Economy Core - DDI 2013 SS

8/9/2019 Economy Core - DDI 2013 SS

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Growth Good/Bad


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Impacts—Growth Good


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War

Economic decline triggers nuclear warHarris and Burrows 9(Mathew, PhD European History at Cambridge, counselor in the National Intelligence Council (NIC) and enni!er, member o! the NIC"s #ong$ange %nalysis &nit '$e isiting the uture* +eopolitical E ects o! the inancial Crisis-http*..www/ciaonet/org.0ournals.tw1. 23i3.!45567689462:;3/pd! )

Increased Potential !or +lobal Conely to bethe result o! a number o! intersecting and interloc>ing !orces/ ?ith so many possible permutations o! outcomes, each with ample $e isiting

the uture opportunity !or unintended conse1uences, there is a growing sense o! insecurity/ E en so, history may bemore instructive than ever / ?hile we continue to belie e that the Great Depression is notli>ely to be repeated, the lessons to be drawn !rom that period include the harm ul e!ects on"edgling democracies and multiethnic societies (thin> Central Europe in 6:35s and 6:25s)and on the sustainability o multilateral institutions (thin> #eague o! Nations in the sameperiod)/ #here is no reason to thin$ that this would not be true in thetwenty%&rst as much as in the twentieth century / or that reason, the ways in which thepotential or greater con"ict could grow would seem to be e en more apt in aconstantly volatile economic environment as they would be i! change would be steadier/ Insur eying those ris>s, the report stressed the li>elihood that terrorism and nonproli!eration will remain priorities e en as resource issues mo eup on the international agenda/ #errorism 's appeal will decline i economic growthcontinues in the (iddle East and youth unemployment is reduced / orthose terrorist groups that remain acti e in 353;, howe er, the di usion o! technologies and scienti@c >nowledge will place some o! the

world"s most dangerous capabilities within their reach/ #errorist groups in 353; will li>ely be a combination o!descendants o! long established groups4inheriting organiAational structures, command and control processes, and training procedures

necessary to conduct sophisticated attac>s4and newly emergent collections o! the angry and disen!ranchised that become sel %radicali)ed * particularly in the absence o economic outlets thatwould become narrower in an economic downturn+ #he mostdangerous casualty o any economically%induced drawdown o ,+-+military presence would almost certainly be the (iddle East / %lthough Iran"s ac1uisition o!nuclear weapons is not ine itable, worries about a nuclearBarmed Iran could lead states in the regionto develop new security arrangements with e.ternal powers* ac uire

additional weapons* and consider pursuing their own nuclearambitions /It is not clear that the type o! stable deterrent relationship that e isted between the great powers !or most o! the Cold?ar would emerge naturally in the Middle East with a nuclear Iran/ Episodes o! low intensity con"ict and terrorism ta>ing place undera nuclear umbrella could lead to an unintended escalation and broader con"ict i! clear red lines between those states in ol ed are not well established/ #he close pro.imity o potentialnuclear rivals combined with underde eloped sur eillance capabilities and mobile dualBcapable Iranian missile systems alsowill produce inherent di0culties in achieving reliable indications andwarning o an impending nuclear attac$ / he lac> o! strategic depth in neighboring states li>e Israel,short warning and missile "ight times* and uncertainty o! Iranian intentionsmay place more ocus on preemption rather than de!ense, potentially leading toescalating crises / 27 ypes o! con"ict that the world continues to e perience, such as overresources* could reemerge* particularly i protectionism grows and

there is a resort to neo%mercantilist practices+ 1erceptions o! renewed energyscarcity will dri e countries to ta>e actions to assure their !uture access to energy supplies/ In the worst case, this could resultin interstate con"icts i government leaders deem assured access toenergy resources , !or e ample, to be essential or maintaining domestic stability and the survival o their regime / E en actions short o! war, howe er, will ha e important geopolitical implications/ Maritime security concerns arepro iding a rationale !or na al buildups and moderniAation e orts, such as China"s and India"s de elopment o! blue water na al capabilities/

I the &scal stimulus ocus or these countries indeed turns inward* one othe most obvious unding targets may be military+ Buildup oregional na al capabilities could lead to increased tensions* rivalries*

http://www.ciaonet.org/journals/twq/v32i2/f_0016178_13952.pdfhttp://www.ciaonet.org/journals/twq/v32i2/f_0016178_13952.pdfhttp://www.ciaonet.org/journals/twq/v32i2/f_0016178_13952.pdf


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and counterbalancing moves , but it also will create opportunities !or multinational cooperation in protectingcritical sea lanes/ With water also becoming scarcer in 2sia and the (iddle East*cooperation to manage changing water resources is li$ely to beincreasingly di0cult both within and between states in a more dog%eat%dog world /

-tatistical analysis proves economic decline causescon"ict %%% pre er our studies3oyal 45 Director o! C $ ( edediah, Director o! Cooperati e hreat $eduction F &/G/ Department o! De!ense, 'Economic Integration,Economic Gignaling and the Problem o! Economic Crises-, Economics o! ?ar and Peace* Economic, #egal and PoliticalPerspecti es, Ed/ +oldsmith and rauer, p/ 362B36;) G/ roc> lomberg is a pro!essor o! economics J ClaremontCollege/ +regory Hess is also a pro! o! economics J Claremont/

#ess intuiti e is how periods o! economic decline may increase the li$elihood oe.ternal con"ict / Political science literature has contributed a moderate degree o! attention to theimpact o! economic decline and the security and de!ence beha iour o! interdependent states/ $esearch inthis ein has been considered at systemic, dyadic and national le els/ Ge eral notable contributions !ollow/

irst, on the systemic le el, Pollins (3559) ad ances Models>i and hompsonKs (6::7) wor> on leadership

cycle theory, @nding that rhythms in the global economy are associated withthe rise and all o a pre%eminent power and the o ten bloodytransition rom one pre%eminent leader to the ne.t / %s such, e ogenous shoc>ssuch as economic crises could usher in a redistribution o relativepower (see also +ilpin/ 6:96) that leads to uncertainty about power balances, increasing theris$ o miscalculation ( ea er, 6::;)/ %lternati ely, even a relatively certainredistribution o power could lead to a permissive environment orcon"ict as a rising power may see> to challenge a declining power (?erner/ 6:::)/ Geparately, Pollins(6::7) also shows that global economic cycles combined with parallel leadership cycles impact theli>elihood o! connown/ Gecond, on adyadic le el, CopelandKs (6::7, 3555) theory o! trade e pectations suggests that 6 uturee.pectation o trade6 is a signi&cant variable in understandingeconomic conditions and security behaviour o states / He argues thatinterdependent states are li>ely to gain paci@c bene@ts !rom trade so long as they ha e an optimistic iewo! !uture trade relations/ Howe er, i the e.pectations o uture trade decline ,particularly !or diLcult to replace items such as energy resources, the li$elihood or con"ictincreases* as states will be inclined to use orce to gain access tothose resources + 7rises could potentially be the trigger !or decreased tradee.pectations either on its own or because it triggers protectionist mo es by interdependent states/

hird, others have considered the lin$ between economic decline ande.ternal armed con"ict at a national level+ Blomberg and Hess 8 55 :&nd a strong correlation between internal con"ict and e.ternalcon"ict* particularly during periods o economic downturn / hey write* helin>ages between internal and e ternal con


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create a 6rally around the "ag6 e!ect / ?ang (6::7), De$ouen (6::;)/ and lomberg,Hess, and hac>er (3557) @nd supporting e idence showing that economic decline and use o! !orce are atleast indirectly correlated/ +elpi (6::8), Miller (6:::), and isangani and Pic>ering (355:) suggest thatthe tendency towards diversionary tactics are greater or democraticstates than autocratic states, due to the !act that democratic leaders are generally more susceptible tobeing remo ed !rom oLce due to lac> o! domestic support/ De$ouen (3555) has pro ided e idenceshowing that periods o wea$ economic per ormance in the , nited - tates*and thus wea$ 1residential popularity* are statistically lin$ed to anincrease in the use o orce / In summary, recent economic scholarship positi ely correlateseconomic integration with an increase in the !re1uency o! economic crises, whereas politicalscience scholarship lin$s economic decline with e.ternal con"ict atsystemic* dyadic and national levels /; his implied connection between integration,crises and armed con


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challenges/ India is still in the early stages o! its emergence as a world economic and geopolitical power/ ?hat does this all meanQ #hereis no substitute or 2merica on the world stage/ #he choice we have be!ore us isbetween the potentially disastrous e!ects o disengagement and the sti!price tag o! continued %merican leadership/

Economic 7ollapse leads to war empirics(ead 9C3. , ?alter $ussell, Henry %/ issinger Genior ellow in &/G/ oreign Policy at the Council on oreign$elations, =nly Ma>es Rou Gtronger* ?hy the recession bolstered %merica, he New $epublicS

None o! which means that we can 0ust sit bac> and en0oy the recession/ History may suggest that@nancial crises actually help capitalist great powers maintain their leadsBBbut it has other, lessreassuring messages as well/ I &nancial crises have been a n ormal part oli e during the 255Byear rise o! the liberal capitalist system under the %nglophone powers, so haswar / he wars o! the #eague o! %ugsburg and the Gpanish GuccessionT the Ge en Rears ?arT the%merican $e olutionT the Napoleonic ?arsT the two ?orld ?arsT the cold war* #he list o warsis almost as long as the list o &nancial crises+ Bad economic timescan breed wars+ Europe was a pretty peace ul place in 49 =* butthe Depression poisoned German public opinion and helped bring2dol Hitler to power+ I the current crisis turns into a depression*what rough beasts might start slouching toward (oscow* @arachi*Bei ing* or ?ew Delhi to be born #he , nited - tates may not , yet,decline* but* i we can6t get the world economy bac$ on trac$* wemay still have to &ght /


