Two countries, divided by a deficit
There are times when Davos feels like a trade fair for the world's economies, where leaders and ministers come to show off their wares. There were two countries on display here on Friday morning, each with a deficit of roughly 10 per cent of national income, each with a very different approach to bringing it down.
Exhibit A was the UK Prime Minister, David Cameron. In his speech in the main hall he said baldly that that getting rid of the spectre of government debt had to be job one. "Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong. You cannot put off the first in order to promote the second."
Then, minutes later, on the same stage, we had Exhibit B, the US Treasury Secretary, Tim Geithner. He has never publicly made any negative remarks about the UK's current budget strategy. But he made quite clear in a set-piece interview with Charlie Rose that he thought rapid cuts in the US would jeopardise - not only the country's economic growth, but its long-term fiscal health as well.
There wasn't any public debate between the two men. But you couldn't help noticing two pieces of news that arrived on the same day. The first was that the American economy grew at an annual rate of 3.2 per cent - or a quarterly rate of roughly 0.8 per cent - in the last 3 months of 2010. That compares with that shocking 0.5 per cent decline in the same period for the UK. The second bit of news was that a key measure of consumer confidence in the UK had suffered its largest decline in a single month since the depth of the recession in 1992.
The comparison between the two countries isn't very fair. As long as the dollar is the world's main reserve currency, everyone agrees that America can get away with a lot more borrowing than anyone else. But there were have been some prominent voices here voicing alarm about the UK.
George Soros warned earlier in the week that Britain would fall into recession if the government went ahead with its cuts. When I raised the issue with John Lipsky, the number two at the International Monetary Fund, he said he didn't want to jump to any conclusions about the GDP data. The Fund has endorsed the coalition's budget strategy before and still does.
But the careful Mr Lipsky did seem to think it would be natural to adjust the fiscal strategy, if growth in 2011 appeared to be a lot weaker than previously thought. These were his exact words:
"The programme for this year and next year was deemed consistent with moderate growth. If those forecasts prove to be too optimistic, I'm sure there will be grounds to think about adjustments." (I asked, does that mean adjustments to fiscal policy?) ......"It seems to me anybody would be willing to re-consider and make adjustments if there was a need and the outlook was substantially different from what was anticipated."
You will be surprised to hear that the Chancellor didn't choose to share any back-up strategy with me when we spoke Friday afternoon. Let alone a Plan B. He said to abandon the government's plans now would be a disaster.
It all took me back to a year ago, when David Cameron came here to Davos as leader of the opposition - and made news when he seemed to suggest that the early spending cuts under a Conservative government would not be as great as people had thought. This time it's the British economy that's wobbled. But Prime Minister Cameron is holding tough.
Among the Davos movers and shakers, Britain's rapid approach to cutting its borrowing stands out as a bold experiment. (As Mr Osborne would doubtless point out, its deficit rather stands out as well.) Those observers won't write off the UK on the basis on a few bad numbers. But some do wonder whether Mr Cameron can really mean it, when he appears to suggest that he will stick to the programme, come what may