Friday, May 30, 2008

Second life

In a funny coincidence I just finished writing an e-mail about this very topic of what's going to happen with globalization (and of course, how to profit from that). Here is Philip Stephens in the Financial Times with Uncomfortable truths for a new world of them and us.
The world has been turned on its head. Consumers in the wealthiest nations are struggling with the consequences of the credit crunch and with the soaring cost of energy and food. In China, retail sales have been rising at an annual 15 per cent. I cannot think of a better description of the emerging global order.
In another interesting coincidence, I found this link via Naked Capitalism, who mentions a place dear to my heart in his commentary.
But the ugly fact is that the US (and the UK) has the potential to go from first world to third world on a relative basis. We've already have one developing economy trait: the emergence of a super-rich cohort that lives in splendid isolation, often with considerable security.

If you think that's impossible, remember that Argentina had a spectacularly rapid fall. Bad leadership can destroy an economy in a surprisingly short period of time. Again, the US will hopefully escape that fate, but no matter what happens, our economic strength is ebbing as others are moving forward. A severe crisis in the advanced economies could lead to a bad outcomes even in emerging economies, but that scenario has perils of its own.
I don't think there's any reason to believe that the US will be destroyed in the long-run by these changes in globalization. After all, it is beginning with a remarkable secular head-start, even if the cyclical tide is against us. But avoiding this -- avoiding becoming Argentina -- will require a certain political will. 8 more years of George Bush would probably be America's undoing.

Argentina and the US are a little bit like twin colonies separated at birth. Someday I hope they are re-united, but I definitely hope it's because Argentina comes to resemble the US, warts and all, rather than vice-versa.

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