J Brauer | © Stone Garden Economics
After a hiatus of two-and-a-half months’ time, the StoneGardenEconomics (SGE) blog is back. I have been traveling. Meanwhile, the wheels of the worlds of nature, politics, culture, and economics have kept spinning. Observing the United States from overseas makes that country (my adopted home) seem as familiar and as strange as ever: Another heat wave, another polarized presidential campaign that thus far is short of substance, another mass shooting, more cities declaring themselves bankrupt, and a lackluster economy that’s become routine.
Nature, people, markets, and politics all seem confused. Unemployment is still over eight percent of the labor force. The pace of bringing it down to a level of, say, four percent is actually not uncommonly slow: The problem lies more with the very high level from which to bring it down. As demand is weak, at least consumer price inflation has been near zero. Nothing much is happening on the housing front. Households and businesses still are busy reshuffling and rebuilding their resource bases. Government at all levels—federal, state, and local—seems to have a much harder time adjusting its accounts and balance sheets. It’s all a bit dire, and I don’t see anything much exciting happening for the next few years.
Meanwhile, the eurozone crisis drags on and on, the patient being shored up cosmetically while the underlying body economic withers away by the day. Britain, a non-euro EU member, and Spain, already are in recession again. Now, it seems, not even an orderly transition to a higher level of monetary and fiscal integration can stave off economic humdrum, or worse, for the next three to five years. Elsewhere, both the whole of Africa and the whole of Latin America are simply too small in economic weight to provide much of a global economic impetus. The same holds for the Oceania region (mainly Australia and New Zealand). This leaves southeast Asia but economic prospects here, too, are far more muted and dull than before. All in all, the short-run prospects for global economic recovery will remain weak for the next several years.
Still, longer-term, local opportunities exist. For example, the ASEAN Economic Community, an integrated economic zone, will open for business in 2015. If successful, this could provide a useful complement to India in the west and China in the north. Africa is, on the whole, more at peace, more democratic, and more open for business—hence employment, production, and internal and external trade—than before and one does not expect a wholesale reversal to the immediate postcolonial period of civil wars, brutal dictatorships, and economic catastrophe. Moreover, once the bloody wars in the Middle East and North Africa have sorted themselves out, there could be hope for an integrated economic region to emerge in the Mediterranean basin but this can hardly be in place before 2025 or later. Australia and, with it, New Zealand, will continue to swing the way China does, such is China’s impact on Australian trade. Central America is in grave danger of collapsing politically under the onslaught of drug gangs and drug money but Mexico and South America could well offer economic and political hope as the current follies of Cuba, Venezuela, and Bolivia become more and more apparent and people simply expect better of their leaders. But, yet again, these are things that will take a generation or more to come to fruition.
All in all, this is not a great time for the middle-aged and the old but those in their teens and twenties have perhaps quite some good long-term prospects to look forward to. To “cash in” on these prospects will require patience and tolerance, education and language skills, wit and foresight, an ability to adapt personally and culturally, and great willingness to travel and relocate. And it will require far more explicit transgenerational and transboundary thinking and acting than in the past.
The end of the second world war and the demise of the colonial period have brought in their wake global institutions built on nation-state parochialism. This has had its good sides. But it also has left the management of increasingly border-spanning, global problems in the hands of the least qualified players to address them—inward-looking, territorially bound nation-states. Meanwhile the worlds of business and civil society have become truly global. Correspondingly, to realize its long-term prospects, today’s young generation will need to rebuild the world political system and make it equally global, capable of dealing with global problems.
J Brauer is Professor of Economics, James M. Hull College of Business, Augusta State University, Augusta, Georgia, USA.