Cover story in today’s New York Times: “Rising Fears That Recovery May Once More Be Faltering”. The article notes that oil prices are high, a sign that some folks on this planet have plenty of cash. On the other hand, growth in the U.S. and Europe is not very strong. Could it be the case that this is simply a realignment of worldwide wealth in favor of people in places other than the U.S. and Europe? E.g., the places where they build stuff (e.g., Asia) and the places where they have stuff that everyone else wants (e.g., oil-rich countries, diamond/mineral-rich countries). Obviously there is nothing that says the U.S. and Europe can’t grow their service economies, but perhaps growth in services is naturally a slower process than expanding production in a factory or drilling a new oil well (look at the lack of productivity growth in education and health care, for example, and these are ever-larger fractions of the U.S. economy).
5 thoughts on “Sluggish recovery in the U.S. and Europe is just a realignment of worldwide wealth?”
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Yes, I believe you are correct and it is what I have been trying to explain to friends (and my children) since the first crash.
There was a time when all of the wealth was held by England. The sun never set and all that brutality. Every interesting item and all of the wealth of the globe was controlled by a single (tiny) island. Well, and a few competitors.
Then, over time, it all dissolved. Right now I see an absurd amount of wealth piled on our shores. And without a real reason for it, from a global perspective. Borrowing money so was can buy things we don’t really need (second homes, graduate school which makes no difference in income levels, helicopters). So as the means become available to other nations, I would expect them to claw some of this relative wealth back to within their borders.
I don’t think a realignment of world wealth describes the situation. I think it’s more of a sobering deleveraging global environment.
Production is the bottom line. All services just trade the productivity of the 1 guy in China. Oil has become a completely impractical fuel. You would never invent a transportation system that costs $5 to go 30 miles, today.
If you’ve read Neal Stephenson’s “Snow Crash” he predicted (this was in 1992) that the US would eventually offer the world only “movies, music, and microcode.” His other prediction of mass privatization hasn’t proved quite as accurate (although maybe it is, depending on how you look at it). Having outsourced all physical production to Asia, the US does nevertheless still lead in popular culture and software. And another salient point is that we still have military bases in every continent, where no other nation has any military bases outside of their own territory. It’s also worth noting that Asia’s electronics manufacturing depends greatly on US buying power (for now, at least).
So does the US need to get down to brass tacks economically? Definitely, and I think it’ll be a very good lesson for people to learn. But are we surrendering our global hegemony to China? Not quite yet, I don’t think.
The way for US and Europe to get back into economic dominance is to think outside the box. For example, we all know that oil is non-renewable source of energy…you either have it or you don’t. Nuclear on the other hand is efficient, but dangerous. Now, why not realign the resources to build a renewable energy much like nuclear but is les hazardous to the people and the community? If US and europe have that, sure all their economic woes will be fixed