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Environment


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Economy Growing

Economy growing steadily—manu acturing* housing* andauto3euters F/4F ($euters, '&G Economy +rowing at Modest Pace, ed Gays,-

uly 68, 3562, http*..www/nbcnews/com.business.usBeconomyBgrowingBmodestBpaceB!edBsaysB7C657757::)#he ,+-+ economy continued to grow at a modest to moderate pacein une and early uly* with manu acturing e.panding in most areaso the country* the ederal $eser e said on ?ednesday/ U In its eige oo> report o!anecdotal in!ormation on business acti ity collected !rom contacts nationwide, the &/G/ centralban> said actories in many o the 4 districts reported increases innew orders* shipments or production+ he @ndings on manu!acturing, compiledby the ederal $eser e an> o! Gt/ #ouis !rom data collected on or be!ore uly 9, @t in withother sur eys and suggest that a slowdown in actory activity earlier in theyear had probably run its course /U he ed also struc> an upbeat note on thehousing mar>et, noting that residential real estate and construction increased at a moderate to

strong pace in all districts/ hat in turn is helping to prop up manu!acturing/ U ($ead more*ernan>e* Mar>ets beginning to understand our message) UO-trong demand in

residential construction continued to stimulate the manu acturingsector in several districts*; the inson, chie! economic strategist at Miller aba> Co ##C in New

Ror>/ ' he summary is littered with evidence o improving conditions* risingdemand* better loan uality and uantity*J which Kpoints to thepotential or improvement over the second hal o the year+J #he

ob mar$et has shown signs o recovery+ ?on% arm payrolls havee.panded on average by around 55*555 obs per month rom

anuary through une+ #he proportion o unemployed wor$ers who

have been without a ob or si. months or more has allen to less than 28percent !rom about 5 percent when ernan>e launched the third round o! 1uantitati e easing in Geptember/ U XHeldGteady" U 'Hiring held steady or increased at a measured pace in most districts, with some contacts noting reluctance tohire permanent or !ullBtime wor>ers,- the report said/ ed oLcials are closely monitoring the labor mar>et to determine

whether it has 'impro ed substantially,- allowing them to wind down their bond purchases/ U ' Ban$ingconditions generally improved ,- according to today"s report, compiled by the ederal $eser e an>o! Gt/ #ouis and based on in!ormation recei ed by uly 9/ 'Credit 1uality impro ed, while credit standards remained largelyunchanged/- U he yield on the 65Byear reasury note !ell to 3/ : percent at 2*37 p/m/ in New Ror> !rom 3/;; percent be!ore

ernan>e"s testimony/ he Gtandard Poor"s ;55 Inde rose 5/3 percent to 6,795/3;/ U Pre ious $eport U he pre ious eigeoo>, released une ;, used the same phrase as today"s report, a 'modest to moderate pace,- to describe growth across

66 o! 63 districts/ he 63th di strict, Dallas, reported 'strong- economic growth in the pre ious report/ U 'Hiring increased ata measured pace in se eral districts, with some contacts noting diLculty @nding 1uali@ed wor>ers,- the ed said in the


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une ; report/ U Employers added 6:;,555 0obs in May and une and 6::,555 in %pril, according to uly ; data !rom the#abor Department/ E en as 0ob growth has pic>ed up, the unemployment rate has remained at 8/7 percent !or three o! thepast !our months/ U ed oLcials predict growth will accelerate in the second hal! o! 3562 and ne t year/ U 'My colleagues

and I pro0ected that economic growth would pic$ up in coming uarters*resulting in gradual progress toward the levels o unemploymentand in"ation consistent with the up notablyin 356 /- U Gpea>ing uly 3 in Gtam!ord, Connecticut, Dudley, who ser es as ice chairman o! the ederal =pen Mar>et

Committee, said ' the private sector o the economy should continue to heal*while the amount o &scal drag will begin to subside+J 2utomaticbudget cuts and a anuary increase in the payroll ta. contributed tothe ,+-+ government's widest monthly budget surplus in more than&ve years in une+ $eceipts e ceeded outlays by W667/; billion last month, the biggest surplus since %pril3559/ U Consumer spending !ell short o! estimates in une, with sales at retailers climbing 5/ percent last month, short o!the 5/9 percent gain that was the median estimate o! 93 economists in a loomberg sur ey/ U =! the : companies in theGtandard Poor"s ;55 Inde that ha e reported second 1uarter earnings, 86 percent ha e e ceeded analyst estimates/

he G P ;55 hit a record high 6,793/; on uly 6;/

Econ growing now—(anu acturing and construction3euters F/4F ($euters, ' ed eige oo>* Economy +rowing at Moderate to ModestPace,- uly 68, 3562, http*..www/cnbc/com.id.6559:2;:7)#he ,+-+ economy continued to grow at a modest to moderate pacein une and early uly* with manu acturing e.panding in most areaso the country , the ederal $eser e said on ?ednesday/ U In its eige oo> report o! anecdotal in!ormation onbusiness acti ity collected !rom contacts nationwide, the &/G/ central ban> said !actories in many o! the 63 districts

reported increases in new orders, shipments or production /U #he &ndings on manu!acturing, compiled by theederal $eser e an> o! Gt/ #ouis !rom data collected on or be!ore uly 9, @t in with other sur eys and suggest

that a slowdown in actory activity earlier in the year had probablyrun its course+ ed not on Kpreset courseK !or tapering U Discussing the ongoing OtaperingO ersus OtighteningOargument on ?all Gtreet, with $ichard Madigan, PMorgan Pri ate an>/ OLow end is low* credit isstill cheap* and high end rates are still going up*; he says+ #he


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Economy ?ot Growing

#he economy is in trouble— ob growth is not an indicatorand other actors point to coming recessionHarding F/M (Gy Harding, inancial Gense, ' he +ood obs $eport does not = set themany Negati es,- uly ;, 3562, http*..www/@nancialsense/com.contributors.syBharding.goodB

0obsBreportBdoesBnotBo setBmanyBnegati es)U


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calmed European mar>ets on hursday and they surged higher/ But the relie was onlytemporary+ #hey couldn't hold the gains and were sharply bac$ tothe downside on


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Econ Impact De ense


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?o war

Economic decline doesn't cause war

Barnett 9[senior managing director o! Enterra Golutions ##C and a contributing editor.online columnist !or Es1uiremagaAine, columnist !or ?orld Politics $e iew, homas P/M/ ' he New $ules* Gecurity $emains Gtable %mid

inancial Crisis,- ?orld Politics $e iew, 9.3;355:, http*..www/aprode /com.theBnewBrulesBBsecurityBremainsBstableBamidB@nancialBcrisisB2:9Bbl/asp S?hen the global @nancial crisis struc> roughly a year ago, the blogosphere was ablaAe with all sorts o! scary predictionso!, and commentary regarding, ensuing conets BB is the

tal> o! the day, itKs interesting to loo> bac> o er the past year and realiAe how globali)ation6s &rst trulyworldwide recession has had virtually no impact whatsoever on theinternational security landscape/ None o! the more than threeBdoAen ongoing coning o er the arious databases, then, we see a most !amiliar picture* the usual mi o! ci il conistan), our in ol ement elsewhere around the planet has been 1uitemodest, both leading up to and !ollowing the onset o! the economic crisis* e/g/, the usual counterBdrug e orts in #atin%merica, the usual military e ercises with allies across %sia, mi ing it up with pirates o GomaliaKs coast)/ E erywhere elsewe @nd serious instability we pretty much let it burn, occasionally pressing the Chinese BB unsuccess!ully BB to dosomething/ =ur new %!rica Command, !or e ample, hasnKt led us to anything beyond ad ising and training local !orces/ Go,to sum up* No signi@cant uptic> in mass iolence or unrest (remember the smattering o! urban riots la st year in places li>e+reece, Moldo a and #at iaQ)T he usual !re1uency maintained in ci il con o! international policing e orts by the systemKs ac>nowledged #e iathan power (ine itable gi en thestrain)T and No serious e orts by any rising great power to challenge that #e iathan or supplant its role/ ( he worst thingswe can cite are MoscowKs occasional deployments o! strategic assets to the ?estern hemisphere and its wea> e orts tooutbid the &nited Gtates on basing rights in yrgyAstanT but the best include China and India stepping up their aid andin estments in %!ghanistan and Ira1/) Gure, weK e @nally seen global de!ense spending surpass the pre ious world recordset in the late 6:95s, but e en thatKs li>ely to wane gi en the stress on public budgets created by all this unprecedentedOstimulusO spending/ I! anything, the !riendly cooperation on such stimulus pac>aging was the most notable greatBpowerdynamic caused by the crisis/ Can we say that the world has su ered a distinct shi!t to political radicalism as a result o!

the economic crisisQ Indeed, no/ #he world6s ma or economies remain governed bycenter%le t or center%right political actions that remain decidedly

riendly to both mar$ets and trade / In the short run, there were attempts across the board toinsulate economies !rom immediate damage (in e ect, as much protectionism as allowed under current trade rules), but

there was no great slide into Otrade wars /O Instead, the ?orld rade =rganiAation is !unctioning as itwas designed to !unction, and regional e orts toward !reeBtrade agreements ha e not slowed/ Can we say Islamicradicalism was ining !orward,austere economic times are 0ust as li>ely to breed connecting e angelicalism as disconnecting !undamentalism/ %t the endo! the day, the economic crisis did not pro e to be suLciently !rightening to pro o>e ma0or economies into establishingglobal regulatory schemes, e en as it has spar>ed a spirited BB and much needed, as I argued last wee> BB discussion o! thecontinuing iability o! the &/G/ dollar as the worldKs primary reser e currency/ Naturally, plenty o! e perts and pundits ha eattached great signi@cance to this debate, seeing in it the beginning o! Oeconomic war!areO and the li>e between O!adingO%merica and OrisingO China/ %nd yet, in a world o! globally integrated production chains and interconnected @nancial

mar>ets, such Odi erging interestsO hardly constitute signposts !or wars up ahead/ ran>ly, I donKt welcome a world inwhich %mericaKs @scal pro


