World will have to 'keep up with the Jones'

Still, it's hard to fathom that the $70 trillion global economy was that dependent on suburban citizens John and Jane Smith going to the mall routinely -- and sometimes not prudently/within their budget -- to buy something. After all, didn't globalization lift more than 1 billion citizens in the developing world out of poverty? Isn't China's middle class expanding at the fastest rate of any major economy? Weren't the new linkages among Latin American economies creating demand for microwave ovens, washer/driers, autos, and clothes?

All of the above about the emerging markets is true, but they still were not enough to prevent a global recession -- the world's first since the end of World War II in 1945 -- from taking hold, once U.S. consumer spending started to lag. The belt-tightening, and outright loss of consumers due to large lay-offs, sapped corporate revenue and earnings growth, put the brakes on a long bull market in international trade.

And the downturn has generated more than it's share of ironies. Here's one: the world that often complained about American hubris (sometimes justifiably so), now suddenly finds it can't grow without the U.S. economy growing. Apparently that hubris contained a lot of dollars and purchasing power.

And about that purchasing power: a U.S. with less purchasing power necessitates that the Chinas and Brazils of the world do their part to eliminate one structural imbalance in the global economy. If the likes of China, India, Brazil, and Russia generate increased internal demand -- create engines of growth aside from exports -- and achieve self-reliant GDP growth, the developing world will have less American hubris on its hand and we'll all benefit from a more-balanced, stronger global economy -- one with multiple engines of growth. Internal demand is a necessity in these economies: demand from the U.S. will almost certainly be considerably less in the next expansion than period to the globalization era. (And it would be great to see international residents buying more U.S. goods and services.)

It will be a more-balanced, stronger global economy, that is, so long as residents of the emerging markets don't use home-equity loans and cash-out refinancings to fuel that growth. We in the states know how that flawed practice ended.

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Financial Editor Joseph Lazzaro is based in New York.