Who to Trust: Meetings or Markets?

The main press atrium is seen at an EU summit in Brussels, Dec. 11, 2008.
AP Photo/Virginia Mayo
Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times, London.

Small groups, gathered in meeting rooms scattered around the world and focused on a single issue, can affect the way we live, at least now and perhaps for a long time. Consider only this week's conclaves.

Here in Washington, the Federal Reserve Board's monetary policy gurus met and decided to keep interest rates low until unemployment drops, even though they agreed that the economy is already improving. Meanwhile, meeting in committee rooms and in the corridors of power, Congress agreed to give the White House what its economists and the president, meeting in the Oval Office, demanded: more stimulus spending. It is true that there is considerable excess capacity in the economy, as the deflation-worriers continually point out. But anyone who believes that the meetings at the Fed, in congress, and in the White House are not laying the ground for future inflation carries a heavy burden of proof.

Meanwhile, in Vienna the members of OPEC, the oil cartel, met and decided that $80 is just about the right price for their crude oil. That means that the cartel is not prepared to support the fragile worldwide recovery by lowering oil prices. It will, of course, sooner or later have to confront the price-threatening problem of stepped-up production from Iraq, perhaps to Saudi Arabian levels, a development that is increasingly likely as foreign oil companies get on with the work of repairing old fields and discovering new ones. But that is for another meeting.

By deciding at its Vienna meeting to keep oil prices far above competitive levels, OPEC is taxing consumers and in effect running a counter-stimulus policy, to the consternation of the groups meeting in Washington.

The Vienna meeting also affected meetings of airline executives and union leaders in London. The decision to keep oil and, therefore, fuel prices up added to the pressure being brought on the fuel-intensive airline industry by strikes and the threat of strikes. Lufthansa has already been put through the wringer by its union, and British Airways is next in line as its cabin crews prepare to lay down their clipboards and serving trays tomorrow (at this writing talks continue and some flights will go, staffed by non-strikers, even if there is a strike). Passengers will not book in usual numbers on an airline under threat of a strike, never mind actually experiencing one. If the British Airways workers succeed, other airline unions around the world might well emulate their British cousin. Indeed, captain David Bourne, Director of the Airline Division of the U.S. International Brotherhood of Teamsters has already met with British union officials.