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Nor "an e"onomi" "rises e$plain t%e bloods%ed & '%at may be t%e most familiar "a sal "%ain in modern%istoriograp%y lin s t%e *reat +epression to t%e rise of fas"ism and t%e o tbrea of 'orld 'ar & - t t%at simplestory leaves too m "% o t& Na.i *ermany started t%e /ar in 0 rope only after its e"onomy %ad re"overed &Not all t%e"o ntries affe"ted by t%e *reat +epression /ere ta en over by fas"ist regimes , nor didall s "% regimes start /ars of aggression& n fa"t, no general relations%ip bet/een e"onomi"s and"onfli"t is dis"ernible for t%e "ent ry as a /%ole &Some /ars "ame after periods of gro/t% , ot%ers

/ere t%e"a ses rat%er t%an t%e "onse1 en"es of e"onomi" "atastrop%e , and some severee"onomi" "rises /ere not follo/ed by /ars &

?o resources or war during economic declineDuedney 91 (+aniel, He/lett Fello/ in S"ien"e, 2e"%nology, and So"iety – Prin"eton University, 30nvironment andSe" rity4 ddled 2%in ing67, - lletin of t%e Atomi" S"ientists, April)Poverty /ars& n a se"ond s"enario, de"lining living standards first "a se internal t rmoil, t%en /ar & f gro psat all levels of affl en"e prote"t t%eir standard of living by p s%ing deprivation on ot%er gro ps, "lass /ar andrevol tionary p%eavals "o ld res lt& Fa"ed /it% t%ese press res, liberal demo"ra"y and free mar et systems "o ldin"reasingly be repla"ed by a t%oritarian systems "apable of maintaining minim m order& f a t%oritarian regimesare more /ar9prone be"a se t%ey la" demo"rati" "ontrol, and if revol tionary regimes are /ar9prone be"a se of t%eirideologi"al fervor and isolation, t%en t%e /orld is li ely to be"ome more violent& 2%e re"ord of previo s depressionss pports t%e proposition t%at /idespread e"onomi" stagnation and nmet e"onomi" e$pe"tations "ontrib te to

international "onfli"t& Alt%o g% initially "ompelling, t%is s"enario %as ma:or fla/s & !ne is t%at it is arg ably based on nso nd e"onomi" t%eory & 'ealt% is formed not so m "% by t%e availability of "%eap nat ralreso r"es as by "apital formation t%ro g% savings and more effi"ient prod "tion& any reso r"e9poor "o ntries, li e;apan, are very /ealt%y, /%ile many "o ntries /it% more e$tensive reso r"es are poor& 0nvironmental "onstraintsre1 ire an end to e"onomi" gro/t% based on gro/ing se of ra/ materials, b t not ne"essarily an end to gro/t% in t%eprod "tion of goods and servi"es& n addition, e"onomi" de"line does not ne"essarily prod "e "onfli"t & Ho/so"ieties respond to e"onomi" de"line may largely depend pon t%e rate at /%i"% s "% de"lines o"" r& And as peopleget poorer, t%ey may be"ome less /illing to spend s"ar"e reso r"es for military for"es & As -ernard-rodie observed abo t t%e modern era, 3 2%e predisposing fa"tors to military aggression are f ll bellies,not empty ones &7 2%e e$perien"e of e"onomi" depressions over t%e last t/o "ent ries may be irrelevant , be"a se s "% depressions /ere "%ara"teri.ed by nder9 tili.ed prod "tion "apa"ity and falling reso r"e pri"es& n t%e< =>s in"reased military spending stim lated e"onomies, b t if e"onomi" gro/t% is retarded by environmental"onstraints, military spending /ill e$a"erbate t%e problem&

Economic Interdependence 7hec$s 7on"ict%ndrew @uchins , $ussian and Eurasian Program at the Carnegie Institution, 35 5 http*..sdli/Gtan!ord/edu.656.lectures.notes35/htmlEconomic Interdependence %rgument* Ma0or war would be too economically de astating!or a great power to consider it in its interests/ Economic globaliAation doesnot a ect all countries and regions e1ually/ Institutional %rguments* $egional andglobal institutions are becoming increasingly more power!ul, and theyencourage and !acilitate cooperation and dispute resolution between nationstates in a peace!ul manner/


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Economy 3esilient

Economy resilientMain Wire 8 (?eporting t%e @ongressional - dget !ffi"e S mmer ?eport on 0"onomi" Assessments, 3F! @ Seen

Hi ing FF? 2%ro g% > , 7, 9 , #e$is)Ho/ever, t%e e"onomi" o tloo "o ld also improve sooner t%an @-! is " rrently fore"asting& + ring t%e past B5

years, t%e e"onomy %as been resilient in the face of adverse shocks C sin"e < 8=, it %ase$perien"ed only t/o relatively mild re"essions, and inflation %as been m "% more "ontained t%an in earlier years&Some e"onomists attrib te t%at long period of relative stability to a n mber of developments 99 for e$ample,less e"onomi" reg lation , greater "ompetition in labor and prod "t mar ets (in"l ding globali.ation),and more9 effe"tive monetary poli"y & 2%ey arg e t%att%e e"onomy %as be"ome more "ompetitive andmore fle$ible , able to respond to s%o" s be"a se pri"es "an ad: st more 1 i" ly to refle"t relatives"ar"ities& (A""ording to t%at vie/, s"ar"e goods and servi"es "an be 1 i" ly redire"ted to t%eir most val ed ses, and apri"e s%o" s negative effe"t on o tp t /ill be m ted&) 2%e " rrent t rb len"e in t%e finan"ial mar ets is testing t%atarg ment, b t p to no/, t%e e"onomy %as "oped /it% t%e severe s%o" s of t%e past year relatively /ell &

n parti" lar, in a distin"t "ontrast to events follo/ing t%e s%o" s of t%e < D>s, t%e la" of a steady s rge in "oreinflation and nit labor "osts, and t%e degree to /%i"% t%e "ons mption of petrole m prod "ts %as de"lined, indi"atean effi"ient response by b sinesses and %o se%olds to s yro" eting oil pri"es& (For e$ample, initial estimates indi"atet%at t%e "ons mption of petrole m prod "ts d ring t%e se"ond 1 arter of t%is year /as abo t E per"ent lo/er t%an it

/as a year ago, even t%o g% real *+P /as , ///&ne/s/ee &"om id EDE8=)2%e U&S& and global e"onomies /ere able to /it%stand t%ree body blo/s in B>>599one of t%e

/orst ts namis on re"ord (/%i"% str " at t%e very end of B>>E), one of t%e /orst % rri"anes onre"ord and t%e %ig%est energy pri"es after H rri"ane Gatrina99 /it%o t missing a beat & 2%isresilien"e /as espe"ially remar able in t%e "ase of t%e United States, /%i"% sin"e B>>> %as beenable to s%r g off t%e biggest sto" 9mar et drop sin"e t%e < =>s, a ma:or terrorist atta" ,"orporate s"andals and /ar& +oes t%is mean t%at re"essions are a reli" of t%e past6 No, b t re"ent events dos ggest t%at t%e global e"onomy s imm ne system is no/ strong eno g% to absorb s%o" st%at B5 years ago /o ld probably %ave triggered a do/nt rn& n fa"t, over t%e past t/o de"ades,re"essions %ave not disappeared, b t %ave be"ome "onsiderably milder in many parts of t%e /orld& '%at e$plainst%is en%an"ed re"ession resistan"e 6 2%e ans/er4 a "ombination of good ma"roe"onomi"poli"ies and improved mi"roe"onomi" fle$ibility & Sin"e t%e mid9< 8>s, "entral ban s /orld/ide %ave %adgreat s ""ess in taming inflation& 2%is %as meant t%at long9term interest rates are at levels not seen in more t%an E> years& A lo/9inflation and lo/9interest9rate environment is espe"ially "ond "ive to s stained, rob st gro/t%&

oreover, "entral ban ers %ave avoided some of t%e poli"y mista es of t%e earlier oil s%o" s (in t%e mid9< D>s andearly < 8>s), d ring /%i"% t%ey typi"ally did too m "% too late, and e$a"erbated t%e ens ing re"essions& 0ven moreimportant, in re"ent years t%e Fed %as been parti" larly adept at "risis management ,aggressively " tting interest rates in response to sto" 9mar et "ras%es, terrorist atta" s and

/ea ness in t%e e"onomy & 2%e benign inflationary pi"t re %as also benefited from in"reasing "ompetitivepress res, bot% /orld/ide (t%an s to globali.ation and t%e rise of Asia as a man fa"t ring : ggerna t) anddomesti"ally (t%an s to te"%nology and dereg lation)& Sin"e t%e late < D>s, t%e United States, t%e United Gingdomand a %andf l of ot%er "o ntries %ave been espe"ially aggressive in dereg lating t%eir finan"ial and ind strial se"tors&2%is %as greatly in"reased t%e fle$ibility of t%eir e"onomies and red "ed t%eir v lnerability to inflationary s%o" s&#oo ing a%ead, /%at all t%is means is t%at a global or U&S& re"ession /ill li ely be avoided in B>> , and probably inB>>D as /ell& '%et%er t%e " rrent e$pansion /ill be able to brea t%e re"ord set in t%e < >s for longevity /ill dependon t%e ability of "entral ban s to eep t%e inflation dragon at bay and to avoid poli"y mista es& 2%e prospe"ts loogood& nflation is li ely to remain a lo/9level t%reat for some time, and -en -ernan e , t%e in"oming "%airman of t%eFederal ?eserve -oard, spent m "% of %is a"ademi" "areer st dying t%e past mista es of t%e Fed


16/34

and %as vo/ed not to repeat t%em& At t%e same time, no single s%o" /ill li ely be big eno g% toderail t%e e$pansion & '%at if oil pri"es rise to I8> or I > a barrel6 ost estimates s ggest t%at gro/t% /o ld be" t by abo t < per"ent99not good, b t no re"ession& '%at if U&S& %o se pri"es fall by 5 per"ent in B>> (an e$tremeass mption, given t%at %o se pri"es %aven t fallen nationally in any given year d ring t%e past fo r de"ades)60"onomi" gro/t% /o ld slo/ by abo t >&5 per"ent to < per"ent& '%at abo t anot%er terrorist atta" 6 Here t%es"enarios "an be pretty s"ary, b t an atta" on t%e order of


