(Via IHT) Clyde Prestowitz writes, Globalization is broken -It can’t be fixed just by currency pegs- as in the 1980s economists said a revaluation of the Japanese yen between 20 percent and 30 percent would balance trade. But the yen has more than doubled since then, and Japan still maintains a large trade surplus globally including the US. The objectives and goals of globalization are different for many countries. Asian countries besides keeping weak currencies offer tax holidays, financial incentives and protected markets to attract new facilities in "strategic" industries that no one expects to move just because currencies fluctuate. These are aimed at accumulating large trade and dollar surpluses as a matter both of stimulating growth from exports and of assuring national economic sovereignty by avoiding dependence on foreign lenders.
The US emphasis is not on attracting investment & is entirely on consumption-led growth. Americans at all levels really do believe that debt and deficits don't matter. The confluence of America's consumerism with the strategic, export-led growth policies of many other countries has produced a world with one net consumer, the United States, which now consumes about $700 billion a year more than it produces. As America consumes more than it makes, it must borrow from abroad to finance its excess consumption. In a kind of vendor finance program, a few foreign central banks provide the financing by buying U.S. Treasury bills and other U.S. assets.Thus, globalization has evolved into a kind of pyramid scheme. To maintain global growth, the United States must consume and borrow ever more while foreign banks buy ever more U.S. Treasuries so their producers can export ever more. US consumers love the low import prices, U.S. chief executives love the foreign tax holidays and the U.S. government loves the foreign lending that helps keep U.S. interest rates low. Now the sustainability of the system has been put into question by the entrance of three billion new players from China, India and the former Soviet bloc at a moment when the Internet and global air express have negated time and distance along with the long standard economic assumptions that labor, capital and technology don't move between countries. Even for America there are ultimate limits on consumption and borrowing. U.S. borrowing already absorbs 80 percent of the world's available savings. At 100 percent, the global economy will be in deep crisis. While this makes good reasoning and logic – the other side of globalization is quite beneficial to the US- The increasing overseas revenue for us companies – Conglomerates, FCMG, Technology , Aviation – not to miss out, Coke, Mcdonalds, Pepsi, KFC etc all are benefiting substantially from the globalization..
Category : Globalisation