Author Archives: Alan Alexandroff

So, Decoupling is not Dead

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Jim O’Neill, Head of Global Economic Research for Goldman Sachs, is not ready to declare decoupling dead – at least with regard to the BRICs.  O’Neill, the ‘inventor’ of the BRICs, recently sought to resuscitate the notion that the BRICs can continue to grow even after their largest export market, the US, succumbs to the Great Recession, because they rely on domestic demand.  The piece is entitled “The New Shopping Superpower:  The BRICs rely increasingly on domestic demand and can boom even if export markets like the US slow,” and was published in NEWSWEEK (March 21, 2009 in the published magazine, March 30, 2009 issue).  Indeed, Jim not only defends decoupling, he has revised his estimate of when he believes the BRICs, collectively, will outgrow, in dollar terms, the G7.  Earlier predictions by Jim argued the BRICs would collectively have a larger economy in 2035.  Now Jim, with an examination of current rates, predicts that the shift could occur as early as 2027.

Though Jim recognizes that, collectively, the BRICs are likely to grow at only 4 percent, predictions for the global economy are a decline of 1.1 percent.  Individual developed states are in much more difficult shape, with Goldman Sachs’s predictions for the US down 3.2 percent, worse for the Euro zone and a dizzying 6.1 percent decline for Japan.

Meanwhile China is predicted to grow at 7 percent this year and over 8 percent in 2010 and India at 6.6 for the same year.  As O’Neill concludes:

“Within the overall picture, there is clear evidence of major rebalancing, as BRIC shoppers account for an increasingly large share of global consumption.  When we track retail shoppers from 2004 to 2008 (using data adjusted for inflation and the relative size of national economies), it becomes clear that European and Japanese shoppers are barely contributing anything to real consumption growth.  American shoppers gradually contributed less up to 2007 before completely zipping up their wallets in 2008.  BRIC shoppers slowly contributed more, and, importantly, their contribution continued to increase into 2008, despite the collapse of the US shopper.”

Jim looks to better growth for China on the basis that China’s retail sales grew by 15 per cent in February.  Consumer prices have declined sharply providing a boost to real income for Chinese consumers.  Jim also notes that the government has announced plans to strengthen medical coverage that he, and I’m sure the government, hopes will help release the savings of the public. And then there is infrastructure spending, etc., etc., ending with the current stock market rally. Notwithstanding the lowering of current growth predictions, Jim remains optimistic over China’s growth prospects.

And he may be right, though the cascading implications of the global financial crisis and its impact on trade, investment and jobs should not be underestimated.  For instance, I note that Brazil’s economy – another of the BRIC economies – is now suffering.  A recent article in the New York Times (“Brazil’s ‘Teflon’ Leader Nicked by Slump,” by Alexei Barrionuevo, dated April 3, 2009) suggests the real economy is now “hurting”. Brazil’s GDP has fallen 3.6 percent in the last quarter of 2008 from the third, and the country lost 654,946 jobs in December 2008, with 101,748 more lost jobs in January.

I would continue to hold all bets on decoupling for the moment.

The Cost of Support

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Today’s New York Times article by Andrew Kramer, “Russian Auto Bailout Protects Jobs (Efficiency Not So Much)” (Tuesday April 7, 2009) chronicles the Russian governments efforts to prop up employment in automobile manufacturing including the Lada (Avtovaz) factory in Tolyatti.  The Russian government is giving billions of dollars, no strings attached,  in an effort to subsidize employment in a facility that has a wretched productivity – each worker producing on average 8 cars a year as opposed to 36 cars a year per worker at GM in Bowling Green, Kentucky.  At the same time, as identified in the World Bank’s trade protection (reported in Elisa Gamberoni and Richard Newfarmer’s “Trade Protection: Incipient but Worrisome Trends“) list, Russia in the fall imposed a tariff on imported cars.  The collapse in automobile demand in Russia has come later than the United States, according to the Times article, but it could be more severe.  And the Russian government is now supporting a no-layoff policy.

Dueling Consensus on the G20

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I was struck  – indeed almost made dizzy – by the contrasting interpretations the media delivered following the London G20 meeting.   In the end I wasn’t sure whether the media was even covering the same event.  This confusion continued till I realized that the contrasting commentary arose from more than a single consensus that Leaders, and in turn the media, concluded for this now completed meeting.

I should, before continuing, express abject apologies from my lengthy absence.  I cannot at this moment go into what we were ‘cooking up’, but I’m hopeful that my absence was worth the lengthy silence.