17/34

,- @ey Debate


18/34

,- ?ot @ey%%World

7hina is the new lynchpin to the global economy—

underpins every mar$et including ,- debtEvans 44 (Mar> E ans, he +lobe and Mail, e it $esol ed* he ChineseEconomy will Dri e the +lobal $eco ery,- une 37, 3566, #e isNe is)7hina is the world6s second%largest economy* its largest e.porter*and has accounted or about M5 per cent o global growth since

55=+ With continued wea$ness in Europe and the ,+-+* sustainingeven a mild recovery is inconceivable without it+ Dri e the global economyQMaybe/ Gustain and trans!orm itQ %lmost certainly/ UDeeply integrated into globalsupply chains and regional production networ$s* it is now the largesttrading partner o apan* -outh @orea and most southeast 2siannations+ Its oreign reserves have topped QA%trillion / Its outbound in estmenthas increased to about W;7Bbillion e en as global in estment is declining/ U7hina6s most

immediate impact on the world economy is through continuingsupport o the ,+-+ de&cits and as the prime driver o about hal oglobal demand or $ey commodities+ 1ost% 55= domesticconsumption o 7hinese manu actured goods has increased alongwith the household spending o a ast%increasing middle class inside7hina and in other parts o 2sia /U Policy re!orms and mar>et ad0ustments are!orcing Chinese enterprises to mo e beyond lowBwage production and toward more ad ancedpositioning in global alue chains/ U estament to ChinaKs centrality is the more diLcult1uestion* %cute property bubbles, industrial o ercapacity, and rising wages are signi@cantchallenges / #he world* not ust 7hina* has a sta$e in how well they aremanaged+ #he bigger long%term story is 7hina6s rising weight androle in managing and de&ning the global economy+ or the moment largelya Oresponsible sta>eholder,O ChinaKs leaders are playing a generally constructi e role ininstitutions including the ? =, IM , ?orld an> and +B35, e en as they support new regionalones that gi e hints o! an alternati e design/ U ChinaKs authoritarian capitalism is not a model !ormany other countries/ ut nor will it 1uic>ly con erge with ?estern practices in the realms o!political institutions, corporate go ernance or economic structures/ U +lobal power shi!ts ha emoral and political as well as economic conse1uences/ ?ith greater economic weight is cominggreater asserti eness about the rules o! the game/ What Bei ing thin$s about thepre erred mi. o states* citi)ens and mar$ets will be a de&ning

eature o the world economy in the messy, multicentric, era we ha e entered/

World not dependent on ,- economy%%decoupling andemerging powersWassener 59 ( ettina ?assener, news reporter !rom the New Ror> imes, 7.25.5: 'GomeEconomies Ghow Gigns o! #ess $eliance on &/G/-http*..www/nytimes/com.355:.58.56.business.economy.56decouple/htmlQs1^ orY35aY35while,Y35whenY35theY35economicY35crisisY35wasY35atY35itsY35worst,Y35itY35wasY35aY35dirtyY35wordY35thatY35onlyY35theY35mostY35pro ocati eY35o!Y35analystsY35daredY35toY35use/Y35Now,Y35theY35DBwordY35YE3Y95Y: Y35decouplingY35YE3Y95Y: Y35isY35ma>ingY35aY35comebac>,Y35andY35nowhereY35moreY35soY35thanY35inY35%sia/Y35PutY35simply,Y35theY35termY35re!ersY35toY35theY35theoryY35thatY35emergingY35mar>etsY35YE3Y95Y: Y35whetherY35ChinaY35orY35ChileY35YE3Y95Y: Y35willY35becomeY35lessY35dependentY35theY35&nitedY35GtatesY35asY35theirY35economiesY35becomeY35strongerY35andY35moreY35sophisticated/Y35 st^nyt ad nnl 6̂ scp^6 ad nnl 6̂2636;98:5BuN=r% lDo?=oiP;5Gapng)


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For a /%ile, /%en t%e e"onomi" "risis /as at its /orst, it /as a dirty /ord t%at only t%e most provo"ative of analysts dared

to se& No/, t%e +9/ord J de"o pling J is ma ing a "omeba" , and no/%ere more so t%an in Asia& P tsimply, t%e term refers to t%e t%eory t%at emerging mar ets J /%et%er @%ina or @%ile J /ill be"ome lessdependent t%e United States as t%eir e"onomies be"ome stronger and moresop%isti"ated & For m "% of last year, t%e t%eory %eld p& any emerging e"onomies %ad steered "learof investments t%at dragged do/n ban ing be%emot%s in t%e 'est, and sa/ not%ing li e t%e t rmoil t%at began to eng lf t%e United States and 0 rope in B>>D& - t t%en, last a t mn, /%en t%e "ollapse of #e%man -rot%ers"a sed t%e finan"ial system to "onv lse and "ons mer demand to s%rivel, emerging e"onomies aro nd t%e /orld got"a g%t in t%e do/ndraft, and t%e +9/ord be"ame m d& No/, t%e tables are t rning, espe"ially in Asia, /%ere many

emerging e"onomies are s%o/ing signs of a stronger re"overy t%an in t%e 'est& Ande"onomists %ere %ave beg n to tal of t%e de"o pling on"e again& 3 +e"o pling is %appening for real ,7 t%e"%ief Asia9Pa"ifi" e"onomist at *oldman Sa"%s in Hong Gong, i"%ael - "%anan, said in a re"ent intervie/& 2o be s re,t%e on"e si..ling pa"e of Asian e"onomi" gro/t% %as slo/ed s%arply as e$ports to and investments from o tside t%e regionsl mped& A"ross Asia, millions of people %ave lost t%eir :obs as b siness dropped off and "ompanies " t "osts and o tp t& Asia is %eavily dependent pon selling its prod "ts to "ons mers in t%e United States and 0 rope, and many e$e" tivesstill say a strong Ameri"an e"onomy is a prere1 isite for a ret rn to t%e boom of years past& - t for t%e past "o ple of

mont%s, d ata %ave revealed a gro/ing divergen"e bet/een 'estern e"onomies andt%ose in m "% of Asia, notably @%ina and ndia& 2%e 'orld -an last /ee fore"ast t%at t%e e"onomies of t%e "o ntries t%at se t%e e ro and t%e UnitedStates /o ld "ontra"t E&5 per"ent and = per"ent, respe"tively, t%is year J"ompared /it% D&B per"ent and 5&< per"ent gro/t% fore"ast for @%ina and ndia&Fore"asts from t%e !rgani.ation for 0"onomi" @ooperation and +evelopment t%at /ere also p blis%ed last /ee ba" ed

p t%is general trend& a:or statisti"s for ; ne, d e 'ednesday, are e$pe"ted to s%o/ man fa"t ring a"tivity in @%inaand ndia are on t%e mend& -y "ontrast, p r"%asing managers inde$es for 0 rope and t%e United States are fore"ast to bemerely less grim t%an before b t still s%o/ "ontra"tions& '%y t%is diverging pi"t re6 2%e "risis %it Asia m "% later& '%ile t%e Ameri"an e"onomy began lang is%ing in B>>D, Asian e"onomies /ere doing /ell ntil t%e "ollapse of #e%man-rot%ers in September& '%at follo/ed /as a r s% of stim l s meas res J rate " ts and government spending programs&

n AsiaKs "ase, t%ese "ame soon after t%ings so red for t%e regionC in t%e United States, t%ey "ame m "% later& oreover,developing Asian e"onomies /ere in pretty good s%ape /%en t%e "risis str " & 2%e last ma:or "risis to %it t%e region J t%efinan"ial t rmoil of < D9 8 J for"ed governments in Asia to introd "e over%a ls t%at ltimately left t%em /it% lo/er

debt levels, more resilient ban ing and reg latory systems and often large foreign e$"%ange reserves& Anot%er"r "ial differen"e is t%at Asia , nli e t%e United States and 0 rope, %as not %ad a ban ing"risis & -an profits in Asia %ave pl nged and some %ave %ad to raise e$tra "apital b t t%ere %ave been no ma:or"ollapses and no bailo ts& 2%e @%inese stim l s pa" age of E trillion renminbi y an, or I585 billion,anno n"ed last November, %as led to a boom in spending and is a ma:or reason /%y e"onomists areoptimisti" abo t @%ina, and abo t m "% of t%e region as a /%ole AsiaKs generally lo/er debt levels alsomean t%ere %as been no "redit "r n"% of t%e ind t%at %as %andi"apped"ompanies and "ons mers else/%ere& 3Asia does not %ave a "redit "r n"%& t %ase$"ess li1 idity ,7 r& Ne mann of HS- @ said& 32%e ban ing system is st ffed /it% li1 idity& 2%is is benefiting Asian asset mar ets J from sto" s to property J and is leading to a grad al 3finan"ial de"o pling7 from t%e United Statesand 0 rope, r& Ne mann said& 3For t%e past t/o de"ades, e1 ities mar ets %ave been driven by 'estern ris "apital, not Asian investors t%emselves,7 %e said& 3No/, yo Kre finding t%at Asian money is in"reasingly driving t%e mar et&7 Analystsat errill #yn"% agree& n a re"ent resear"% note t%ey said t%e Hong Gong sto" mar et, for e$ample, %ad performed m "% better t%an mar ets in t%e United States, and property pri"es in t%e "ity %ave risen, partly be"a se of "apital inflo/s frommainland @%ina& !f "o rse, none of t%is means Asia %as be"ome "ompletely independent from t%e rest of t%e /orld& Asiaremains %eavily reliant on e$ports for e"onomi" gro/t%& 2%e res lt, despite in"reased 3de"o pling,7 is t%at gro/t% in Asia%as slo/ed do/n, in some "ases s%arply& 2%e ndonesian e"onomy, for e$ample, is e$pe"ted to gro/ =& per"ent t%is year,t%e Asian +evelopment -an fore"asts& 2%is "ompares to more t%an per"ent in B>>8 and B>>D 2%e ban e$pe"ts t%e

ndian e"onomy to gro/ to 5 per"ent t%is year, and t%e @%inese e"onomy D per"ent J do/n from D&< per"ent and per"ent, respe"tively, in B>>8& Nor %as t%e effe"t been niform& +eveloped Asian e"onomies, li e ;apan, Singapore andHong Gong, are m "% more tig%tly tied into t%e /orld e"onomy and finan"ial system& All t%ree are in re"essions& 32%eUnited States %as deep str "t ral problems t%at are "oming %ome to roost J Asia %asnKt got t%ose, and t%at %as been very,

very important,7 says r& *arner of organ Stanley 3 0merging Asian nations /ent into re"essionlast,7 %e says& n"reasingly, t%ey are loo ing li e t%ey /ill also to "ome o t first Jand strongest&7


