Today, the International Monetary Fund announced yet another a reduction in its global growth projections for 2014, with its estimate of U.S. growth also reduced (citing reduced government spending, but not the present U.S. government shutdown — or the heretofore unthinkable notion of the U.S. government defaulting on its obligations). Despite the seeming urgency of global economic slowdown, when world leaders attended their annual fall confabulation at the United Nations in New York last month, they focused on the diplomacy of physical security (Syria, Iran, etc.). Thus another year has passed in which global economic security issues were on no one’s reported agenda.
Policy makers continue to fail to appreciate that the most formidable economic challenge today lies in the area outside the borders of any one nation or region — and that multilateral action to address this challenge is arguably more important than efforts at increasingly less-effective internal stimulus.
Present-day economic imbalances — particularly those stemming from the rapid emergence of the post-socialist nations over the past 15 years, with their associated supply of excess labor, productive capacity and global capital, relative to demand — have hamstrung the economies of the advanced nations. Such economic dislocation can no longer be resolved by any one power, or even by two or three. Indeed, there is enormous risk today of unilateral or bilateral actions being viewed by players left out of such actions as economically threatening or even hostile, leading to economic countermeasures. The issue is compounded by the complexity of the relationships among and between developed nations on the one hand and emerging ones on the other. It is hard to imagine moving beyond a global economy that is just getting by, and therefore at material risk of new and deeper crisis, without a more open dialogue among the Group of 20 (G20) nations and proactive steps toward mutual accommodation.
Yet, since the central banks of the developed world have managed to more-or-less stabilize their economies — however tenuously — discussion of a global grand bargain focused on rebalancing international trade and finance has been all but absent. This is unfortunate, as it makes it unlikely that the advanced nations will be able to return to their potential growth trajectories for some time to come.
There is, nevertheless, enormous common interest if nations can find the right way to open a dialogue with one another. Both surplus and debtor nations have so far understood that it is to no one’s benefit to attempt to aggressively advance their singular interests at the expense of their trading partners. We’re all in this together, our interests are intertwined in a flat world, and we’re dealing with more economic interdependence than ever before. And thus far, at least, we have mostly avoided the “beggar thy neighbor” strategies that went awry in previous slumps, either out of wisdom or good fortune of their ineffectiveness. That said, we are a long way from a harmonious, cooperative global trading environment.