Newspaper article The Christian Science Monitor

Author Says Governments Can't Control Economies

Newspaper article The Christian Science Monitor

Author Says Governments Can't Control Economies

Article excerpt

PETER DRUCKER would probably agree with President Clinton's mantra: "It's the economy, stupid."

But while Mr. Clinton means it as a pin prick to remember his priorities, Mr. Drucker means it is stupid for government - any government - to think it can control the economy.

The management guru and watcher of the evolution of societies says presidents can tinker at the margins - set goals to lower inflation, reduce the deficit, cut regulations.

But economies are too complex, and the accepted means of stimulating them, through more government spending, can't be done because governments are too deeply in hock. Even if they could, it would only stimulate inflation, and no models exist that can explain how consumers or the economy would react.

So when you ask the author, lecturer, and management consultant what he thinks of President Clinton's economic plan, he replies, "Does he have one? He has economic hopes. Don't confuse this with economic plans."

He states that the only intelligent thing for a government to say is "We cannot control the economy," adding, "Every developed country has used up its resources. Nobody can increase the deficit any more. The Japanese just did it, but even the Japanese are at the limit."

To avoid special-interest politics, Drucker suggests the United States go back to a budgeting process used earlier this century in which revenue limits are set first and expenditures fit into them. That way, he says, it will be a "system that makes choices and says 'no' instead of a system that pleases everybody."

He urges shifting money from consumer spending to capital spending, encouraging investment in production, technology, and innovation. But that would mean, he says, cutting consumption and shifting from an income tax to a value-added tax.

The result would be an "enormous export expansion in the next three to five years" but, politically, it would mean telling people that, for now, "we cannot give you a speedy recovery; you'll have to suffer out of it. …

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