20/34

World economy has decoupled rom ,-—7hina and otherdeveloping countries driving growth@ennedy 45 (Gimon ennedy, loomberg, '?all Gtreet sees ?orld Economy Decoupling!rom &G,- =ctober , 3565, http*..www/bloomberg/com.news.3565B65B52.worldBeconomyBdecouplingB!romBuBsBinBslowdownBreturnsBasBwallBstreetB iew/html) K#he world has already become partially decoupled*J oseph GtiglitA said in aGept/ 35 inter iew/ &nderpinning their analysis is the iew that international reliance on,+-+ trade has diminished and is too small to spread the lingeringe!ects o 2merica's housing bust+ 1roviding the ,+-+ pain doesn'troil &nancial mar$ets as it did in the credit crisis* Goldman -achse.pects a wea$ening dollar* higher bond yields outside the ,+-+ andstronger emerging%mar$et e uities /U ' Go long as it doesn"t turn to ets economic research in New Ror>at o!% Merrill #ynch, said in a telephone inter iew/ He predicts the &/G/ will e pand 6/9 percent ne t year,compared with 2/: percent globally/ U hat may pro ide com!ort !or some o! the central ban>ers and @nanceministers !rom 698 nations ing to ?ashington !or annual meetings o! the International Monetary undand ?orld an> on =ct/ 9B65/ I(< chie economist =li ier lanchard last monthpredicted Kpositive but low growth in advanced countries*J whiledeveloping nations e.pand at a Kvery highJ rate / He will release re ised!orecasts on =ct/ 7/ U XPartially Decoupled" U ' he world has already become partiallydecoupled,- Nobel laureate oseph GtiglitA, a pro!essor at New Ror>"s Columbia &ni ersity, saidin a Gept/ 35 inter iew in Vurich/ He will spea> at an IM e ent this wee>/ U Gi teen months a!terthe world"s largest economy emerged !rom recession, the ,+-+ recovery is losingmomentum , with !actory orders !alling 5/; percent in %ugust and unemployment !orecastto increase to :/8 percent in Geptember !rom the pre ious month"s :/7 percent, according tothe median estimate o! 89 economists in a loomberg News sur ey/ U heir predictions don"tinclude another contraction, with growth estimated at 3/8 percent this year and someindicators showing progress/ =rders !or capital goods rose ;/6 percent in %ugust and thenumber o! contracts to purchase pre iously owned homes increased /2 percentT both werehigher than !orecasts/ U China Manu!acturing %ccelerates U Even so* emerging mar$etsare showing more strength+ (anu acturing in 7hina accelerated or asecond consecutive month in -eptember , and industrial production in India

0umped 62/9 percent in uly !rom a year earlier, more than twice the une pace/ U ' It seemsthat recent economic data help to con&rm the story o emerging%mar$ets outper ormance*J said David Lubin* chie economist oremerging mar$ets at 7itigroup Inc+ in London+ #he gap in growthrates between the developing and advanced worlds is widening , hesaid/ Emerging economies will account !or about 75 percent o! global e pansion this year andne t, up !rom about 3; percent a decade ago, according to his estimates/ U he main reason !orthe di ergence* ' Direct transmission rom a ,+-+ slowdown to othereconomies through e.ports is ust not large enough to spread a ,+-+demand problem globally ,- +oldman Gachs economists Dominic ?ilson and GtacyCarlson wrote in a Gept/ 33 report entitled 'I! the &/G/ sneeAes///-


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,- @ey%%World

#he ,- will remain the most important part o the world

economy or decades(illigan 44 (%ndrew Milligan, In estment ?ee>, 'Is the &G #osing itsInably wea> reco ery !rom the +reat inancial Crisis compared withpast history/ Political commentators and global in estors ali>e are beginning to as> R 6Is the,- losing its in"uence KIs the pressure o! being the worldKs largest economy, the@nancial superBpower, becoming too muchQ U =ur answer to such a 1uestion would be simple*yes , the &G is losing its iney issue B the process remainsslow+ 2merica will be the single most important driver or the globaleconomy and &nancial mar$ets or years to come+ Let us &rste.amine economic growth+ S course* the ,- will e.pand moreslowly than the larger emerging economies+ In 54 * or e.ample*AT would be a target that Sbama could only dream about , while in ChinaPremier ?en would be aghast i! growth was less than 9Y a year / Sver time* 7hina iscatching up Bcurrently it is the worldKs second largest economy/ U Indeed in some areas itdominates, most notably in commodities where in broad terms it is responsible !or about 5Yo! global demand !or items such as copper/ Policy signals !rom ei0ing, say about in!rastructuredemand, matter rather more than those !rom ?ashington !or many mining stoc>s/ Centralban>s in the &G, and other =ECD countries, are increasingly @nding that the iney area where the &G is losing its innown, China now holds o er W2trn o! !oreigne change reser es, primarily in &G go ernment bonds/ %merica !aces some ery signi@cantdecisions in coming months and years* how to deal with a go ernment borrowing re1uiremento! W6/5trnB6/;trn a year, or put another way how to re i e e ports o! high alue manu!acturingand ser ices to deal with a current account de@cit still running at W 55B;55bn a year/ U Indeed,currency e empli@es many o! the problems !acing the &G%, as well as some o! its inherentad antages/ #he dollar is still the world6s reserve currency Tdespite growingworries its share o! total !oreign e change reser es has only !allen !rom about 85Y to about7;Y in the past @ e years, largely at the e pense o! the euro but also commodity relatedcurrencies/ #he ,- &nancial mar$ets remain very large and li uid * themar>et capitalisation o! the $ussell 2555 largest &G @rms is o er W6;trn, compared with someW2trn !or the & Ks %ll Ghare or !or EuropeKs largest ;55 companies/ U hat re!erence to &G@rms is an important note to end on / Despite all the headline worries aboutthe decline in the ,-26s &nancial* political or military in"uence* or


22/34

the role o the dollar as a means o e.change* the bedroc$ or the ,-remains its corporate sector / In \3, &G @rms deli ered about W3trn o! pro@ts on anannualised basis/ It remains a world leader in technology, aerospace, pharmaceuticals, energyand comple @nancial ser ices/ Res, it is less competiti e than some years ago, but the ,-will still in"uence &nancial mar$ets more than other economies orat least the coming decade+

,- $ey to the global economy—largest produce andconsumer-traits #imes 44 (Gtraits imes, '&G Economy* attered but by no Means

noc>ed out,- No ember :, 3566, #e isNe is)?hat is your economic outloo> !or the &GK U #HE world6s largest economy is acingseveral serious problems+ irst, its postBcrisis reco ery and growth ha e beenanaemic/ he economy is pro0ected to grow around 6/7 per cent this year, and between 3 percent and 3/3 per cent ne t year/ Continued concerns o er so ereign debt in the European&nion and a slowdown in ma0or emerging economies will also weigh on &G growth prospects/ U

Gecond, the &G is !acing deep structural challenges, including a persistently highunemployment rate/ U hird, the &G hit its debt ceiling o! &GW6 /2 trillion (&GW69/6 trillion) inMay/ he political polarisation that characterised the debt ceiling discussions underscored thepre ailing concern around go ernance, decisionBma>ing and policy certainty/ Companies mayneed to prepare !or policy uncertainty, especially at the !ederal le el, when engaging the &G /UIn this case, should I disregard the &G mar>etQ U CE$ %IN#R not/ Despite the concernsand sluggish economy* it is too early to write o! the ,- mar$et+#here are several actors that account or 2merica6s resilience whichinternationalising GingaporeBbased companies should consider/ U _ GiAe o! the mar>et* In thiscurrent climate* it is easy to orget that the ,- is the world6s largesteconomy ( &GW6 /8 trillion in gross domestic product), which is e uivalent to thecombined economies o 7hina* apan and Germany+ With apopulation o A45 million ma$ing up P per cent o the globalconsumer mar$et* it represents a substantial mar$et or companies /U_ Ease o! doing business* he &G is a relati ely easy place to do business / #he labour

orce is one o the most competitive in the world with productivityhigher than in most other developed states / In addition, union participationin the pri ate sector has declined dramatically !rom 3; per cent in 6:8; to 7/: percent last year/ U

,- $ey to the global economy—7hina can't solve7aploe 9 (Da id Caploe, he Gtraits imes, ' ocus Gtill on %merica to #ead the +lobal $eco ery,-%pril 8, 355:, #e isNe is)IN HE a!termath o! the +B35 summit, most obser ers seem to ha e missed perhaps the mostcrucial statement o! the entire e ent, made by &nited Gtates President arac> =bama at hispreBcon!erence meeting with ritish Prime Minister +ordon rown* K he world has becomeaccustomed to the &G being a oracious consumer mar>et, the engine that dri es a lot o!economic growth worldwide,K he said/ KI! there is going to be renewed growth, it 0ust canKt bethe &G as the engine/K U ?hile super@cially sensible, this iew is deeply problematic/ o beginwith, it ignores the !act that the global economy has in act been 62merica%centred6 or more than O5 years+ 7ountries BChina, apan, Canada, raAil,

orea, Me ico and so on Beither sell to the ,- or they sell to countries thatsell to the ,- /U his system has generally been ad antageous !or all concerned/ %merica


