Sunday, September 5, 2010

Global Economic Reality

         Is the US economy going to rebound after the debacle of the Bush years, leading the world out of global recession?  Or are we about to slide in the abyss of socialism?
The numbers say that neither of the extreme images is likely to be true, but lean goverment spending coupled with emphasis on manufacturing and heavy industry is a good prescription for a growing economy.

Some of the things these numbers tell us are

     a. First, the US is growing, but at rate of only 2.6%.  Many countries are growing more than the US, but some countries are much worse (I  confess that I find it exhilirating to think that politicians in other countries may be dumber than ours!). 

     b. It is certainly not the case that free market societies are growing faster than countries which have more government control of the economy. China is growing at a healthy 9.5% per year. Even Russia is growing a tad faster than the US  (and no, that does not mean that the US is more Communist than China or Russia).

    c. There are countries which are worse than the US. Spain is actually contracting, due partly to running up enormous debts during the global real estate boom and bust. Heavily socialized countries like Japan, the Scandavians, etc. are also stagnant.

d. The Pacific Rim countries which rely on heavy industry, manufacturing and exports are enjoying much higher growth rates. Korea, Malaysia, Indonesia and the Philippines are among the economies which are growing. I would guess that these countries have lower social spending per capita than the US, Japan and Western Europe.

    It seems to me that the countries which are still growing are those that resisted excessive government spending, but which favored heavy industry, and job creation via exports. Those that were disciplined enough to build up their industrial base are now reaping the benefits. On the other hand, the countries of Western Europe and North America, in which the politicians favor enormous deficits and high social spending, are now pretty much tanking.