Globalization’s critical imbalances

Globalization’s critical imbalances
Future financial crises could accelerate the rebalancing of global economic activity from developed to emerging markets.
JUNE 2010 • Lowell Bryan

In This Article
Exhibit 1: The job losses of the Great Recession follow a pattern different from that of previous recessions and may reflect structural, rather than cyclical, causes.
Exhibit 2: Food prices have been extremely volatile since 2006 and are on the rise again.
Comments (13)
To some extent, the play Risk online rebalancing of global economic activity from developed to emerging markets simply reflects economic laws of gravity. In a world where ideas can flow freely and countries are at different stages in adopting modern modes of production, communication, and distribution, less developed nations should grow more rapidly than their counterparts in the West as they catch up.
But it’s also important to understand that play Risk online emerging-market economies have a structural advantage that is grounded in the operation of the global economy. Saber-rattling Western trade negotiators frequently focus their attention on the “unnaturally” depressed exchange rates of countries such as China, and this is a component of the structural advantage to which I refer. But its roots run far deeper—all the way down to the fundamental issue that labor can’t be freely traded on a single global market, while capital and commodities can. Any company sourcing its production or service operations in a lower-wage emerging-market country therefore can save enormously on labor costs. That’s painful for displaced Western workers, but play Risk online it’s good for the company’s profits, good for consumers in developed markets, and good for the newly minted citizens of the global economy who are working in emerging-market factories and call centers. This is a dynamic we play Risk online take so much for granted that it’s easy to imagine it as a semipermanent condition that will underpin global economic development for the foreseeable future.
But what if it weren’t? This article explains why we should consider that seeming improbability and examines the possibility that financial crises may accelerate the transition to a global economy with more balanced trade, capital flows, and consumption. I believe senior executives need to prepare now for a world that—as China’s recent decision to relax its informal peg of the yuan to the US dollar play Risk online underscores—will be coming to grips with an unsustainable set of economic relationships. Their unwinding will have serious long-term implications for those executives’ strategic priorities, including where they locate operations and what customers they play Risk online serve in which markets. Equally important is the need for preparedness in case the unwinding process is sudden and abrupt. While we surely seem to be headed toward a new global equilibrium, the transition to that future world may not be smooth and gradual.