23/34

gained certain historically unprecedented bene@ts, but the system also enabledparticipating countries % &rst in Western Europe and apan* and later*many in the #hird World % to achieve undreamt%o prosperity+ 2t thesame time* this deep inter%connection between the ,- and the resto the world also e.plains how the collapse o a relatively smallsector o the ,- economy BKsubBprimeK housing, logarithmically e ponentialised by?all GtreetKs ingenious chicanery Bhas cascaded into the worst globaleconomic crisis since the Great Depression /U o put it simply, Mr =bamadoesnKt seem to understand that there is no other engine or the worldeconomy % and hasn6t been or the last si. decades+ I the ,- doesnot drive global economic growth* growth is not going to happen+#hus* ,- policies to deal with the current crisis are critical not ustdomestically* but also to the entire world / Conse1uently, it is a matter o! globalconcern that the =bama administration seems to be !ollowing apanKs KmodelK !rom the 6::5s*allowing ma0or ban>s to a oid declaring massi e losses openly and transparently, and soperpetuating KAombieK ban>s B technically ali e but in reality dead/ U %s analysts li>e Nobellaureates oseph GtiglitA and Paul rugman ha e pointed out, the administrationKsunwillingness to con!ront &G ban>s is the main reason why they are continuing theirincreasingly ine plicable credit !reeAe, thus ra aging the %merican and global economies/

eam =bama seems reluctant to ac>nowledge the e tent to which its policies at home are!ailing not 0ust there but around the world as well/ U ?hich raises the 1uestion* I the ,-can6t or won6t or doesn6t want to be the global economic engine*which country will #he obvious answer is 7hina / ut that is unrealistic !orthree reasons/ U irst , 7hina6s economic health is more tied to 2merica6sthan practically any other country in the world+ Indeed* the reason7hina has so many dollars to invest everywhere % whether in ,-#reasury bonds or in 2 rica % is precisely that it has structured itsown economy to complement 2merica6s / he only way China can ser e as theengine o! the global economy is i! the &G starts pulling it @rst/ U Gecond, the &GBcentred systembegan at a time when its domestic demand !ar outstripped that o! the rest o! the world/ he!undamental source o! its economic power is its ability to act as the global consumer o! lastresort

/U 7hina* however* is a poor country* with low per capita income

,e en though it will soon pass apan as the worldKs second largest economy/ here are realpossibilities !or growth in ChinaKs domestic demand/ ut gi en its structure as an e portBoriented economy, it is doubt!ul i! e en a success!ul Chinese stimulus plan can pull the rest o!the world along unless and until China can start selling again to the &G on a massi e scale/ U

inally, the >ey KsystemK issue !or China B or !or the European &nion B in thin>ing aboutbecoming the engine o! the world economy B is monetary* ?hat are the implications o! ha ingyour domestic currency become the global reser e currencyQ U his is an e tremely compleissue that the &G has struggled with, not always success!ully, !rom 6:;: to the present/?ithout going into detail , it can sa!ely be said that though ha ing the &G dollar as the worldKsmedium o! e change has gi en the &G some tremendous ad antages, it has also created hugeproblems, both !or %merica and the global economic system/ U he Chinese leadership iscertainly !amiliar with this history/ It will try to a oid the yuan becoming an internationalmedium o! e change until it !eels much more con@dent in its ability to handle the mani!oldcurrency problems that the &G has grappled with !or decades/ U +i en all this , the ,- willremain the engine o global economic recovery or the oreseeable

uture* even though other countries must certainly help+ #his crisisbegan in the ,- % and it is going to have to be solved there too+


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,- @ey—Latin 2merica

US econ key to Latin American economyFryer 93 (Wesley A. Fryer, “Defining and Refocusing US Policy Toward a!in A"erica#,$%&'% 993, )!!*+%%www.wesfryer.co"%usla*olicy.)!"l , -

This relationship demonstrates a historic imbalance, and the importance of the UnitedStates to Latin America continues to outweigh the importance of the region to its powerfulnorthern neighbor. Many Latin American governments are largely dependent on the U.S.for their economic well-being, and an economic decline in the United States is virtuallycertain to trigger a recession in Latin America . T)is cause and effec! rela!ions)i* is su""ari/ed 0y !)e*)rase 1W)en !)e U.S. econo"y snee/es, a!in A"erican econo"ies ca!c) *neu"onia.1 The economic, political,and military influence of the United States in the region has historically been tremendous.

2any go ern"en!s sou!) of !)e U.S.%2e4ican 0order )a e !radi!ionally defined !)eir foreign *olicies 0y o**osi!ion !o !)eUni!ed S!a!es, and ir!ually all !)e ci!i/ens of !)e region )ar0or so"e resen!"en! for *as! "eddling and in!er en!ions of1!)e ugly A"ericans1 in a!in A"erican in!ernal affairs.

http://www.wesfryer.com/uslapolicy.htmlhttp://www.wesfryer.com/uslapolicy.htmlhttp://www.wesfryer.com/uslapolicy.htmlhttp://www.wesfryer.com/uslapolicy.html


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Latin 2merica @ey to ,- Economy

Latin 2merican Economy $ey to ,-

BB7 (onitoring 2sia 1aci&c 45 ( C Monitoring %sia Paci@c, %ugust 6:,3565, #e is Ne is)In response to a `inhua reporterKs 1uestion when meeting the press on that day, alenAuela said* 7hina6s economic activities in Latin 2merica will not cause a concernor constitute a threat to the ,nited -tates / ?e ery much welcome ChinaKse pansion o! in estment and trade in #atin %merica/ his will help carry along #atin %mericancountriesK economies and increase employment opportunities/ UHe saidR 7hina6s tradewith Latin 2merica accounts or only M per cent o its tradeworldwide+ By contrast* the ,- trade with Latin 2merica accounts orP5 per cent o its trade world wide+ Historically* the ,nited -tateshas had a very signi&cant trading relationship with Latin 2merica /U

alenAuela arri ed in ei0ing on 67 %ugust !or the !ourth round o! consultations on #atin%merican a airs with Chinese oreign Ministry oLcials/ he consultations started in 3557 and

are a subdialogue under the !ramewor> o! ChinaB&G strategic and economic dialogue/ hecurrent consultations are the @rst ChinaB&G consultations on #atin %merican a airs since=bama too> oLce/U alenAuela said that the consultations on #atin %merican a airs are basedon the common stands and ob0ecti es o! the &nited Gtates and China/ he &nited Gtates andChina are committed to promoting #atin %mericaKs economic growth, increasing employmentopportunities in the region, impro ing the standard o! li ing, and promoting trade andin estment/


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Impacts—Growth Bad


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Environment

Growth is collapsing the environment and resources

causes e.tinction+-peth = $hodes Gcholar J = !ord &ni ersity, Chairman o! Council onEn ironmental \uality !or E ecuti e =Lce, ounder o! ?orld $ecoursesInstitute ( hin>B an>), #ed the ?estern Hemisphere Dialogue on En ironmentand De elopment, %dministrator o! &nited Nations De elopment Program,Dean o! Rale Gchool o! orestry and En ironmental Gtudies, #eader o! thePresident"s as> orce on +lobal $ecourses and the En ironment, Holdsmultiple awardsZNational ?ildli!e ederation"s $ecourse De!ense %ward and#i!etime %chie ement %ward o! En ironmental #aw Institute, and lue PlanetPriAe, ames, ' he ridge at the Edge o! the ?orld-, pages 6B:

he remar>able charts that introduce this boo> re eal the story o! humanity"s impact on the naturalearth/K he pattern is clear* i! we could speed up time, it would seem as i! the global

economy is crashing against the earth—the +reat Collision/ %nd li>e the crash o!

an asterB oid, the damage is enormous/ or all the material blessings economic progress has pro ided,!or all the disease and destitution a oided, !or all the glories that shine in the best o! our ci iliAation,the costs to the natural world, the costs to the glories o! nature, ha e been huge and must be countedin the balance as tragic loss/ Hal the world 's tropical and temperate orestsare now gone+' #he rate o de orestation in the tropics continuesat about an acre a second+' %bout hal the wetlands and a third othe mangroves are gone /X %n estimated 95 percent o the large predator&sh are gone* and FM percent o marine &sheries are nowover&shed or @shed to capacity/" #wenty percent o the corals are gone*and another 5 percent severely threatened+ -pecies aredisappearing at rates about a thousand times aster than normal+'#he planet has not seen such a spasm o e.tinction in si.ty%&ve

million years* since the dinosaurs disappeared /- Sver hal theagricultural land in drier regions su!ers rom some degree odeterioration and deserti&cation / Persistent to.ic chemicals can nowbe ound by the do)ens in essentially each and every one o us /-Human impacts are now large relati e to natural systems/ he earth"s stratospheric oAone layer wasse erely depleted be!ore the change was disco ered/ Human acti ities ha e pushed atmosphericcarbon dio B ide up by more than a third and ha e started in earnest the dangerous process o! warmingthe planet and disrupting climate/ E erywhere earth"s ice @elds are melting/O Industrialprocesses are &.ing nitrogen* ma$ing it biologically active* at arate e ual to nature'sU one result is the development o more thantwo hundred dead )ones in the oceans due to over ertili)ation+JHuman actions already consume or destroy each year about P5percent o nature 's photosynthetic output* leaving too little orother species+; s two worlds/ ehind is the world we ha e lost, ahead the world we are ma>ing/ It is diLcult toappreciate the abundance o! wild nature in the world we ha e lost/ In %merica we can thin> o! the preBColumbian world o! 6 :6, o! #ewis and Clar>, and o! ohn ames %udubon/ It is a world where nature islarge and we are not/ I t is a world o! ma0estic oldBgrowth !orests stretching !rom the %tlantic to theMississippi, o! oceans brimming with @sh, o! clear s>ies literally dar>ened by passing s o! birds/ %s?illiam Mac#eish notes in he Day be@nre %merB ica, in 6753 an Englishman wrote in his 0ournal thatthe @sh schooled so thic>ly he thought their bac>s were the sea bottom/ ison once roamed east to


