Not so long ago I was I invited to a dinner to listen to Jeff Immelt, CEO of General Electric (GE), one of the biggest and most admired companies in the United States.
With great pathos, he spoke about the financial crisis in the US and spoke in particular about the world economy and one of his remarks rings true to me, he said: “The best insurance we have for prosperity, peace, and democracy is free trade across borders, without any restrictions in terms of national competitiveness.”
And I couldn't agree more!
Through stronger international relations, will we neutralize stereotypical presumptions and, by that enrich our knowledge and embrace mutual understanding between cultures. This is necessary for a global economy that sustains international trade, production, competitive service and consumption resulting in prosperity for everyone, everywhere, if done correctly.
And only If done correctly!!!!!
A free trade economy must adapt its businesses to demand and supply and as we know, the economy fluctuates. The business cycles continue to swing. The financial crisis though was caused by greedy money speculations that were sold to consumers who did not understand the level of risk and not financially savvy enough to understand their own investment limits. And something went monumentally wrong. The financial crises in combination with a downturn in the economy led us to one of the most difficult and deepest economic recessions since the Great Depression.
If you look at the FTSE today, however, it the stock market is back to the same level as before the crisis. And those on Wall Street are, again, collecting their inflated bonuses. The trouble is that while Wall Street is paying out these huge bonuses, we still have problems on Main Street. We have a jobless recovery, as someone defined it. The ordinary, lower to middle income families on Main Street, if they haven’t lost their house already, can’t consume at all. Instead, after the recession, they are wisely trying to balance their own budget by consuming less, saving more, and paying off their debts.
Is this the way to do it correctly????
In parallel to the economic crisis, we also have the political stalemate in the US. This is not a good combination for any president, especially now in the midst of the mid term election campaign. The US is not dependent on its exports trade (ca 10% of its GDP), as is, for instance my home country, Sweden (55-60% of its GDP). On the other hand, the US is vitally dependent on its own domestic trade as 70% of the GDP comes from the internal market. It goes without saying that if you have an unemployment rate of 9,5% of the total work force and a collapsing housing market on top of an administration that funds its efforts with a tough fiscal policy, it will affect the internal market and consumption, so much so that it threatens the US status as being the biggest economy in the world.
Today, the United States is the biggest individual economy on the globe. In 1990 the US represented 22,5% of total GDP in the world. At the same time China represented around 3%. Tomorrow this will be different.
By 2015, according to the analysts, the US contribution to total world GDP will have decreased to 17,5%...and China's will reach...yes...17,5%. Very, very soon China’s economy will be bigger than Americas.
Mind blowing!! And food for thought!
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