Global market economy under trial

Is the promise of the market-driven global economy of the 1990s unraveling? Hardly, but the very idea is facing its most severe test.

Should market psychology worsen, consumer spending drop off and the specter of recession loom, the Federal Reserve Board could help soothe anxious consumers and businesses with an interest rate cut. A rate cut would help buttress the U.S. economy and make it easier for other countries to strengthen their securities. Perhaps most importantly, the United States would be taking a global economic leadership role.

Others might follow. Japan, the world's second-largest economy, currently poses the biggest problem as the government dawdles in indecision, unwilling to face the shock of cleaning up a banking system festooned with bad debts.

The Russian economy is tiny in comparison, but the depth of political uncertainty there is exacerbating fears that a world nuclear power is rudderless and thus dangerous.

Japan is the most startling and troublesome example of a centrally controlled economy out of sync with the open capitalism which drives markets today. Russia's more spectacular failure at creating an honest market economy has left some there pining for the old days. Even the Federal Reserve Board could find itself locked in its inflation ideology -- but we're betting (Federal Reserve Chairman Alan) Greenspan is too smart for that.

-- The Los Angeles Times