Tuesday, February 10, 2009

A Reallignment Ahead?

There are some really exciting potential consequences of this current global recession, especially if governments around the world do the right thing, and it appears to me anyway, that most countries are trying to do the right thing. Let me name a few:

1) A realignment of world economies: We have had a global situation where the really poor countries manufactured all of the goods we, Americans, consumed. So, since we were buying and not consuming, most of our money went overseas to China, Iran, Russia on either manufactured goods or oil. Those countries either put the money back into our economy through investments (China) or kept it highly concentrated within the ruling class leaking just enough out to keep their people happy (Iran, Russia, etc.). This was hardly a sustainable way to manage the world economy and it produced economic conditions that led very directly to the bubble and its eventual bursting that we're experiencing right now. What a realignment would mean is that if China could (and it seems that they are) pull some of that money back and spend more heavily on its citizenry - in schools, health care, infrastructure, they will see an increase in internal wealth distributed broadly. They will then be in a better position to consume more of the world goods, putting us in a better position to produce some of those same goods. Countries like Iran and Russia have lost much of their political leverage both internally and abroad, and hopefully this can give them an impetus toward reform and give us more leverage to encourage reform.

2) An opportunity to assist the most desperately poor in the world. One of the consequences of the booming economy was that there was a run-up in the global cost of food worldwide as recently as last summer. The poorest of us were literally starving, their governments were literally going to have to contend with riots. One of the consequences of the economic collapse is the global price of food (and oil) has fallen, easing the pressure on those countries. Solving world poverty is a solvable problem, I'm not sure exactly how the global recovery from the recession will help exactly, but there was a good consequence of the current global recession for those folks anyway.

3) We are in potentially a better position to fix some of our own internal problems in health care, dependence on foreign oil, education, and infrastructure. All of these things could be seen as economic stimulus. We have literally underfunded local infrastructure in favor of both tax cuts, military spending, and wasted, inefficient entitlement spending. The conservative argument that government is the problem has ironically allowed Republican government to really live up to that mantra. We now have a president who believes that government can and should contribute and perform and that it can and has done so efficiently and effectively. Now is the opportunity to reform our health care system, our schools, reach for alternative energy solutions.

4) We have a huge imbalance between the halves and the have nots. Too much of our local GDP was controlled by a very small percentage of our working population. We had many, many people working hard, doing meaningful work but barely getting by. Right now there's a real palpable anger at the excesses in wall street, the exorbitant salaries and bonuses. I hope this allows us to work toward an economic system where the salaries are more broadly distributed, both through the markets and if necessary enforced through tax policies. Success should be rewarded, but its been far too easy to game the system to benefit the few. Hopefully, there will be a resurgence in better regulation and more responsible CEOs and business leaders.

This is my hope for the future.

No comments: