Business NOTES

October 12 1998

Business NOTES

October 12 1998

The Viagra solution: a fix for economic ills

The sexual potency drug has the power to lead a consumer spending spree that could rescue faltering economies

The Nation’s Business

Peter C. Newman

Suddenly, there's the smell of panic in the autumn breeze, the distinct aroma of once-rational investors going goofy as they dump their stocks and abandon their reasonable outlooks. Desperate times require desperate measures. And maybe it will take a strong dose of Viagra to save the world for capitalism. (For details, please keep reading.)

Stripping risk from overexposed portfolios is always a good idea and it’s certainly time for the unprecedented eight-year stock market spree to reach for more realistic values.

But why such panic?

That’s the nature of the beast. During the past few years, we have become slaves to hype and hyperbole. If a typical high-tech company’s

earnings don’t grow by 40 per cent a quarter, it’s toast. Stocks have been overvalued for such a long time that with every hiccup investors panic. When Northern Telecom confirmed it would meet its profit projections but might experience lower revenues, hysterical investors last week wiped more than $9 billion from its market value.

When you expect miracles, reality is bound to disappoint.

History has moved so fast. It’s not quite a decade since the Berlin Wall came down and everything looked possible and cheerful.

Among the most popular predictions then (including some made in this column) was that the 21st century would be the Age of the Dragons—that Asia would lead the world economies into a new age of plenty. Praise for the concept of the global village was heard everywhere, for the barriers it would eliminate and the shared prosperity it would bestow on earth’s far meadows.

Instead, the world seems to have imploded, and globalization turned out to mean nothing more complicated or beneficial than the feeling we’re all in the same boat.

What’s essential now is to keep one’s nerve and decide whether we’re facing the collapse of the world as we know it, or one of those nasty dips that inevitably follow economic peaks. So far, the evidence strongly points to the latter. We most decidedly are not in an economic endgame bound to climax in another Depression. Times will get tougher, but providing the Americans don’t respond to their growing trade deficit by becoming protectionist, most economies will recover, probably in time to celebrate the millennium, only 15 months from now. (Ends of centuries energize investors; the idea of a new start gives everybody hope; consumers will start spending again, and most economies will turn.)

Still, some bold reforms are essential. While Russia’s plight is brutal, its economy remains too insignificant to worry anyone outside its immediate orbit. That’s not true of Japan. That country’s weary politicians will have to face the uncomfortable reality that the status

quo, which they have packaged under eight different but basically identical governments during the past decade, is no longer tenable. The country’s interest rates have been hovering at or near zero for the past 38 months, but that intended incentive has had no effect. The country’s largest municipality, Tokyo, is in fiseal crisis. Banks continue to fail and 22 of the country’s largest corporations are in danger of having their credit ratings cut.

A political revolution designed to modernize its ingrained culture is overdue. Because saving face is such an essential part of the Oriental makeup, this will be difficult but not impossible. Without it there can be no turnaround.

Despite the many weak and struggling players on three continents, the International Monetary Fund last week issued updated

figures that showed the world’s GDP for 1998 is still expected to increase by two per cent. (The IMF’s growth prediction for Canada, at three per cent, was down only 0.2 percentage points from its original projection earlier this year.)

What the world fears most now is the kind of massive deflation triggered by a collapse in demand. That was what set off the Great Depression of the 1930s, when production and trade kept falling by an average of 10 per cent a year, as consumers were unwilling or unable to pickup the slack.

And that’s where Viagra comes in.

The only sure way to rescue faltering economies is to stimulate consumer demand. The United States, where some five million males have already used the sexual potency drug (and an estimated 30 million others need it), has experienced a remarkable boomlet in lifestyle-enhancing products, such as sports cars, yachts, foreign travel and

other items and activities that appeal to the senses. According to Success magazine, Viagra is causing the old boys to experience a radical shift in their self-image, which in turn is loosening their purse strings—and they’re the generation with the most disposable cash. ‘The Viagra phenomenon,” the magazine rhapsodized in its September issue, “isn’t just a love story. It’s an entrepreneur’s dream.” The magazine even suggests, tongue in cheek, the birth of 390,000 new “Viagra babies” by next spring, based on the historical average of a 13-per-cent impregnation rate for sex between fertile individuals.

One of the few serious studies of the phenomenon agrees. “When men start feeling better about themselves,” writes Dr. Steven Lamm in The Virility Solution, a book on the Viagra revolution, “they start spending money. There’s going to be more dating, more people going to restaurants. Every industry that benefits from increased well-being will benefit.”

Next time you’re feeling frisky, don’t fight it. Remember, you’re saving the world economy.