So back to the G20 London meeting.  As I was suggesting, the media was commenting on more than one consensus. Continue reading →

India’s Dilemma I

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I had the pleasure recently of reading two very valuable papers on India.  Both examine the challenge for this emerging great power, and the challenge for the traditional great powers, in India gaining great power leadership in global governance.  The first piece is written by Barbara Crossette, formerly of the New York Times and George Perkovich, Vice President for Studies and Director of the Nonproliferation Program at Carnegie Endowment for International Peace.  In addition there is a commentator, C. Raja Mohan, a Professor of South Asian Studies at the S. Rajaratram School of International Studies at Nanyang Technical University, Singapore.

The article and the accompanying commentator article are entitled “India: The Ultimate Test of Free-Market Democracy.” This piece is one in the series “Power & Principles: International Leadership in a Shrinking World,” commissioned by the Stanley Foundation.   For anyone concerned with the emergence of the great powers in global governance, this series is well worth tackling.  As the Stanley Foundation describes it, this series “is designed to identify plausible actions and trends Continue reading →

The ‘Pathway’ To a New Liberal Internationalism?

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The evolving international order and the role of American leadership in that order were taken up recently by G. John Ikenberry in our Global Institutional Reform Workshop (GIR).  John is Princeton University’s Albert G. Milbank Professor of Politics and International Affairs and a leading proponent of liberal internationalism.  His After Victory: Institutions, Strategic Restrain, and the Rebuilding of Order After Major Wars (2001) is a much-cited examination of the rise of liberal internationalism.

The GIR Workshop is a partnership in part between CIGI and Princeton University.  This past August (August 25-27, 2008) at Princeton we held the second biennial Princeton Summer Workshop.  John produced a most interesting paper, “The Three Faces of Liberal Internationalism.”  This, like many of the other presentations, (other chapters will be reviewed here at the Rising BRICSAM blog in the next few weeks) will be brought together, and in, the second Continue reading →

The Collapse of Demand! The Case of China

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We know, or at least think we do, that world demand is ‘collapsing’.  We’ve seen emerging power currencies fall significantly; equity markets deflate; and governments planning and then announcing fiscal stimulus packages.  But assessing the state of the BRICSAM economies is not easy.  None is more difficult to gauge than China.  It remains a rather daunting task to get a handle on the growth/lack of growth of the Chinese economy.

When I was last in China in December, it was impossible to get a ‘read’ on where growth was; or was going.  Could one identify growing domestic demand in China? Was this domestic demand beginning to sop up the ‘over capacity’ Continue reading →

Clubs, Clubs Clubs – How to Lead the Way to Better Global Governance?

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Much discussion of new international organizations has accompanied the recent examination of global governance reform in the light of the completed US Presidential election and now the global financial meltdown.  There is much contention over the nature of reorganization.

There appears to be three distinct models that advocates of global governance reform have raised.  The first is: the ‘Universalist model of the UN – everybody gets in, everybody has a voice.  This universalist consensus model is modified at least in the security realm (but not only)  by the Security Council that sits atop the universalist Continue reading →

‘Entangling Alliances,’ Global Governance and US Sovereignty

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It has become rather commonplace for US ‘opposition’ to raise the early perspectives of American political leaders in discussing American foreign policy.  Yet such references to these early alliance warnings and the threat to US sovereignty have become overused and are often offered in an unreflective way.  Those who rely on these early cautions, often call on these nostrums abstractly and without any acknowledgment of the context in which they were expressed and the state of the United States at the time such figures as Thomas Jefferson expressed them.

So it is that the new opposition – read this as those who had influence in the last US Administration but appear to have little cache now –  have begun the campaign to limit US global governance leadership.  Two rather well Continue reading →

‘A Plan for Action’ – Managing Global Insecurity (MGI)

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The MGI Project, begun in 2007, is the joint initiative of the Brookings Institution Foreign Policy section – led by Carlos Pascaul,  the Center on International Cooperation at New York University – led by Bruce Jones, and the Center for International Security and Cooperation at Stanford University – led by Stephen Stedman.  The Project has recently produced it’s major Report – A Plan for Action: A New Era of International Cooperation for a Changed World: 2009, 2010, and Beyond.  This Report will be followed by a book from the three directors, out sometime this year, entitled, Power and Responsibility: International Order in an Era of Transnational Threats.  The Report and the Project is directed to, as the Plan suggests, “[to] build international support for global institutions Continue reading →

Brazil’s new Vision: Imagining a Great Power?

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Brazil is thinking big.  I mean Big!  On December 19, 2008 President Luiz Inacio Lula de Silva – Lula in other words, released a new national defense strategy. This document called for: upgrading Brazil’s military forces and for remaking the defense industry.  And – contentiously for the Brazilian public, it called for Brazil’s mandatory military service to be enforced on all Brazilian classes.

As noted by Alexei Barrionuevo’s New York Times piece: “The new strategic vision, more than a year in the making, calls for Brazil to invest more in military technology, including satellites, and to build nuclear-powered submarine fleet that would be used to protect territorial waters and Brazil’s deepwater oil platforms.  The proposal also calls Continue reading →