As the World Changes - By Rauf Naqishbendi

Social, political, and economic changes throughout the world are about to commence. Some think the end of the American Empire is near. On contrary, America will maintain its economic and military supremacy but with a feeble economy. Credit will be tightened resulting in less consumption and slower economic growth.  The jobless rate will increase and will remain high by today’s standard and one that will continue to hold beyond the lifespan of the current generation. As social needs arise, governments throughout the world will be over-burdened with debt resulting in intolerable tax hikes. An already skewed wealth distribution that continues to favor the wealthy will persist. Consequently, we can expect a lower standard of living for the vast majority of people.

This is an analysis rendered independent of major geopolitical negatives. This is not a scenario of gloom and doom, but a new order whereby the artificially high living standard cannot be sustained.  Living on borrowed money will no longer be feasible. Even with minimum defense spending but maintaining current conventional and nuclear arsenals, America’s military supremacy will persist for decades. Economically, America will remain the superpower to the world for as long as the dollar remains in circulation as the preeminent world currency. This is not because America’s economy is fundamentally sound, which it is not. Rather, it is a consequence of the dismal state of the rest of world’s economy.

Notably, America will preserve its supremacy because there is no other country in the world to challenge America militarily or economically. Conventional wisdom has designated China as the likely future economic superpower to the world. This is a misconception. China’s economic progress is owed to the generosity of America for bestowing upon China its own manufacturing base. For China to become an economic superpower, the American economy has to shrink miserably and China’s economy must grow substantially.  Even if this occurs, it wouldn’t happen overnight and will take years if not decades. Nevertheless, Asian nations have some advantage over their western counterparts, due to lower standards of living resulting from lower wages. Additionally, while they are less developed, they have more room for growth than the developed nations. Still, the good news is America will maintain its supremacy, but with a lesser degree of economic power, and less
prosperity at home.

  Going forward, the world economy will face less consumption translating into low growth as a consequence of less disposable income, high unemployment, inflation, wage stagnation and tax hikes. Dwindling consumption will lower the demand for consumer goods. The result will be a reduction in the industrial production and an unavoidable reduction in the demand for labor. Unlike several decades ago, the Asian population is now demanding higher standards of living, and that requires more jobs with good wages. At the same time, Asian countries have established solid manufacturing bases taking away jobs from other industrial countries, specifically America as has been the trend for decades.  The bottom line is that the world economy will not be able to produce enough jobs to meet its population demands.

The recent spree of printing and borrowing money by most of the world’s central banks will take a big bite out of the budgets of governments, which at present imposes no immediate threat.  The exact timing when this problem will create a dangerous storm with the potential to hit hard is difficult to predict, but it is still years away. As the interest on these debt keeps taking big bite on government revenues, it for undoubtedly cause high taxes and a devaluation of some countries' currencies, and a high inflation which will cause prolonged economic stagnation or sever economic recession.  While this ailing economy is global, the world as a whole will shoulder the burden.

Economists fueling WallStreet greed are acting as cheerleaders, assuring the public that the worst of the bad economic news is behind us. The worse of the bad news may be behind us for now because of the immense amount of bailout funds made available to Wall Street by the government. What is not behind us is the draining of funds from the treasury, a sky-rocketing national debt, the still troubling balance sheets of financial institutions, and the failure to create needed jobs. Another pending detrimental problem:  the state governments budget deficits and their future commitment to social services and entitlements.

The world economy relies on consumption as its pivotal ingredient. A healthy consumption to foster economic growth cannot be sustained without full employment. For decades economies have been characterized by a combination of extravagant spending and easy borrowing, creating all kind of jobs throughout the globe. Now most of those jobs have evaporated in the financial meltdown. Real economic growth and true recovery, therefore, will not materialize without sustainable employment and job creation. The question is, where will these new jobs come from?  The western nations must expect lower standard of living. We may avoid another Great Depression, but in the meantime we will have to be content with less than we have become accustomed to.
Thus far we have endured Wall Street's brand of capitalism.  The impending economic circumstances will bring about changes that will go deep and create profound changes in our lives that will, in turn, bring about political and social change.  One change that seems unavoidable:  America can no longer cater to the greed of those in power who lack an ethical infrastructure.  As the political system changes, so does culture, expectations, the way we live, and the way we interact with the rest of the world. Change is not always easy to adapt to and sometimes the cost inflicted by change is devastating. But the changes that we will have to deal with in the coming years may not be as bad as the doomsayers predict, nor as rosy as optimists hope for.

Recently published, Rauf Naqishbendi’s
memoirs The Garden Of The Poets recently

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May 6, 2009
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