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lorida/ here were 0aguars in the Goutheast, griAB Aly bear in the Midwest, and wol es, el> andmountain lions in New England/' %udubon described the breathta>ing multitudes o! the passenger piBgeon migration, as well as the rapacity o! their wild and human predaB tors* ' ew pigeons were to beseen be!ore sunsetT but a great number o! persons, with horses and wagons, guns and ammunition,had already established encampments/ / / / Guddenly, there burst !orth a general cry o! XHere theycome]" he noise which they made, though yet distant, reminded me o! a hard gale at sea/ / / / %s thebirds arri ed, and passed o er me, I !elt a current o! air that surprised me/ housands were soon>noc>ed down by polemen/ he current o! birds, howe er, still >ept increasing/ / / / he pigeons, coming

in by thousands, alighted e eryB where, one abo e another, until solid masses / / / were !ormed one ery tree, in all directions/ / / / he uproar continues / / / the whole night/ / / / oward the approach o!day, the noise rather subsided/ / / / he howlings o! the wol es now reached our earsT and the !o es,lyn es, cougars, bears, raccoons, opossums, and poleBcats were seen snea>ing o !rom the spot/ ?hilsteagles and haw>s, o! di erent species, accomB panied by a crowd o! ultures, came to supplant them,and en0oy their share o! the spoil/ It was then that the authors o! all this de astation began their entryamongst the dead, the dying, and the mangled/ he pigeons were pic>ed up and piled in heaps, untileach had as many as he could possibly dispose o!, when the hogs were let loose to !eed on theremainder/-O he last passenger pigeon on earth e pired in a Aoo in Cincinnati in 6:6 / Gome decadeslater, !orester and philosopher %ldo #eopold o ered these words at a ceremony on this passing* '?egrie e because no li ing man will see again the onrushing phalan o! ictorious birds, sweeping a path!or spring across the March s>ies, chasing the de!eated winter !rom all the woods and prair ies/ / / / Menstill li e who, in their youth, remember pigeons/ rees still li e who, in their youth, were sha>en by ali ing wind/ / / / here will always be pigeons in boo>s and in museums, but these are eBpigeons cannot di e out o! a cloud to ma>e thedeer run !or co er, or clap their wings in thunderous apB plause o! mastBladen woods/ oo>Bpigeons

cannot brea>!ast on newB mown wheat in Minnesota and dine on blueberries in Canada/ hey >now nourge o! seasonsT they !eel no >iss o! sun, no lash o! wind and weather/- X9 Human societies are mo ing,rapidly now, between the two worlds/ he mo ement began slowly, but now we are hurtling toward theworld directly ahead/ he old world, nature"s world, continues, o! course, but we are steadily closing itdown, roping it o / It , he $e engeo!+aia/K ?hy the Earth Is ighting ad* and How ?e Can Gtill Ga e Humanity y an %merican e pert*

ames Howard unstler, he #ong Emergency* Gur i ing the End o! =il, Climate Change, and =therCon erging Catastrophes o! the wangB@rst Century y a &/G/ e pert on cons are so great, but $ees is athought!ul indi idual/ In any case, it would be !oolish to dismiss these authors/ hey pro ide a star>warning o! what could happen/ he escalating processes o! climate disruption, biotic impo erishB ment,and to i@cation that continue despite decades o! warnings and earnest e ort constitute a se ere


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indictment, but an indictment o! what e actlyQ I! we want to re erse todayKs destructi e trends,!orestall !urB ther and greater losses, and lea e a bounti!ul world !or our children and grandchildren, wemust return to !undamentals and see> to understand both the underlying !orces dri ing suchdestructi e trends and the economic and political system that gi es these !orces !ree rein/ hen we canas> what can be done to change the system/ he underlying dri ers o! today"s en ironmentaldeterioration ha e been clearly identi@ed/ hey range !rom immediate !orces li>e the enormous growthin human population and the dominant technoloB gies deployed in the economy to deeper ones li>e the

alues that shape our beha ior and determine what we consider important in li!e/ Most basically, we

>now that en ironmental deterioration is dri en by the economic acti ity o! human beings/ %bout hal!o! today"s world popuB lation li es in ab0ect po erty or close to it, with per capita incomes o! less thantwo dollars a day/ he struggle o! the poor to sur i e creB ates a range o! en ironmental impacts wherethe poor themsel es are o!ten the primary ictimsZ!or e ample, the deterioration o! arid and semiaridlands due to the press o! increasing numbers o! people who ha e no other option/ But the muchlarger and more threatening impacts stem rom the economicactivity o those o us participating in the modern* increas% inglyprosperous world economy+ #his activity is consuming vast

uantities o resources rom the environment and returning to theen% vironment vast uantities o waste products / he damages are alreadyhuge and are on a path to be ruinous in the !uture/ Go, a !undamental 1uestion !acing societies todayZperhaps the !undamental 1uestionZis how can the operating instructions !or the modern worldeconomy be changed so that economic acti ity both protects and restores the natural worldQ ?ithincreasingly !ew e ceptions, modern capitalism is the operatB ing system o! the world economy/ I use

'modern capitalism- here in a broad sense as an actual, e isting system o! political economy, not as anidealiAed model/ Capitalism as we >now it today encompasses the core economic concept o! pri ateemployers hiring wor>ers to produce products and ser ices that the employers own and then sell withthe intention o! ma>ing a pro@t/ ut it also includes competiti e mar>ets, the price mechanism, themodern corporation as its principal instituB tion, the consumer society and the materialistic alues thatsustain it, and the administrati e state acti ely promoting economic strength and growth !or a arietyo! reasons/ Inherent in the dynamics o! capitalism is a power!ul dri e to earn pro@ts, in est them,inno ate, and thus grow the economy, typically at e ponential rates, with the result that the capitalistera has in !act been characteriAed by a remar>able e ponential e pansion o! the world economy/ hecapitalist operating system, whate er its shortcomings, is ery good at generating growth/ hese

eatures o capitalism* as they are constituted today* wor$together to produce an economic and political reality that is highlydestructive o the environment+ 2n un uestioning society%widecommitment to economic growth at almost any costU enormousinvestment in technologies designed with little regard or theenvironmentU power ul corporate interests whose overridingob ective is to grow by generating pro&t* including pro&t romavoiding the environmental costs they createU mar$ets thatsystematically ail to recogni)e environmental costs unlesscorrected by governmentU government that is subservient tocorporate interests and the growth imperativeU rampantconsumerism spurred by a worshipping o novelty and bysophisticated advertisingU economic activity so large in scale thatits impacts alter the undamental biophysical operations o theplanet—all combine to deliver an ever%growing world economythat is undermining the planet's ability to sustain li e+

Growth and environmental sustainability are oppositesand cannot e.ist togetherHueting* V5= F $oe@e, Ph/ D !rom the &ni ersity o! +roningen, En ironmental Economist, X?HR EN I$=NMEN %#G&G %IN% I#I R C%N M=G P$= % #R N= E % %INED ?I H +$=?IN+ P$=D&C I=N", GcienceDirect ..


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/ %rguments why en ironmental sustainability can most probably not be attainedwith growing production and without broad acceptance o! deBgrowth he o!@cialpolicy o! all countries in the world is that standard NI F production F must increase in order to create scope !or @nancing en ironmentalconser ation, and thus attain sustainability/ he theoretical mista>e o! this reasoning is shown by Hueting [35S/ =! course, the !uture cannot be

predicted/ ut the plausibility o! whether (a) the actual production le el and (b)en ironmental sustainability will de elop in the same direction , which is the conse1uenceo! the causal relation e pressed in the political statements abo e, can indeed be e amined/ De eloping in the same direction is a minimum

prere1uisite !or assuming a causal relation/ =n the grounds o! the data discussed below such de elopment is e tremelyunli>ely / he author !eels the opposite is more plausible !or the !ollowing se enreasons/ (6) heoretically, the possibility cannot be e cluded that growth o! production and consumption can be combined withrestoration and maintenance o! en ironmental 1uality/ Howe er, such combination is highly uncertain andscarcely plausible/ It would re1uire technologies that simultaneously* (i) aresu!@ciently clean, (ii) do not deplete renewable natural resources, (iii) @ndsubstitutes !or nonBrenewable resources, (i ) lea e the soil intact, ( ) lea esu!@cient space !or the sur i al o! plant and animal species and ( i) arecheaper in real terms than current a ailable technologies, because i! they aremore e pensi e in real terms then growth will be reduced / Meeting all thesesi conditions is scarcely concei able !or the whole spectrum o! humanacti ities / Especially simultaneously realising both (i) through ( ) and ( i), which is a prere1uisite !or combining production growth andconser ation o! the en ironment, is e tremely di!@cult/ o gi e one e ample* as a rule, renewable energy is in mar>etterms currently much more e pensi e than energy generated using !ossil!uels / he costs o! implementing renewable energy throughout society arehigh, and this substantially lowers production growth / Internalising the costs o! eliminating theemissions o! burning !ossil !uels will reduce the production le el considerably/ %nyhow, technologies necessary !orthe combination o! production growth and !ull conser ation o! the !unctions o! the en ironment are not yet a ailable / %nticipating their !uture a ailability, that is stimulating NI growth in thee pectation that e/g/ clean, renewable, sa!e and cheaper energy, that does not damage ital en ironmental !unctions, will become a ailable in

