The Democrats received a punishing blow on Nov 2 as the Republicans regained the House of Representatives comfortably while cutting into the Democratic lead in the Senate. The next two years would likely witness a major struggle between the White House and the bitter Congress riding on the wave of discontent fuelled by Obama’s failure to fulfil the promises from his galvanising campaign in 2008. Though the US is no longer amidst a recession, the anaemic growth rate has not been able to make a substantial dent in the high unemployment rate which currently stands at 9.6 per cent.
The United States is currently passing through a transitional period in its history as the once cherished ‘American dream’ appears to have degenerated today. The US’ short-term interest rates are at or near zero per cent; the federal reserve has just recently provided an injection of $600 billion into the financial markets in an attempt to get the economy rolling again.
The $800 billion fiscal stimulus of 2009, which was proclaimed to be the panacea for turning the US economy around, fell far short of expectations. In fact, the Republican party fully capitalised on the discontent of Americans by discrediting Obama’s left-leaning Keynesian policies and drumming the fears of high future inflation due to soaring government deficits.
Several economists have begun to draw similarities between Japan of the last two decades and the United States of today. The once promising Japanese economy has not been able to break away from low growth and deflationary traps despite having attempted a wide variety of policy measures. Though the United States is still the world’s largest economy, it does now appear that its finest days are behind it. Many analysts and forecasters expect China’s economy to surpass the United States’ economy by the middle of the next decade.
The forces of globalisation unleashed over the past two decades, though profitable for large corporations, have also contributed to the problems of the American workforce. Whereas the aggregate supply-shock provided by China has raised living standards of consumers throughout the world, including in the western nations, the comparative cost-advantage of business and a large pool of skilled workforce in Asia has allowed multinational firms to move away from their reliance on the Western worker.
India and China have done a spectacular job by positioning themselves as the outsource destinations for the globe. Their increased capacities have also started to pay dividends for them by fuelling domestic and regional demand for consumer and business products. Though China has handily outperformed India in manufacturing, the ‘brand India’ and its primary torch bearers around the world, namely the Indian expatriates, have been able to convert the youth-driven IT revolution into large business enterprises.
Indian firms today are on their way to become household names in western business centres. From the global reach of the Ambani Brothers’ Reliance Group to the manufacturer of the revolutionary $2500 Nano car, Tata Motors, which has also acquired the iconic Jaguar and Land Rover brands, Indian firms are making their mark in a variety of industries. The dominance of US firms is likely to decrease as a rising Asia accelerates to catch onto a limping US.
We in Pakistan have missed the initial thrust of globalisation. It is time that we identify specific areas that we can excel in and align our competencies with the needs of a richer and rising China and with rest of the emerging giants. It is fruitless at this point to waste our energy by exclusively relying on obtaining trade benefits from the US. Let’s not make the US the end all for our economy.
The sooner we recognise the shifting global economic dynamics the better we will be able to position ourselves in the fast-paced world of today. The time to act is now and incompetence at this point will have us waste the gift that our favourable demographics offer us today. It’s time that our government and our businesses identify the demands of the rising Asia and develop our ability to fulfil it. We cannot afford to miss the train once again.
The writer is a management consultant and a regular contributor. Email: ayaza75@hotmail.com
The United States is currently passing through a transitional period in its history as the once cherished ‘American dream’ appears to have degenerated today. The US’ short-term interest rates are at or near zero per cent; the federal reserve has just recently provided an injection of $600 billion into the financial markets in an attempt to get the economy rolling again.
The $800 billion fiscal stimulus of 2009, which was proclaimed to be the panacea for turning the US economy around, fell far short of expectations. In fact, the Republican party fully capitalised on the discontent of Americans by discrediting Obama’s left-leaning Keynesian policies and drumming the fears of high future inflation due to soaring government deficits.
Several economists have begun to draw similarities between Japan of the last two decades and the United States of today. The once promising Japanese economy has not been able to break away from low growth and deflationary traps despite having attempted a wide variety of policy measures. Though the United States is still the world’s largest economy, it does now appear that its finest days are behind it. Many analysts and forecasters expect China’s economy to surpass the United States’ economy by the middle of the next decade.
The forces of globalisation unleashed over the past two decades, though profitable for large corporations, have also contributed to the problems of the American workforce. Whereas the aggregate supply-shock provided by China has raised living standards of consumers throughout the world, including in the western nations, the comparative cost-advantage of business and a large pool of skilled workforce in Asia has allowed multinational firms to move away from their reliance on the Western worker.
India and China have done a spectacular job by positioning themselves as the outsource destinations for the globe. Their increased capacities have also started to pay dividends for them by fuelling domestic and regional demand for consumer and business products. Though China has handily outperformed India in manufacturing, the ‘brand India’ and its primary torch bearers around the world, namely the Indian expatriates, have been able to convert the youth-driven IT revolution into large business enterprises.
Indian firms today are on their way to become household names in western business centres. From the global reach of the Ambani Brothers’ Reliance Group to the manufacturer of the revolutionary $2500 Nano car, Tata Motors, which has also acquired the iconic Jaguar and Land Rover brands, Indian firms are making their mark in a variety of industries. The dominance of US firms is likely to decrease as a rising Asia accelerates to catch onto a limping US.
We in Pakistan have missed the initial thrust of globalisation. It is time that we identify specific areas that we can excel in and align our competencies with the needs of a richer and rising China and with rest of the emerging giants. It is fruitless at this point to waste our energy by exclusively relying on obtaining trade benefits from the US. Let’s not make the US the end all for our economy.
The sooner we recognise the shifting global economic dynamics the better we will be able to position ourselves in the fast-paced world of today. The time to act is now and incompetence at this point will have us waste the gift that our favourable demographics offer us today. It’s time that our government and our businesses identify the demands of the rising Asia and develop our ability to fulfil it. We cannot afford to miss the train once again.
The writer is a management consultant and a regular contributor. Email: ayaza75@hotmail.com
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