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 Business News | August 2006 
The Re-Balancing of Global Growth
 Pierre-Antoine Delhommais - Le Monde
As though nothing were going on, as though gas weren't more expensive and interest rates higher, the global economy continues to grow rapidly, at a rate of about 4%, demonstrating an unsuspected resilience, to use the word in vogue at the moment. But the geographic distribution of this wealth creation is in the process of changing.
First of all, the shares of emerging countries in global GDP, led by China, India, and Russia - all in full boom, and posting total economic growth rates between 6 and 11% - continue to progress. That growth benefits all, but poor nations more than rich ones. Then, the hierarchy is also changing inside the group of big industrialized countries.
The United States is slowing down; Europe is straightening out; Japan is speeding up. American GDP only grew at a 2.5% rate the second quarter, after 5.6% in the first, as the oil price blow-up weighed on consumption.
In Europe citizens are, on the contrary, in a better frame of mind and unemployment is dropping, with no one exactly sure what role the excellent results in the World Cup soccer match by the three Euro-zone heavyweights, Germany, France and Italy, may have played in this bright spot. Japan, finally, seems to have emerged for good from the long period of stagnation and deflation into which it was plunged at the beginning of the 1990s by the bursting of the real estate and stock market bubbles.
Is this great re-balancing of global growth to the United States' disadvantage durable? Caution [is called for], when we know that the decline of the American economy has already been predicted numerous times in the last fifteen years. And always incorrectly.
Today, nonetheless, the United States' economic hegemony seems to be truly contested. When Japan and Europe slumbered, American weaknesses, especially the gigantic disequilibrium in external accounts, remained only theoretical. But now that the two powers are waking up, those weaknesses are becoming a real fragility.
The United States undoubtedly has less to fear from a Europe that remains handicapped by structural rigidities and calamitous governance than from the Japan-China couple, with its sharp political antagonisms but very strong economic complementarity. Japan with its modernized industrial and financial apparatus, once again productive and profitable, China with its pool of cheap and inexhaustible labor, and above all, with the incredible energy that a people's will to forget decades of misery provides.
"I am not a forecaster, but according to what I see, I am undisturbed," President George Bush asserted this week with respect to the slowdown in American growth. "I believe we will remain strong (...). We have a remarkable economy that can overcome terrorist attacks, corruption issues on the financial markets, economic scandals, national disasters, high energy prices."
In a famous article published in 2002, American sociologist Immanuel Wallerstein emphasized how the White House had gone "from hysterical discourse in the 1980s about the Japanese economic miracle, to an excess of confidence, as though it were convinced Japan is way behind from now on." He also recalled "one of the oldest realities in the history of hegemonies (...). The dominant power concentrates, to its own detriment, on military matters, while the candidate for succession concentrates on the economy, on what has always created great advantages (...) Why wouldn't it be the same for Japan, perhaps in the framework of an alliance with China?" Perhaps the moment for a change in powers has arrived.
Translation: t r u t h o u t French language correspondent Leslie Thatcher. |
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