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The United States has long relied on a financial system that intertwines its economy with China and Japan, allowing us to run huge trade and budget deficits. Now, as this ad-hoc system may be leading the world toward a global depression, most policymakers agree that the U.S. should reduce its trade deficit with Asia, while Asian countries should abandon their strategy of export-led growth.
A close examination of China's economic reform policies in the 1980s and 1990s reveals differences that shed light on motivations for its $586 billion stimulus plan.
As emerging-market powers have grown economically, their geopolitical rise is occurring equally quickly. The G20 summit highlights a new ‘new world order,’ in which emerging powers have a stronger voice in international institutions. Despite their sometimes differing agendas, countries like China, India, Russia, and Brazil are learning to work together to earn a voice in this new economic order.
The G20 meeting scheduled for November 15 will begin to restructure the global economic order, presenting new challenges to the leaders of wealthy nations. The U.S. must support new global financial institutions and regulatory systems, and President-elect Obama will need to convince Americans that stronger multilateral mechanisms will actually help preserve our sovereignty and influence.
China’s just-announced nearly $600 billion stimulus package is almost certainly overkill for China’s needs—China’s domestic demand expansion this year is too strong to warrant this much money spent any time soon. But the stimulus announcement is just in time to give a needed lesson to the U.S. government about what an effective stimulus package might look like.
The success of "state capitalism" – a capitalist economy run with a high degree of state control – has made it a model for states across the developing world. Western powers may now be wondering whether their brand of capitalism will triumph after all.
As world leaders prepare for next month’s international financial summit, critics remain skeptical about how quickly the IMF and the World Bank can actually adapt to the 21st century. Yet the mere fact that the upcoming summit will include leaders from the G20—rather than just the G7, as tradition would have it—suggests that the world is moving toward an unprecedented new financial order.
Recent WTO rulings indicate an increasing willingness to restrict trade based on the environmental impact of goods production. The global community should incorporate trade-related measures into any post-Kyoto multilateral climate agreement.
In this phase of the financial crisis, struggling countries are looking to rising powers for help, rather than turning to the conditional aid traditionally offered by the IMF. This trend highlights the shifting global financial order and indicates that emerging powers will undoubtedly play a larger role as the international community attempts to define a new global financial system.
As globalization spread over the last twenty years, migration expanded less rapidly than either trade or foreign investment. Yet migration remains contentious. The net impact of migration is positive for the migrants and high-income countries, and more gains are feasible. Developing countries, however, may suffer from growing brain-drain.
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