"English" the Language Of Prosperity?

English-speaking nations are outperforming other industrial nations economically.

The reasons, economists say, go far beyond the fact that English is the primary language of international commerce.

Beneath the language is a culture that nourishes growth in the US, Britain, Canada, Australia, and New Zealand.

These countries, in patterns traceable to the Industrial Revolution, give average citizens more clout in politics and investors more clout in business.

"Their more free-market approach seems to confer an advantage ... in the current climate of fierce global competition," says Tony Riley, research director with A. Gary Shilling & Co., an economic consultant in Springfield, N.J.

Last year, these five nations enjoyed average economic growth of 2.3 percent, versus 1.6 percent for 10 continental European nations. These averages are not weighted by country size.

As you might expect, counter-examples exist: The Netherlands' economy grew 2.7 percent last year, Norway's 4.8 percent.

But the trend is striking enough to draw attention from economists.

Rudiger Dornbusch, at the Massachusetts Institute of Technology in Cambridge, Mass, points to the power of voters.

"More-effective democracies" in English-speaking nations, he says, prompt their central banks to be "more pragmatic."

By contrast, "central bankers are allowed to do unspeakable things in continentalEurope," he says. Currently that means restraining economic growth - leading to double-digit unemployment - in an effort to meet treaty conditions for the European Monetary Union.

The US has had "great success" in creating jobs in the pastfive years, says Christopher Widness, an economist at Chase Securities Inc. in New York.

The US and Britain, these economists say, have led the way in deregulating markets - financial services, telecommunications, air travel, and labor. They have also applied more restraint to spending on social programs.

"Our job structure is more prone to downsizing - and to up-sizing," says Dennis Gartman, writer of a financial newsletter in Suffolk, Va. That can help productivity.

"continental Europe, in an approach taken even further by Japan, appears to distrust untrammeled market outcomes," Mr. Riley says. In these nations "regulatory obstacles and societal pressure [give] many groups a virtual veto on change"

Welfare, unemployment compensation, and minimum wages are higher in continental Europe than in the US or Britain.

In Japan, year-end bonuses are costly, and large corporations often under-employ workers by trying to maintain lifetime employment.

In continental Europe, companies are slow to hire new workers because firing them is so difficult.

Riley suspects the different attitudes toward the economy may go back to the Industrial Revolution, the transition from an agrarian to an industrial society that began in Britain in the 18th century.

In Britain and the US, it was gradual and market-driven, says Riley, who is British.

Later industrialists in Europe and Japan were impatient. Their governments wanted to force the pace and catch up.

Governments encouraged investment banks to provide scarce capital to industry. Often they actually created new industries.

This brought a close relationship between banks and industry that now characterizes capitalism in much of Europe and Japan, explains Riley.

Now Germany and France are starting to abandon this "corporatist" model.

One legacy of this history: English-speaking nations rely more than others on stock markets to finance businesses.

In the US and Britain, individuals own most company shares either directly or through institutions such as mutual funds.

By contrast, corporations and banks together own more than half the outstanding equity in France and Germany and 44 percent in Japan.

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