the !uture, con


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War

Growth ma$es war inevitable and more dangerous

simplistic statistics don't assume the changing nature owar and new transnational threats+Echevarria 5A F (Mar/ 3552, #ieutenant Colonel %ntulio / Eche arria, PhD in History, Princeton&ni ersity, Director o! $esearch !or the &/G/ %rmy ?ar College, 32 year long military career, publishede tensi ely in scholarly and pro!essional 0ournals on topics related to military history and theory andstrategic thin>ing, graduate o! the &/G/ Military %cademy, the &/G/ %rmy Command and +eneral GtaCollege, and the &/G/ %rmy ?ar College, '+#= %#IV% I=N %ND HE N% &$E = ?%$,- Gtrategic GtudiesInstitute, http*..www/strategicstudiesinstitute/army/mil.pdLles.pub36;/pd! V$) Despite its apparent positi eimpact on the spread o! democracy and !reeBmar>et economies, globali)ation mightproduce a more dangerous and unpredictable world* especially i thecultural bac>lash it has generated thus !ar gathers more momentum+ #his worldmight be characteri)ed by shi ting power relationships* ad hocsecurity arrangements* and an ever%widening gap between the

richest and poorest nations / 9 % number o! new democracies Zlac>ing strongtraditions !or maintaining chec>s and balancesZ might , !or e ample, collapse a ter onlytransitory successes / ransnational threats, such as international crimesyndicates* terrorist networ$s* and drug cartels* could continue togrow in strength and in"uence , thri ing among autocratic, wea>, or soBcalled !ailedstates/ %nd, ethnic ri alries, nationalism, religiousbased antagonisms, and competition !or scarceresources, including water, could go unresol ed/ hus, s erious crises would undoubtedlyarise* especially as the world's population continues to grow / =n theother hand, globaliAation could gi e rise to a more stable world in which national interests merge into thegeneral aim o! promoting peace, stability, and economic prosperity/ : In this world, the rule o! law and thee istence o! pluralistic political systems would continue to spreadT and the number o! !reeBmar>eteconomies would e pand, distributing economic prosperity still !urther/ Even i this K,topiaJshould materiali)e* a number o crises Zsome o! which will undoubtedly re1uire

military inter entionZ will most li$ely have had to occur be orehand , since mostautocratic regimes will probably not surrender power without a @ght/ Moreo er, as the 6::: oso o crisis3demonstrated, e en relati ely small states armed primarily with con entional weapons can posesigni@cant security challenges to a superpower and its strategic partners/ 65 he world need not de ol einto a 'clash o! ci il iAations- or a 'coming anarchy,- there!ore, in order !or military power to continue toplay a signi@cant role in the !uture/ 66 In any case * globali)ation will surely continueand may even accelerate i data concerning the rate o technologicalchange are any indication / 63 %s numerous studies and strategic papers ha e pointed out,globali)ation is already changing how wars are being ought in the 4st century*ma$ing them more dangerous than in any previous era / 62 %t a minimum, the greatermobility o! people, things, and ideas will mean increased mobility !or nonstate actors, weapons o! massdestruction, and radical !undamentalism o! all types/ In !act, the &/G/ Department o! Gtate currently reportsthat more than 75 acti e terrorist groups e ist (with some 655,555 members)T and o er oneBthird o! themha e the capacity !or global reach/ 6 urthermore, today"s terrorists ha e pro en ery adapti e, learning

!rom pre ious generations, and changing their tactics in response to new antiBterrorist measures/ 6;+lobaliAation clearly o ers them some e traordinary capabilities to communicate and coordinate theire orts/ Globali)ation also acilitates the proli eration o destabili)ingcapabilities* such as weapons o mass destruction or mass e!ect /Ele en countries currently ha e nuclear weapons programsT thirteen more are acti ely see>ing them/ 67More than 3; countries now possess ballistic missiles, and o er 8;,555 cruise missiles are in e istence,with the number e pected to rise to between 95,555 and :5,555 by 3565/ 68 %lso, at least 68 countriesZincluding the soBcalled '% is o! E il -Zcurrently ha e acti e chemical and biological weapons programs,and the number is rising/ 69 %s the %ssistant Gecretary o! Gtate !or NonBproli!eration recently e plained,despite the pro isions 2o! the Nuclear NonBproli!eration reaty and the Chemical and iological ?eaponscon entions, proli!eration o! chemical, biological, radiological, nuclear and high e plosi e.high yield

http://www.strategicstudiesinstitute.army.mil/pdffiles/pub215.pdfhttp://www.strategicstudiesinstitute.army.mil/pdffiles/pub215.pdf


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weapons continues worldwide* ' here is an intense sort o! cooperation that goes on among countries thatare trying to ac1uire such weapons/- 6: or e ample, China and North orea ha e long contributed to theproli!eration o! chemical and biological weapons, both !or strategic le erage against the &nited Gtates and!or economic ad antages/ 35 hus, globaliAation assists some power!ul moti es that run counter tononproli!eration e orts/ Biological weapons* especially* pose a serious threatnot only to human populations* but also to agriculture and livestoc$ /&n!ortunately, &/G/ crops lac> genetic di ersity, rendering them ulnerable to disease/ urthermore * thenation's centrali)ed eeding and mar$eting practices ma$e livestoc$e.tremely vulnerable to a biological attac$+ I such an attac$ were tooccur* a devastating ripple e!ect would surely spread throughoutthe global economy since the ,nited -tates produces A5%M5 percento the world's oodstu!s / 36 +lobaliAation has also introduced a new !orm o! war!are* cyberBwar/ More than 25 countriesZincluding $ussia, China, and se eral soBcalled rogue statesZha e de elopedor are de eloping the capability to launch strategicBle el cyber attac>s/ 33 #heinterconnectedness o many nations' in rastructures means that asuccess ul cyber attac$ against a single sector in one country couldresult in adverse e!ects in other sectors within the same country* orthose o its neighbors / Indeed, intended (and unintended) ad erse e ects could well tra elglobally/ 32 I! globaliAation is ma>ing war more dangerous and adding new dimensions to it (such as cyberspace), is it in some way changing the nature o! warQ ?hat e actly is the nature o! warQ hese 1uestionsare o! more than a purely academic interest, since the nature o! a thing tends to de@ne how it can andcannot be used/

Growth is the root cause o war changes nationalpriorities and encourages violence in the name o growth#rainer* V5 B ed, Ph/ D o! Gocial Gciences !rom the &ni ersity o! New Gouth ?ales, Genior #ecturer in the Gchool o! GocialGciences, XI! you want a uence, prepare !or war", http*..socialsciences/arts/unsw/edu/au.tsw.D73I!Rou?ant% uence/html ..

I! this limits to growth analysis is at all alid the implications !or the problem o! global peace andcon


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counterparts /O73 OGtruggles are ta>ing place , or are in the oLng, between rich and poornations o er their share o! the world product Twithin the industrial world o ertheir share o! industrial resources and mar>ets O/72 O hat more than hal! o! thepeople on this planet are poorly nourished while a small percentage li e inhistorically unparalleled lu ury is a sure recipe !or continued and e enescalating international cone it clear that it was prepared togo to war in order to secure supplies / OPresident Carter last wee> issued a clear warning that any attempt togain control o! the Persian +ul! would lead to war/O It would O be regarded as an assault on the ital interests o! the &nited Gtates/O7; O he&G is ready to ta>e military action i! $ussia threatens ital %merican interestsin the Persian +ul!, the &G Gecretary o! De!ence, Mr/ rown, said yesterday/O77 lareKsrecent boo> $esource ?ars discusses this theme in detail, stressing the coming signi@cance o! water as a source o! international coney materials is growing at an unsustainable rate/O O the incidence o! con a !action that will then loo> !a ourably on ?estern

interests / In a report entitled, O he rich priAe that is GhabaO, reeAe begins, O Increasing ri alry o er a shareBout between rance and elgium o! the mineral riches o! Ghaba Pro ince liesbehind the 0oint rancoB elgian paratroop airli!t to Vaire /O O hese mineral riches ma>e thepro ince a aluable priAe and help e plain the ?est"s e tended diplomatic courtship,///O79 hen there is potential coning place, or arein the oLng, between rich and poor nations o er their share o! he world product, within the industrial world o er their share o! industrial

resources and mar>ets O85 +rowth, competition, e pansion and war / inally, at the most abstract le el,the struggle !or greater wealth and power is central in the literature on thecauses o! war / O///war are appears as a normal and periodic orm ocompetition within the capitalist world economy /O O///world warsregularly occur during a period o economic e.pansion /O86 OWar is aninevitable result o the struggle between economies ore.pansion+; 83 Choucri and North say their most important @nding is that domestic growth is a strongdeterminant o! national e pansion and that this results in competitionbetween nations and war /82/ ?orld ?ars I and II can be seen as being largelyabout imperial grabbing / +ermany, Italy and apan sought to e pand theirterritory and resource access/ ut ritain already held much o! the world withinits empire which it had pre iously !ought 83 wars to ta>e] O inite resources ina world o! e panding populations and increasing per capita demands create asituation ripe !or international iolence /O8 %shley !ocuses on the signi@cance o! the 1uest !or economicgrowth/ O ?ar is mainly e plicable in terms o! di erential growth in a world o!scarce and une enly distributed resources O O e pansion is a prime sourceo! consecurity is to de elop greater capacity to repel attac> / In the case o! nations this meanslarge e penditure o! money, resources and e ort on military preparedness / Howe er there is amuch better strategyT i/e/, to li e in ways that do not oblige you to ta>e more than your !air share and there!ore that do not gi eanyone any moti e to attac> you / ut this is not possible unless there is globaleconomic 0ustice / I! a !ew insist on le els o! a uence, industrialisation and economic growththat are totally impossible !or all to achie e , and which could not be possible i! they were ta>ing only their


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!air share o! global resources, then they must remain hea ily armed and their security willre1uire readiness to use their arms to de!end their un0ust pri ileges / In other words i we want a uence we must prepare or war / I! we insist on continuing tota>e most o! the oil and other resources while many su er intensedepri ation because they cannot get access to them then we must beprepared to maintain the aircra!t carriers and rapid deployment !orces, and thedespotic regimes, without which we cannot secure the oil @elds and plantations/ Global peace is not possiblewithout global ustice* and that is not possible unless rich countriesmove to ;#he -impler Way+;

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Economy Core - DDI 2013 SS