You are here

THE WORLD ECONOMIC OUTLOOK: THE IMMEDIATE FUTURE

29 October, 2015 - 17:21

Now that the United States no longer serves as the driving force, or locomotive, of economic growth around the globe, the International Monetary Fund is looking for a new primus mobile-a new vehicle for stimulating world economic growth and trade expansion. 1 It appears that West Germany and Japan are the most likely candidates for the role. Both of these countries are expected to drive down interest rates, thereby creating an environment conducive to investment and consumption. The increase in economic activity should lead to an increase in employment and incomes and, of course, greater demand for goods and services. Some of this increased demand, it is hoped, will be satisfied by imports from the United States and the developing world.

The United States is likely to make the elimination of its budget deficit a top priority. With the U.S. government borrowing less money, international liquidity will increase, driving interest rates down further. The lower interest rates will make external debt servicing easier for the big debtors and will allow them to devote some cash to growth-producing projects. Greater growth will help these countries finance their own economies, thereby eliminating the need for further accumulation of external debt.

The biggest winner in this shift in the global consumption and trade patterns would be the United States. By decreasing the rate of growth of imports and increasing the rate of growth of exports, the United States could manage to arrest the increase in its current account deficit.

Whether this scenario comes true will depend on how quickly world leaders recognize the changes that have occurred during the past few years and institute appropriate national and global cooperation policies and procedures. Of particular importance is recognition of the transition of the world economy from a goods economy to a symbolic economy. World leaders must realize that world economic transactions involve information much more often than they do goods and services. Trillions of bits of information are transmitted daily through high-speed supercomputers to confirm decisions to buy, sell, hire, fire, invest in new plants, or close down existing factories or offices. These bits of data affect the lives of billions of people. Knowledge-driven and -directed global business is rendering obsolete the market mechanism that in the past equilibrated world markets.

ISSUES FOR DISCUSSION

  1. Do you perceive any dangers inherent in the emergence of what Drucker calls the symbolic economy?
  2. Discuss the three fundamental changes that Drucker believes occurred during the last decade.
  3. Has the United States managed to cut its deficits since this book was published?
  4. How has the dollar been affected?
  5. Have Japan and West Germany grown as expected?