, of which he is a chairman. At the subsequent press conference he expressed surprise that there had been no questions about oil, because, without doubt, oil was one of the key topics at official meetings and fringe seminars.
Those with long memories will recall that the Third World debt crisis began after the 'oil shocks' of the 1970s. What used to happen at IMF meetings in those days was that governments would encourage the 'recycling' of the spare millions (even billions) that the newly rich oil-exporting countries had to invest, and bankers - eager to make a turn - would not ask too many questions about the viability of African economies to which they offered money.
It was the financial markets' rather belated discovery that Britain possessed North Sea oil that led to an embarrassing surge in the pound in 1977, within months of Denis Healey's having to turn back at the airport to face a major sterling crisis. (He never got to the 1976 IMF meeting. They sent a team to him.)
My sense of last weekend's meetings is that there is an atmosphere of suppressed panic about the oil price, and about the danger of a serious crisis. This is over and above the well-publicised concerns about potential storms in the foreign-exchange markets when the financial world finally becomes nervous about the mani festly unsustainable US budget and balance-of-payments deficits - a nervousness which may well surface shortly after the presidential election.
Oil prices loomed large in the statement by G7 finance ministers and central-bank governors, which conceded: 'Oil prices remain high and are a risk. So first, we call on oil producers to provide adequate supplies to ensure that prices remain moderate. Second, it is important consumer nations increase energy efficiency. Third, it is important for consumers and producers that oil markets function efficiently and we encourage the IEA (International Energy Agency) to enhance its work on oil data transparency.'
The call for 'adequate supplies' is an obvious sign of concern. The call for increased efficiency contrasts with all those complacent analyses we have seen recently suggesting that the world is much less vulnerable to an oil shock that it was in the 1970s and 1980s. Efficiency? According to the US Energy Information Administration, US oil consumption rose by 16 per cent between 1973 (the year of the first oil shock) and 2003, whereas in France it dropped 21 per cent. (France, of course, invested heavily in nuclear energy.)
I am not forecasting that oil prices are going to remain at $50 a bulk barrel or even rise a lot higher. But the fear is there. And I can report that the price of oil has been obsessing Federal Reserve chairman Alan Greenspan. One regular visitor to his office said that, although the chairman's desk was covered as usual by sta tistical papers, this time they were not about interest rates but oil.
The other big worry in Washington was the poor performance of business investment in recent years, at a time when, in the words of one official, 'consumers have been spending virtually everything they have, and the savings rate is down to 1 per cent'.
'The reasons are not economic,' said one senior official on the investment scene. 'When people are depressed, they go out and spend,' is one popular explanation, and there was much talk of the impact of those notorious Enron-style scandals on the animal spirits of businessmen.
But to return to oil - because everybody I met seemed to return to oil. While officials tried endlessly to place their faith in the improved techniques of the oil industry and better extraction results from individual fields, the fear of terrorism was marked.
Back in England, the first items of economic news to grab one's attention were the poor recent figures for industrial production here, and the warning by the president of the European Central Bank, Jean-Claude Trichet, that the oil price posed threats to the already very modest recovery of the eurozone.
Oh, and by the way, I only had my fingerprints taken once, but at Washington National Airport, on my way to interview Professor Galbraith, I was told at the security desk: 'Your airline has selected you for additional screening.' There was the option of enjoying this extra privilege in private. What, in George Bush's America? They must be joking.