the visible hand

it is the theory which decides what can be observed – einstein

decoupling revisited?

Posted by ecoshift on June 8, 2010

Can the BRIC move their focus to building domestic demand? Do they have a choice?

………………..
China’s Exports May Become Costlier as Wages Rise – NYTimes.com

“Coastal factories are increasing hourly payments to workers. Local governments are raising minimum wage standards. And if China allows its currency, the renminbi, to appreciate against the United States dollar later this year, as many economists are predicting, the relative cost of manufacturing in China will almost certainly rise. “

………………..
Economist’s View: “Can Emerging Markets Save the World Economy?
Michael Spence and Mohamed El-Erian:

…emerging economies, once considered much more vulnerable, have been remarkably resilient. With growth returning to pre-2008 breakout levels, the performance of China, India, and Brazil is an important engine of expansion for today’s global economy. …

So it is important to know whether this breakout growth phase is sustainable. The answer comes in two parts. One depends on emerging economies’ ability to manage their own success; the other relates to the extent to which the global economy can accommodate this success. The answer to the first question is reassuring; the answer to the second is not.

While still able to exploit the scope for catch-up growth, emerging economies must undertake continuous, rapid, and at times difficult structural change, along with a parallel process of reform and institution building. In recent years, the systemically important countries have established an impressive track record of adapting pragmatically and flexibly. This is likely to continue.

…Emerging economies’ ability to provide the growth lubrication that facilitates adjustment in industrial countries is also a function of the latter countries’ willingness to accommodate tectonic shifts in the operation and governance of the global economy.

Mark Thoma comments:

The political problem will, I think, take care of itself. As the developing countries grow and gain economic power, and they will whether developed economies like it or not, the political and institutional power will follow. The old institutions will either change with the shifting global economy, or be replaced by new ones. I don’t think developed economies will have any choice except to “accommodate tectonic shifts in the operation and governance of the global economy.” For one, corporations of today do not have traditional national boundaries, and the globalization of production cannot be easily reversed. We can make it hard, or we can accept the inevitable. Other countries are starting to grow up, and we will have to begin treating them like adults. That means, among other things, giving them a seat at the big table.

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