In 2008, at a time of financial peril, the world united to restructure the global banking system.
In 2009, as trade collapsed and unemployment rose dramatically, the world came together for the first time in the G-20 to prevent a great recession from spiraling into a great depression.
Now, facing a low-growth austerity decade with no national exits from long-term unemployment and diminished living standards, the world needs to come together in the first half of 2011 to agree on a financial and economic strategy for prosperity far bolder than the Marshall Plan of the 1940's.
Time is running out on the West, because both Europe and America have yet to digest the fact that all the individual crises of the last few years -- from the sub-prime crisis and the collapse of Lehman Brothers to Greek austerity and Ireland's near-bankruptcy -- are symptoms of a deeper problem: a world undergoing a far-reaching, irreversible, and, indeed, unprecedented restructuring of economic power.
Of course, we all know of Asia's rise, and that China exports more than America and will soon manufacture and invest more as well. But we have not fully come to terms with the sweep of history. Western economic dominance -- 10 percent of the world's population producing a majority of the world's exports and investment -- is finished, never to return. After two centuries in which Europe and America monopolized global economic activity, the West is now being out-produced, out-manufactured, out-traded, and out-invested by the rest of the world.
Otto von Bismarck once described the patterns of world history. Transformations do not happen with "the even speed of a railway train," he said. Once in motion they occur "with irresistible force." If the West fails to understand that the real issue today is responding to the rise of Asian economic power by renewing its own, then it faces the grim prospect of steady decline, punctuated by brief moments of recovery -- until the next financial crisis. Throughout it all, millions will be without jobs.
So why, despite this new reality, am I convinced that the twenty-first century can be one in which the United States, by reinventing the American dream for a new generation, remains a magnet for the greatest companies, and in which Europe can be home to a high-employment economy?
Because, fortunately for all of us, soon one billion and more new Asian producers will -- first in their tens of millions, then in their hundreds of millions -- become new middle-class consumers, too.
The growth of an Asian consumer revolution offers America a road to new greatness. Today Chinese consumer spending is just 3 percent of world economic activity, in contrast to Europe and America's 36 percent share. Those two figures illustrate why the world economy is currently so unbalanced.
By 2020 or so, Asia and the emerging-market countries will bring double America's consumer power to the world economy. Already, companies like GE, Intel, Proctor & Gamble, and Dow Jones have announced that the majority of their growth will come from Asia. Already, many Korean, Indian, and Asian multinationals have majority foreign (including US) shareholdings. This new driver of world economic growth opens up an opportunity for America to exploit its great innovative and entrepreneurial energy to create new, high-skilled jobs for US workers.
Asian consumer growth -- and a rebalancing of the global economy -- can be the exit strategy from our economic crisis. But the West will benefit only if it takes the right long-term decisions on the biggest economic questions - what to do about deficits, financial institutions, trade wars, and global cooperation?
First, deficit reduction must occur in a way that expands investment in science, technology, innovation, and education. Both public and private investment will be needed in order to deliver the best science and education in the world.
Second, new markets cannot be tapped if the West succumbs to protectionism. Banning cross-border takeovers, restricting trade, and living with currency wars will hurt the US more than any other country. In the last century, America's own domestic market was so big and dominant that it need not worry much about trade rules. But, with Asia poised to be the biggest consumer market in history, US exporters - the greatest potential beneficiaries -- will need open trade more than ever. America must become the champion of a new global trade deal.
A commitment to public investment and open trade are, however, necessary but insufficient conditions for sustained prosperity. All the global opportunities of the new decade could fade if countries withdraw into their own national shells.
In another age, Winston Churchill warned a world facing the gravest of challenges not to be resolved to be irresolute, adamant for drift, solid for fluidity, and all powerful for impotence. I believe that the world today does have leaders of Churchill's stature. If they work together, drift need not happen.
America must now lead and ask the world to agree on a modern Marshall Plan that coordinates trade and macroeconomic policies to boost global growth. America should work with the new chair of the G-20, French President Nicolas Sarkozy, to revive private lending by creating global certainty about the standards and rules expected of banks.
