Broad challenges to global economic health are rising gradually perhaps not yet fully recognized as they seem to be still far out at sea, but may soon crash upon shore like Hurricane Isaac’s storm surge. While the GOP Convention is delayed for a day, critical decisions, (from fiscal cliff to tax legislation) needed today are being put off till after the election, when the US economy may be already swept out to sea and adrift. The “Photo Parade” in this article misleads on the level of political agreement/commitment and emphasis on resolving now ever more globally shared challenges/risks.
The data/evidence is troubling more broadly. US job creation is stalled. Most of the Eurozone is in recession – today’s data for Spain was significantly worse than expected with a 1.3% economic contraction, but even more troubling is the rising withdrawal of Euros from Spanish bank accounts – down by 5% in last reporting period. It is a panic. China’s economy, the engine that helped pull the globe out of the last recession, is now again slowing by most indications, and China’s leadership no longer appears to be as quick on the gas pedal. While the concerns may have started due to credit quality and Eurozone structural deficiencies, the real issue is slowing global economic growth, inadequate job creation, spiking prices of essential food and oil and a middle class in a squeeze in the western democracies in particular.
Because there is no election campaign, the Chinese selection process for the very top leadership/Politburo may be unnoticed by most of the public. The Bo Xilai scandal may be a symptom of a more dramatic/contentious process behind the scenes that has made China’s leadership more cautious and less flexible in its reaction to growing economic challenges. The reliability, or lack thereof, of China’s economic data only adds to global uncertainty as to what is happening both politically and economically.
Europe has become a nut case – in the political sense. European political leaders are more about talking to themselves than doing. Thus, after every crucial meeting/challenge, there is a depressing return to the pre-euphoria that preceded – thus the tag “Another ‘Groundhog Day’ for Euro-Tragedy or Comedy?. Worse, while Europe continued to slide further in terms of employment, economic activity and consumer confidence, most European leaders set the example of going off on holiday for a month. Greece is not the real problem, although the symbolism is important. Rather, the ideological divide has still to deliver a commitment to economic growth. Austerity is the rhetoric in the current Netherlands election debate and not only the theological frame of reference of many political leaders in Germany.
The Obama-Romney policy divide is significant but is probably dwarfed by the differences that exist between the two more polarized bases of the two parties. Mitt Romney’s running mate, Paul Ryan, represents an even more dramatic shift to fiscal austerity. Today’s data evidenced a significant drop in consumer-confidence, which is at least in part linked to the spike in gasoline/oil prices. (See our Blog for Film "Oil Speculation Consuming Economic Recovery"). However, the visions of America’s economic as well as social/ideological fabric going forward are so divergent that there is little confidence of continuity – worse, there is fear of perpetuating political stagnation, (more heated rhetoric and less resolution), on key challenges/issues.
Emerging markets are ever increasing presence at global economic conferences. Nonetheless, most emerging economies still ply waters in the wake of the world’s mega powers, (US, EU and China) and thus can only marginally alter their financial destiny. Commodity based economies in particular will follow the lead of the giants, but will their fortunes are likely to oscillate even more wildly.
Global leaders are speaking to each other, or at least at each other, more than ever before. There is the G-20 and the G-8 and soon the UN General Assembly session and so on, and on… E-mails and iPhones work better than ever if leaders cannot meet face to face. However, I have the view that much of the talk is for show rather than geared toward solution. (These global conferences have served more as Photo opportunities for domestic audiences and forthcoming elections – thus again our “Photo Parade”).
Political leaders are loathe to admit discord or paralysis. Consequently, the language reflects diplomatic platitudes in effort to avoid being pressed to tough decisions. Further, most of the political leaders, from China to Germany to the US are looking inwards toward their election/selection even while speaking outwards to global political leaders. The end-result is, we have been on a jogging mill – much motion, a bit of manufactured sweat, but we are in the same spot, but a few precious months/years later. The UN General Assembly starts in a couple of weeks bringing together once again the same cast of characters. Will it again prove to be one more mere Photo-op and economic "Groundhog Day" moment?
Ambassador Muhamed Sacirbey - FOLLOW mo @MuhamedSacirbey
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