[Stolen wholesale from “The Irish Economy”:http://www.irisheconomy.ie/index.php/2009/05/04/dependency-theory-for-the-21st-century/, a very interesting blog, which I recommend to you all].
The last time the world experienced an economic catastrophe on the present scale, governments in Latin America and elsewhere drew the conclusion that reliance on fickle overseas markets was a dangerous thing. World War II only served to reinforce this conclusion.
Similar lessons are being drawn “today”:http://news.bbc.co.uk/2/hi/business/8031456.stm, with one crucial difference. Back then, the decision was made to artificially decouple national economies from the international economy by developing protected industries that would service the home market. Now, the focus is on lessening export dependence by boosting local demand, which will involve temporary stimulus measures in the short run, but more structural measures in the longer term, for example promoting “social safety nets to give Asian consumers, especially the poor, the confidence to spend”. Moving towards higher wages, a more equal income distribution, and lower savings rates in countries like China, so that more of what is produced there is consumed there, would seem to be among the more benign adjustment scenarios available to the world economy today.
{ 3 comments }
JoB 05.04.09 at 2:01 pm
If the Chinese would put their money in buying themselves social security instead of buying the US debt, wouldn’t that be a trifle unwelcome for the US economy?
Antti Nannimus 05.04.09 at 11:01 pm
Hi,
I killed the last post on The Irish Economy with Guinness Stout and Irish whiskey. Perhaps I can do it again.
Here’s to a long life and a merry one.
A quick death and an easy one.
A pretty girl and an honest one.
A cold pint– and another one!
Have a nice day!
Antti
P O'Neill 05.05.09 at 11:26 am
The more troublesome scenario is where the bankers convince the Chinese that the people would be more likely to spend with the security that would come from endlessly rising home values if the magic of credit access was opened up.
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