More Reasons to Think Globally

I mentioned in my "Viewpoints" post a few days ago about how I think more in terms of the world and not just the US. The statement I made could probably bear more explanation, and part of that is the need for us in the US to realize the growing complexity of interaction between us and the rest of the world in all areas of life. This post from Robert Reich is an economic example of why I think it's dangerous to be too insular in your perspective:

But in a more significant way, the de-coupling is not at all good news for us. It means the price of many things we buy from developing nations -- especially raw materials like oil - will continue to be high, and might even rise. Years ago, recessions in the United States depressed prices in the developing world, including oil prices -- and these price drops helped cushion us against even deeper recessions. Now it's the reverse. China's almost insatiable need for Middle-East oil, for example, continues to bolster oil prices even though demand for oil is slowing here as the American economy slows. As a result, high global oil prices are making our slump even worse.

The world no longer revolves around the US. In fact, the US is much more dependent on the rest of the world than it was 20 years ago and more so than we would like to admit. Every year we become more of a consumer and less of a producer society. This is partly due to sending production and support jobs overseas to save money, and partly because the more cool new stuff gets made, the more we want it. Our mentality is to own the latest, greatest thing (which developing nations are only just catching on to), and it costs us in our lifestyle as well as our wallets.

While we may be tightening our belts to ride through a recession, we won't be getting relief on things like gasoline prices or imported goods because they are still in strong demand in the rest of the world. In the flourishing new economies of places like China and India, where they are just beginning their love/hate relationship with personal car ownership, they are going to want everything we had in say post-WWII America. Cars and road trips, stereos and music, and refrigerators and junk food left overs to keep in them.

The US can't rely on the rest of the world economy keeping pace when we have a downturn. We have to fix our own problems and catch back up to them. It's the way of the world in the 21st century, and it's only going to become more obvious as time goes on. In the very short term, the windfall tax rebate we're all supposed to be getting will only help offset the higher prices for everyday goods (like $3+/gallon gas) and will be even less of a band-aid than the government had hoped for. And that's if you aren't immediately using yours to pay off debt or to stash away in savings - where it doesn't boost the economy at all.

posted by Tom at 12:36 PM | 0 comments |

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