THE BROADER VIEW Global economic warming? A change in the financial climate

By Hoyt Purvis <a href="mailto:email@nwarktimes.com">

Posted: August 23, 2009 at 5:50 a.m.

• Print item
• E-mail
• Share
• Tweet

Have we entered into a period of economic recovery?

There are about as many different answers and responses to that question as there are assertions aboutwhat is or isn't or should or shouldn't be in the health care legislation.

The health care debate has, unfortunately, turned into a rather tawdry sideshow, with some of the claims being made every bit as deceptive and misleading as those made by the old-time carnival barkers or pitch men. Important as the issue may be, and symbolically significant for President Obama, it is the broader economic picture that is more consequential and ultimately probably more of a determining factor in Obama's political status - though Obama correctly points out that what happens on health care can have considerable economic impact.

So are we seeing improvement in the economic picture?

The first thing we need to know to answer the question about economic recovery is who "we" is.

And the simplest answer would be that some of "us" are and some are still lagging badly. There are positive signs and negative indicators.

Remember, this has been a global economic recession, affecting countries around the world.

So we need to look around the world and consider not just what's happening in this country, where some regions and sectors are doing much better than others, but to look at other countries, with some doing much better than others - in some cases, significantly better than the United States, at least by certain measures.

This leads me back to the health care debate for a quick but relevant aside. You've probably heard about the ludicrous editorial in Investor's Business Daily, which claimed that physicist Stephen Hawking, the brilliant physicist who has a degenerative motor neuron disease, would never have survived under Britain's National Health Service medical care. This was, of course, part of an attack on a "nationalized" medical system. There may be legitimate questions or concerns about that system, but Stephen Hawking is, in fact, a British professor who said, when asked, "I wouldn't be here today if it were not for NHS. I have received a large amount of high-quality treatment without which I would not have survived."

Health care in the United States is exceptionally good and advanced in many respects; however, there are other countries, with quite different health-care systems, that are of high quality as well and offer broadbased service.

The point here is that too many in this country are badly informed about what goes on in the rest of the world and fall into facile stereotypical assumptions - failing to realize all the diverse factors that are part of the socio-economic and political make-up in other countries, which in turn feeds into the global panorama.

When economic analysts look at that panorama today, they see some promising signs in certain regions, particularly in parts of Europe and Asia. They point to a global manufacturing resurgence and the reports from Germany, France, and Japan, three advanced economic powers, all experiencing growth in the most recent quarter. In Japan, a significant jump in exports and a large-scale stimulus program have put that country back in the economic growth column after a deep downturn.

Not long ago, it would have been hard to imagine a headline such as that appearing recently on the front page of The Wall Street Journal: "Europe Recovers as U.S. Lags."

China, India, Hong Kong, South Korea, Indonesia, and Singapore have also reported economic growth, an indication that stimulus efforts are paying off across the globe. Brazil, Latin America's largest economy, is on an upward economic path as well.

There are two points to keep in mind, however:

(1) This recovery is still relatively fragile,both globally and in many of these individual countries. Fed Chairman Ben Bernanke said this week that while the global economy is on more stable ground, he isn't expecting a rapid recovery.

(2) In modern times the United States has usually been the pace-setter in world economic trends and in leading the way in global economic rebounds.

Although there is no doubt that the United States is still an economic powerhouse and what happens in this country will significantly affect others, what we have to understand is that what happens in other countries and regions affects us as well.

It is particularly noteworthy that some of the "developing" nations are shining amidst what has been general economic gloom. Indeed, it is the emerging giants - China, India, and Brazil - which in many respects are setting the pace for broader recovery. Those three, along with Russia, constitute what is known as the BRIC countries and held their own summit meeting earlier this summer to push for more influence in global financial affairs. They also expressed dissatisfaction with the U.S. dollar's role as the world's only reserve currency. (China has started trading with these countries in their own currencies.) Although Russia wants to be a major factor in the global economy, it is plagued by economic difficulties and isn't doing nearly as well as the other three - so for now we can refer to the BIC countries as those with growing global clout.

Not too many years ago, these three nations were considered to be part of the "Third World," a term not heard much anymore. At the time, the term was applied to less-developed countries in Asia, Africa, Latin America, and the Middle East which were outside the two major power blocs - the First World being the United States and its allies; the Second World being those in the Soviet orbit.

Certainly there are still a number of countries in the less-developed category, some of them struggling to subsist, and it is also true that there are large segments of population in the BIC countries that are outside of or on the margins of economic prosperity.

However, what we have witnessed in some of those former Third World countries has been a remarkable turnaround. And though they are not without significant weaknesses, their financial institutions are in comparatively good shape and their governments are not burdened with massive debt.

An interesting and not insignificant aspect of the current world economic picture is that China has a decided interest in a stable and growing U.S. economy because of the inextricable linkages between the two. As America's largest creditor, and with an estimated two-thirds of its more than $2 trillion in reserves in dollar assets, China has much more at stake in the U.S. economy than just as an export market. At the U.S.-China Strategic and Economic Dialogue last month, China's finance minister said the United States must give "high attention" to fiscal deficits.

Here's a telling point about the way things have evolved: Coca-Cola, that most quintessential of American products, experienced better than anticipated profits in the last quarter - in large part because of robust earnings in China and India. Beverage sales were actually down in the United States during that period, but 33 percent volume growth in India and 14 percent in China boosted Coke's overall revenue.

That's a striking indication of how much things have changed. We hear lots of discussion about global warming and environmental climate change these days, but as we hope for global economic warming, we need to understand more about the changing economic climate as well.

Hoyt Purvis is a journalism and international relations professor and served as press secretary to Sen. J. William Fulbright, foreign/defense policy adviser to Senate Majority Leader Robert Byrd, and as chairman of the Fulbright Foreign Scholarship Board. His column appears on Sundays.

Opinion, Pages 5 on 08/23/2009

Comments

To report abuse or misuse of this area please hit the "Suggest Removal" link in the comment to alert our online managers. Please read our comment policy.

Use the comment form below to begin a discussion about this content.