{"id":38695,"date":"2011-08-17T10:01:21","date_gmt":"2011-08-17T15:01:21","guid":{"rendered":"http:\/\/media.lclark.edu\/content\/hart-landsberg\/2011\/08\/15\/a-shakey-world-economy\/"},"modified":"2012-02-20T16:15:57","modified_gmt":"2012-02-20T21:15:57","slug":"a-shaky-world-economy","status":"publish","type":"post","link":"https:\/\/thesocietypages.org\/socimages\/2011\/08\/17\/a-shaky-world-economy\/","title":{"rendered":"A Shaky World Economy"},"content":{"rendered":"

The U.S. economy is in trouble and that means trouble\u00a0for the world\u00a0economy.<\/p>\n

According to a United Nations Conference on Trade and Development\u00a0report<\/a>, \u201cBuoyant consumer demand in the United States was the main driver of global economic growth for many years in the run-up to the current global economic crisis.\u201d<\/p>\n

Before the crisis, U.S. household consumption accounted for approximately 16 percent of total global output, with imports comprising a significant share and playing a critical role in supporting growth in other countries.<\/p>\n

…as a result of global production sharing, United States consumer spending increas[ed] global economic activities in many indirect ways as well (e.g. business investments in countries such as Germany and Japan to produce machinery for export to China and its use there for the manufacture of exports to the United States).<\/p><\/blockquote>\n

In short, a significant decline in U.S. spending can be expected to\u00a0have a major impact on world growth, with serious blow-back for the United States.<\/p>\n

There are those who argue that things are not so dire, that other countries are\u00a0capable of stepping up their spending to compensate\u00a0for any decline in U.S. consumption.\u00a0However, the evidence suggests otherwise.As the chart below (from the report<\/a>) reveals, consumption spending in the U.S. is far greater than in any other country;\u00a0it is greater than\u00a0Chinese, <\/span>German, and Japanese\u00a0consumption\u00a0combined.<\/p>\n

\"consumption.jpg\"<\/a><\/p>\n

Moreover, there is little reason to believe\u00a0that the Chinese, German, or Japanese governments are interested in\u00a0boosting consumer spending in their respective countries.\u00a0 All three governments <\/span>continue to pursue export-led growth strategies that are underpinned by policies designed to suppress wage growth (lower wages = cheaper goods = stronger competitiveness in international markets).\u00a0 Such policies restrict rather than encourage national consumption because they limit the amount of money people have to spend.<\/p>\n

For example, China is\u00a0the world\u2019s fastest growing major economy and often viewed as a potential alternative growth pole to the United States.\u00a0 Yet, the\u00a0Economist<\/a><\/em> reveals that the country\u2019s growth has brought few benefits to the majority of Chinese workers.<\/span><\/p>\n

\"picture1.jpg\"<\/p>\n

According to the U.S. Bureau of Labor Statistics<\/a>, despite several years of wage increases, Chinese manufacturing workers still only\u00a0earn an average of\u00a0 $1.36 per hour (including all benefits).\u00a0 In relative terms, Chinese hourly labor compensation is roughly 4 percent of that\u00a0in\u00a0the United States.\u00a0\u00a0 It\u00a0even remains\u00a0considerably below that in\u00a0Mexico.<\/p>\n

Trends in Germany, the other high-flying major economy, are rather similar.\u00a0As the chart<\/a> below shows, the share of German GDP going to its workers has been declining\u00a0for over a decade.\u00a0 It is now considerably below its 1995 level.\u00a0 In fact, the German government\u2019s success in driving down German labor costs is one of the main causes of Europe\u2019s current debt problems — other\u00a0European countries have been unable to\u00a0match Germany\u2019s cost advantage, leaving\u00a0them with\u00a0growing trade deficits and foreign debt (largely owed to German banks).<\/p>\n

\"germany.jpg\"<\/a><\/p>\n

The Japanese economy, which remains in stagnation, is definitely unable to play a significant\u00a0role in supporting world growth.\u00a0 Moreover, as we\u00a0see below<\/a>, much like in the United States,\u00a0China, and Germany,\u00a0workers in Japan continue to produce more per hour while suffering real wage declines.<\/p>\n

\"japan.gif\"<\/a><\/p>\n

For a number of years, world growth was sustained by\u00a0ever greater\u00a0debt-driven U.S. consumer spending.\u00a0 That driver now appears exhausted and U.S. political and economic leaders are pushing hard for austerity.\u00a0 If they get their way, the repercussions will be serious for workers everywhere.<\/p>\n

Our goal should not be a return to the unbalanced growth of the past but new, more stable and equitable\u00a0world-wide\u00a0patterns of production and consumption.\u00a0 Achieving that outcome will not be easy, especially since as the United Nations Conference on Trade and Development\u2019s World Investment Report 2011<\/a><\/em> points out, transnational corporations (including their affiliates) currently account for\u00a0one-fourth of global GDP.Their affiliates alone produce\u00a0more than\u00a010 percent of global GDP and one-third of world exports.\u00a0 And, these figures do not\u00a0include the activities of\u00a0many national\u00a0firms that produce according to terms specified by\u00a0these transnational corporations.\u00a0\u00a0 These dominant firms\u00a0have a big stake in maintaining\u00a0existing structures of production and trade regardless of the social costs and they exercise considerable political influence in all the countries in which they operate.<\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. economy is in trouble and that means trouble\u00a0for the world\u00a0economy.
\nAccording to the United Nations Conference on Trade and Development\u2019s Trade and Development Report, 2010, \u201cBuoyant consumer demand in the United States was the main driver of global economic growth for many years in the run-up to the current global economic crisis.\u201d
\nBefore the […]<\/p>\n","protected":false},"author":1853,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[29,229,36,98,12498,64,1772,1777,1821,3920,76],"class_list":["post-38695","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-class","tag-consumption","tag-economics","tag-capitalism","tag-economics-great-recession","tag-globalization","tag-nation-china","tag-nation-germany","tag-nation-japan","tag-nation-united-states","tag-work"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38695","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/users\/1853"}],"replies":[{"embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/comments?post=38695"}],"version-history":[{"count":9,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38695\/revisions"}],"predecessor-version":[{"id":45108,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/posts\/38695\/revisions\/45108"}],"wp:attachment":[{"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/media?parent=38695"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/categories?post=38695"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thesocietypages.org\/socimages\/wp-json\/wp\/v2\/tags?post=38695"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}