The WSJ had a story yesterday headlined, 'Global Search for Growth Will Turn to U.S.' The focus of this article is a question -- who will the world economy rely on for its consumer base, more specifically, will America remain that base or will we contract relative to others as the only indispensible consumer? As I see it, the answer will have a lot to do with where America sits, economically and socially, in five or ten years. The question is up in the air because America just created a global recession that threatens to turn into a world depression, just as other nations are developing new consumer bases, i.e, China. You never want to piss off the world, but especially not right as an alternative to you is in the process of emerging.
So, what do we know. We know there will be a fierce contraction this year and next, and then a slow recovery will take over after that. Let's call that a total of three or four years. What about year five and beyond? What about the medium-term?
One deciding factor about year five and beyond could be whether the US remains by far the most significant consumer basis in the world. Right now there is the thought that China might eat into that significance. So the question is, while the US will remain the most important, will it remain as important, as central, as unilaterally determinative? That, we might say, is another question. If China eats into American demand -- in other words, if the world's producers, investors, and bankers transfer a certain amount of the world's business to China as their population, already enormous, creates an-ever growing middle class of consumers that, just by numbers, could swallow us Americans -- our standard of living will go down. We will have to produce more and consume less. We might even feel it, and it will make our lives different than they are now, and have been. Specifically, it would be less access to easy money and less than limitless consumer items.
Of course, the above scenario is but one alternative. The WSJ article suggests another. The article reports the world's elite believe the system still depends on American consumers, and bad. I gotta say, whether they are right or wrong on that, this WSJ story is fabulous. It uses the word 'elite.' I get disappointed when people shy away from using it, in a sociological way. I don't like the political use of the word -- as if anybody should be ridiculed because he or she's an elite. But when just talking about how society works, the word, or something like it, is necessary. Anyway, here's an excerpt and the question is: what do elites think?
Two questions preoccupy the world's economic elite here: Will the government money pledged to prop up national economies be enough to keep the world from going into a prolonged slide? And where will the growth come from, once bottom is touched?
At the start of the five-day World Economic Forum, the broad outlines of answers are emerging. Economists say the fiscal-stimulus packages from Washington to Beijing will cushion the downturn but fall short of preventing a world-wide recession. And global growth, when it comes, will still be powered in part by U.S. consumers -- though they'll spend far less than they did in the debt-fueled years of the recent boom.
Chinese Premier Wen Jiabao, the first Chinese leader to attend a Davos meeting in the event's 38-year history, will likely seek to lower expectations that China can extract the world from the economic crisis. Despite its rise as a global production hub, China -- like emerging Asian economies such as India -- is too small, too poor, and too export-dependent to provide much of a buffer for the global economy in the next few years.
Asia's inability to compensate for the drop in U.S. consumption means any global recovery will be slow in coming and marked by lower growth rates than the world has seen in recent years.
But again, the real question with US-China and who is the world's consumer is not today. It is five, ten years from now, and beyond.