Given the difficulties that Caribbean countries have had to try to overcome following the global financial and economic crisis that began around the end of 2007, the last thing any country in the region would wish to confront at this time is a major disruption on the international front that could lead towards more global insecurity. And for that reason alone, the financial and economic data that are emerging from the international arena have to be not only worrying for us in the region but also rather depressing.
Whether the financial and economic data released globally pertain to the United States of America, China, or the European Union, does not matter at this moment because they are all equally troubling. China for a long time has been a major global leader in export-led economic growth. But, as the economic fundamentals in its main trading partners weaken, more and more pressure is being brought to bear on China’s ability to maintain strong economic growth that is driven mostly by its export sector.
And that is precisely what has happened as the country’s recent quarterly growth rate fell to about 7.5%, less than the rate of growth that was anticipated. The irony in this is that most countries around the world would have been happy to achieve that level of increased economic activity.
In Europe, unemployment has now reached a new high of 11.2%. In Spain alone, the rate of unemployment exceeds 20%. The worrying side of this development is that it has come at a time when the euro zone is still working desperately to overcome fiscal and debt challenges that continue to put a tremendous amount of pressure on the euro, forcing not only the leaders of those countries but also the President of the United States to stand tough and publicly express their desires to keep the euro afloat and avoiding any possible “crash” of the currency.
With the Presidential elections less than 100 days away, the world will soon be presented with alternative strategies from both the Democrats and Republicans on how best to tackle the massive debt burden facing the United States, the enormous Federal fiscal deficit, the relatively high unemployment that continues to stand over 8%, and the sluggish economic growth that does not seem capable of crossing the 2-3% barrier on a quarterly basis.
Much of the debates are likely to focus on the extent to which increased spending and tax hikes on the Democratic side will be used to stimulate the economy as opposed to the alternative Republican policy of smaller government and reduction in taxes as the catalysts to turn the ailing economy around.
The interesting aspect of all these developments in China, the United States and Europe is that they will subsequently have tremendous implications not only for those countries but for the global economy as well. And no one knows for sure whether these consequences will be positive or negative.
As the waiting game continues, Caribbean and other developing countries should continue to look inward for economic and financial stability. In essence, therefore, domestic policy instruments have to be fully exploited to keep our economies stable and prepare them for whatever eventually happens globally.
There is simply no need to let our economic and financial guards down at this crucial juncture by pretending that there is nothing we can do in the midst of global turmoil to aid our already struggling economies.
(Dr. Brian Francis is a Senior Lecturer in the Department of Economics at the Cave Hill Campus in Bridgetown, Barbados of the University of the West Indies)