By Gordon Brown (former prime minister of England)
REUTERS: The European crisis is no longer a European crisis. It is now everyone’s. Unless Monday’s G20 summit in Mexico coordinates a concerted global action plan right now, we face a global slowdown that will also have a deep impact on the U.S. presidential election and even on China’s transition to a new leadership. This is the last chance…
Already we are in the downward spiral that shows no sign of ending. Austerity means decreasing economic activity and then an ebbing of confidence. As, in turn, wholesale funding becomes more difficult to obtain, confidence ebbs further, and, just as the economy sinks deeper into recession, bank losses get larger and government deficit targets cannot be met. What’s more, with Greek private debt already subordinated to that of official funders, private funders will not be easily attracted back as long as they fear defaults and even exits from the single currency. They have to be satisfied with stronger guarantees that their money will be safe…
But even then higher global growth will remain elusive. With inflation generally low, a globally coordinated Central Bank stimulus is justifiable, but there is now a unique structural imbalance in the world economy that cannot be rectified by a repetition of ordinary post-recession policies. Ten years ago American consumer spending ($10 trillion annually) could propel the world to a higher plateau of growth. Ten years from now Asians, with nearly half of all consumer expenditure, will drive world growth. But we are in transition from an old world to a new one. The world’s biggest producers are already the emerging markets, but the world’s biggest consumers are still the advanced economies. Today neither the Western consumer, who now needs to earn to spend, nor the Asian producer, who needs someone to buy his goods, can drive the world economy forward independently of each other. So high growth will return only when Asians are confident that markets are reviving in the West and when Americans and Europeans are confident they can earn some money selling to the East.… (more)
