by Paul Petillo
American Reporter Correspondent
January 29, 2005
THE DILEMMA IN DAVOS
The World Economic Forum convened in Davos this week to discuss how the wealthiest nations should conduct themselves in the coming year, what problems to focus on, and more importantly, how to save their smaller, financially troubled neighbors. The United States, which in the past was represented by the likes of Vice President Dick Cheney and Secretary of State Colin Powell, sent no high-level official from the administration to represent our position on issues like poverty and the ills of globalization..
That's unfortunate. Perhaps we had good reason to be absent from this meeting of G8 nations.
Third World nations are primed to accelerate into the new century if the shackles of the past can be removed and a few concessions made to ease the transition. And the moneyed nations want to help. What they lack is an understanding of the nuances of nation-building in the 21st Century.
The economic influences that lead to national strength are vastly different than they were a decade ago. The future beckons for African leaders and the quest to join the elite, the financially endowed nations, the masters of the marketplace, is the driving force that has kept many struggling countries from simply crumbling.
The president of Nigeria, Olusegun Obasanjo, was correct in refuting former President Bill Clinton's assumption that leadership, developed through systems, cheap medications and debt relief were the keys to healing the ills in this troubled part of the world.
Obasanjo, sharing the stage with Bono, BIll Gates, Tony Blair and Thabo Mbeki, president of South Africa, said in clear but punctuated tones that the problem was capacity. Economics would solve the problem, he seemed to suggest, understanding that this was the reason many of his people chose life abroad to life in Nigeria. He gave as an example, 5,000 doctors who, according to Obasanjo, trained in his country but practice in foreign lands.
The need for debt relief would, as Clinton pointed out, pay far greater dividends than stepping in at a later date to try and save the government and its people from insurgency. The money owed by these countries is a drop in the bucket compared to the cash we are pouring into Iraq and relief would be the quickest way to help. He was right but it is doubtful that this was the message that would have been conveyed by the Bush administration.
The economic stability in this part of the world would open American doors to another marketplace willing to supply us with cheaply made goods. But the economic equilibrium would be shifted in such a way as to make us an unwitting accomplice in our own demise. Americans have been doing their best to help the rest of the developing world, why should we ignore Africa?
Globally, we are the big spenders on the block. We exercise our right to buy with impunity and the continued ability to borrow to satiate those desires. A new market in Africa would not be a two way street anymore than Asia currently is. Of course, it would take a while to get to the level of financial savvy that the Asians have as they continue to comfort our fears and fed our weakness for debt by purchasing our Treasuries at a steady pace.
But few of us understand the consequences of this. As the trade deficit widens and our current accounts deficit grows, we risk lowering our standards to meet the rising world economy rather than the "all boats rise" belief that is currently embraced.
The dilemma in Davos for America is simple. We are almost, but not quite, among those struggling African nations. As we continue to borrow, we send the wrong economic message to the world. Debt without consequences does not exist. At some point, you need to, as the saying goes, "pay the piper."
But there are many who would disagree with this scenario. We are not a nation in danger of collapsing under our own deficit spending. We are, after all, the United States, capable of great and wonderful economic ideas. But those ideas have become ideals and these have a diminishing market value.
Markets are mobile, and although we understand this we do not fully accept the consequence of even more companies eyeballing greener pastures overseas.
"Globalization and the movement of capital flows lead to things happening much more dramatically" Michael Rake, International Chairman, KPMG said, "and require an ability to lead a company that is flexible and quick in adjusting to different circumstances."
He was also concerned about the weakened dollar, the growing income disparities in this country, and our lack of understanding in the cause and effect of such loose spending policies.
But the American people, unwittingly could be at the center for the biggest shift in this mobilization of business. Growth of business overseas depends on the strength of the demand here at home. Strength of demand depends on income equality, which has begun to shift markedly in the last several years, accommodative monetary policies, and the ability to one day make our case of the forum at Davos asking that our debt might one day be relieved as well.
Paul Petillo's new book, "Building Wealth in A Paycheck-to-Paycheck World," is available online at Barnes & Noble. Visit him at http://bluecollardollar.com.