15 November 2007
Waking from the American Dream, 4
Posted by Carleton Schade under: Economy; Sustainability .
Blamed for the precipitous drop in the value of the U.S. dollar are rising oil prices, depression in home building, the most recent speculation bust which created the mortgage-bubble, and the U.S. trade deficit and governmental deficits. Whatever the causes, one consequence of a weaker dollar is that it shrinks American buying power. Countries that rely on exports to the U.S. will experience decreased sales, which likely translates into economic slowdowns in their near future. In the long run, a weakened U.S. dollar is not viable for the exporter countries. For thirty years now, the U.S. has consumed too much and various Asian countries have produced too much. It will not be economically sustainable for these countries to continue this co-dependent relationship with the United States. According to the old economic paradigm, then, this will spur these countries—specifically China and India—to move more rapidly away from being principally export economies to becoming consumer economies.
This has always been their strategy, anyway. The Asian countries have been following the well-worn path of Japan, Taiwan, then South Korea, of generating booming economies by producing first low-end, then ever high-end products for the U.S., specifically, and the world, in general. In a positive feed-back loop, exports generate capital for more investment. Meanwhile, a rising proportion of the wealth remains within the country, producing a middle class that consumes the country’s production. Americans, to a great extent, have been financing Asia’s growing wealth. And they’ve been going in debt doing so. Nothing wrong with that—in the old classical paradigm, that is. The old paradigm being that the earth is infinite and can provide as many people as many products as they can financially afford, and that the American economy is big enough to absorb any trivial trillions lost in profligacy.
One Comment so far...
Allan Herman Says:
5 December 2007 at 7:08 pm.
Dear Carleton,
I find your photo of a town on a cliff with nowhere to expand nor accomodate an increasing population a wonderful metaphor for our current dilema.