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To be sure, the U.S. consumer will play a role: a $14 trillion economy -- still, the world's largest -- remains an influential contestant in the GDP arena, but if the global economy hopes to achieve a balanced, sustainable growth track, consumption by consumers in the world's other major economies have to play a larger role, so says economist Peter Dawson.
Dawson's analysis assumes that the U.S. consumer will return -- not to home equity loan-driven, frenzied, unsustainable consumption of this decade, but to a moderate growth track, after real median incomes start to rise after the U.S. economy starts to recover. The above is mentioned as a backdrop because some economic models assume severely-challenged U.S. consumption for several years; Dawson's model is not one.
Still, even a moderate-growth U.S. consumer spending model does not invalidate the need for structural changes in the global economy.
"Citizens in China, India, Brazil / Latin America, Russia, and Japan have to consumer more," Dawson said. "If they continue to depress demand through currency intervention or other mercantilist policies, it clouds the whole global recovery picture and timetable," Dawson said.
Dawson is optimistic about consumption growth in Russia, India, Brazil and the broader Latin American region. However, China and Japan remain problematic, for different reasons, he said.
"China has to allow foreign goods to circulate more freely in China, and it has to move away from any effort to devalue its currency [the yuan], as it will simply contract demand more by making foreign goods more expensive," Dawson said.
"Japan's problem is part demographic and part habit. Its aging population means its younger citizens will have to pick up the slack, in order for Japan to contribute to global consumption, on a net basis, but saving tendencies work against this," Dawson said.
In sum, in the post global recession world, rising consumption in emerging markets must take place for sustainable growth to occur, Dawson said. "The economies and middle classes of Russia, India, Brazil are large enough to create more demand, and combined with developed world demand, this should be enough to get the global economy on a sustainable growth track," Dawson said. "With those growth engines in place, consumer demand from China and Japan would be a bonus."
Economic Analysis: The era of emerging markets pumping out goods, then counting on U.S. consumers to drive global growth is over. As economist Dawson noted, emerging market demand will be needed to both get the economy out of recession and on a sustainable growth track characterized by multiple engines of growth, not just one growth engine in United States.
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Reader Comments (Page 1 of 1)
12-17-2008 @ 7:15AM
BHarrison said...
Now that the "life savings" and the discretionary income have been FRAUDULENTLY embezzled from the American people, we simply do not have the discretionary revenue to spend enough to "refuel our economy" or to adequately stimulate our economy.
The CORRUPT CEOs, FIs, corporations, and market people have simply skimmed off the savings and income of far too many Americans . . . this is totally unprecedented, except for what happened in the1930 Great Depression. Our lives and our economy are a lot more complex today, than they were for our grandparents or great grandparents during the 1930s.
Now that so many of the American people up up to their nose in debt, and have been devasted financially by all of this economic fraud, most Americans have been squeezed to the maximum. Now the only solution is to convince the rest of the world that they now have to become the "consumers to fuel the global economy" . . . that they now need to mortgage their lives and to spend or invest substantilly more to "feed the economic system of the global banks".
Our new "enemies of the people" of the world are: religious fanaticism and global banks . . . that accounts for 98% of the "evil" in the world. The global banking system is like one enormous pyramid scheme; it has to have a continuous growth or it collapses.
Isn't this all like some Star Wars movie where the space travelers observe some planet self imploding economically and socially? Is it a case of "life imatating art". It is all too surreal for the average person to fully grasp the consequences of these matters, isn't it?