Agreement is also needed that each country's multi-year deficit-reduction plan will be accompanied by acceleration of consumer spending in the East and of targeted investment in education and innovation in the West. Such a plan must encourage China and Asia to do what is in their and the world's interest: reducing poverty and expanding the middle class. And
the West must speed up structural reforms to become more competitive while ensuring that fiscal consolidation does not destroy growth.
Through joint action, the G-20 economies can see not just a marginal change, but growth above 5 percent by 2014. Instead of a world deadlocked over currencies and trade and retreating into the illusory shelter of protectionism, we could see $3 trillion of growth converted into 25 million to 30 million new jobs, and 40 million or more people freed from poverty.
Gordon Brown is a former prime minister of the United Kingdom.
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The west has a different tradition about the value of human life and freedom.
The world cannot long sustain the kind of uniform global consumption looked for in this piece.
The risk for most of us is that when this constraint is finally recognized by the ruling class the solutions they will most likely jump to will be very bad for the rest of us.
F & F
of course it will be bad for the rest of us - what do you think G20 - a group of altrusitic, good stewards of the world economy???? No, it's a coalition of the most greedy, exploitive people on earth.
The perils of playing at democracy perhaps? I understand Tony sets the value of his autograph at a nominal sum in Stering. While you appear to believe yours worth more than a referendum.
“this new reality”
Isn’t a new reality. Its merely actual reality. Raising a somewhat unattractive head above that pretend palisade, we imagined we could erect around ourselves.
“growth -- and a rebalancing of the global economy -- can be the exit strategy from our economic crisis.”
Still dreaming the unsustainable consumer dream, I see.
“illusory shelter”
Having dug down through government reserves, tax revenues, printing pound notes and every other source of funds available. You finally reached the bottom of the barrel. But rather than go in search of another barrel to empty. Hows about a real an eye-opener Gordon? Try a Palin sans the RV? Talk some TV company into sending you out with Ray Mears. I’m sure he can give you a taste, of what the bottom line of this is really all about.
what our leaders fail to see is that the world needs a new economic paradigm.. something radical and new..
but in our age of extreme partisanship and institutional resdistribution of wealth from the bottom to the top.. I can't see any one with the vision or the balls to suggest it.
Not unless it’s part of Citibank’s or Goldman Sachs’ business plan.
For all of you pessimist about America, name one great idea, innovation, or invention in the last 200 years that did not come from the US or Europe? I rest my case.
"creative-financing",
"derivative-trading",
"hedge-funds"
In short, we now have a Business models based on fraud not just spin.
I would fan you again if I could...
Clinton's freetrade initiatives and those that followed is what has destroyed America's economy - but that's okay with our governmnet because GE and Jeff Inmelt has never had such a fireld day, such a free for all - at American taxpayers expense..
Despite what many write, need for two-incomes in a family are priorities and life-style. If we solved this issue - or rather made it easier (tax incentives if needed) to survive on a one-income family, we would improve the society's well-being:
1. Solve the unemployment crises.
2. Solve the education dilemma with a high (50%) school drop-out rate (and 70% in big cities).
3. Shrink the healthcare crises caused by lack of illness-prevention and end-of-life care; costing 50% of all healthcare costs; which is 2 trillion dollars.
4. Reduce the cost of managing chronic illness and nursing home which accounts for 75% of healthcare costs and 70% of deaths.
5. Reduce the 50% divorce rate.
6. Reduce the high incidence of depression in adults and children.
7. Reduce the high incidence of stress and stress-related disorders.
8. Decrease the consumption of junk, fast-foods, prepared foods and alcohol.
9. Rediscover the value of family, (near and extended), neighborhood and society.
10. Rediscover the importance of cultural values and ties.
Any one of the above should give us pause to realize what we are doing to ourselves; and how history will judge and evaluate present civilization. Yet long before history judges us, our children and grandchildren will judge us by the type of America we leave them; including the massive debt.