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Globalization is rushing ahead, but toward what?

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One aspect of globalization -- basically free markets and the transfer of jobs to lower labor cost production centers -- that remains a high research priority for many economists studying markets is consumer spending. Or, more specifically, where are all the new, international consumers going to come from?

That's because the world in this early stage of the globalization era has an abundance of manufacturers and producers, but it hasn't identified where all the new shoppers will come from for the increased amount of goods.

One aspect of consumption is certain, economists generally agree: U.S. consumer spending will not be enough to support adequate, sustainable global GDP growth. Moreover, it was the myth of and the reliance on U.S. consumer spending as the primary engine of global GDP growth in the current decade that helped cause the global recession in the first place. When tapped-out, debt-laden, or laid-off U.S. consumers stopped spending, the export-dominant economies of the world, particularly in emerging markets, collapsed shortly thereafter.

For globalization's second decade, no one expects or is counting on U.S. consumer spending to pull the world out of its recession. In fact, in research circles in the states, it remains an open question as to whether U.S. consumers can pull just the U.S. economy out of its recession. With the United States having entered the "frugal consumer" era in which Americans save at a much higher rate, "we've entered uncharted waters," to borrow a Bob Woodward phrase. The conventional wisdom (but by no means empirically-demonstrated conclusion) is that U.S. consumption will at least come close to consumption patterns of previous expansions. Still, given the high private debt levels and large work force declines (7.6 million jobs lost during the recession), even that modest accomplishment is by no means assured.

And yet, despite the likely reduced consumption by Americans, and the lack of (so far) the appearance of substitute growth engines internationally to maintain adequate, sustainable, global GDP growth, the world has proceeded full-speed-ahead with globalization, without much critical discussion at the global forum level as to where the new customers are going to come from, and what the consequences will be for national economies, east and west, if the those growth engines do not appear.

It's as if a base runner for the New York Yankees in a World Series game is running for third base on a base hit, and prepares to head for home plate, without looking for a signal from the third base coach. (That's something no 2009 New York Yankee would do, by the way.) The result could be the runner is safe and scores a run ... or is thrown out by 20 feet. That's a pretty big difference. Likewise with the global economy: international leaders have to pick up a few clues about what's ahead next before letting globalization round third base and head for home.

Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.

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Last updated: November 20, 2009: 06:35 PM

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