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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Reader Comments (Page 1 of 1)
11-16-2009 @ 12:40PM
sonnype said...
The United States cannot afford to let our jobs continue to flow to low wagw countries.If good paying jobs are not created than america will face domestic turmoil and social unrest that will traumatize it.
11-16-2009 @ 1:07PM
MyKisa said...
....maybe some of the toys will have to be broken and then replaced.....uh, big war?
11-16-2009 @ 2:46PM
Iridium said...
Globalization's first decade was the 1990s under Bill Clinton. The next decade will mark the third decade of the implementation of globalism. It takes around thirty years to radically change the landscape of an economy. It takes much longer to plan.
The seeds of the current growth of globalism were planted at the turn of the century. Two world wars were fought for the rights to control the new global economy. The Cold War prevented the plans from being realized. For twenty years protectionism dominated the economic landscape and domestic production and consumption ruled.
There was a problem however. The middle class was becoming too powerful of an economic force. Reliance on the centralized government was perhaps at the lowest level in modern history. Plans were made to keep the wealthy in power and to destroy the prosperity of the growing middle class. Under Nixon the globalist plan was set in motion. The gold standard was rejected and China was opened as a trade partner. Both would have profound effects on the growth of globalization in a few short decades.
The majority of big box retail stores that rely on globalization for profit grew by leaps and bounds during the 1990s. The wholesale destruction of small and medium business also occurred during the 1990s. More privately owned retail stores were closed from 1992-2000 than any time in history.
The rise of Home Depot and Lowes took the country from over 200,000 individual hardware stores to less than 1000 in a decade. The rise of Circuit City and Best Buy drove the local appliance and TV store into the ground. Dick's and Sports Authority put hundreds of thousands of small sporting goods stores out of business.
Walmart went from a handful of mega stores in the early 1990s to a Walmart in almost every city and suburb in America by 2000. In 1994 there was only one Walmart within 20 miles of the house I grew up in. Now there are 15.
This is the true legacy of Bill Clinton and 1990s liberalism. The wholesale destruction of the engine that creates middle class wealth. The destruction of the locally owned and operated business. Small business can not exist in an era of global enterprise. They simply can not compete in the economy of scale necessary to generate profit.
The next step in the program was to remove the barriers of global trade and government regulations of the stock market. When Bill Clinton signed the Commodities Futures Modernization Act the globalist agenda was set and the sovereignty of the United States ended. That single act also doomed every middle class American to economic extinction. Every bit of the last decades boom and bust can be blamed on that single piece of legislation.
We have already had hyperinflation because of it and never in history has more wealth been transferred to the top 1%.