Taking a helicopter view of the global economy is too close. It can get you cross-eyed as you ponder about deficits as a percentage of GDP, FDI flows, unemployment, government debt, and so on. We need to rise higher for a truly global perspective. Then, we can see the economy within the context of society at large. So let’s get on to the International Space Station (ISS) orbiting the earth and take a ride.
The US is stuck in a slow growth mode as it continues to struggle to create employment opportunities. People are not spending money on goods and services, as many either still do not have jobs, or are not certain of their jobs continuing, or are in jobs that are paying less than what they were earning previously. So investments have slowed.
Out of sync
With elections due in November, both candidates for the presidency are beating about the bush, holding on to traditional positions of their respective parties and completely ignoring what we can see from the ISS, namely, the complete hollowing out of America. The middle is missing. The widening inequality means the rich have a lot to spend but how many Rolexes or islands can you buy? The middle is missing because the jobs (manufacturing and service sector) have gone overseas as a consequence of companies seeking global efficiencies.
Nothing much is made in the country. And not too many people can be employed designing new video games or new phones. Will a real leader who confronts this deep problem emerge?
Of Europe, the less said the better. With Greece in a crater and Spain, Italy and others perched precariously on the brink, the formation of the European Community is itself being questioned.
In difficult times, people safeguard what little they have. Politicians have gone back to taking national views at a time when that is not going to work anymore.
People have stopped expecting better times, for they see the same tired faces at the helm of events, saying the same things, and none of it evokes images of the miracle that they are still living through, namely, here are diverse countries that fought bitter battles not too long ago and are still managing to talk to each other. Can a real leader build on this foundation?
Not moving forward
Europe faces a critical time as it finds that its socialist welfare state model of society, which was the envy of the rest of the world, cannot be sustained in a global economy.
High income countries are stuck with defending an old notion of free trade, while not recognising the consequences of the decisions that came with it, namely cheap imports that makes customers happy but causes loss of jobs.
Europe faces a tough choice of moving forward with more centralised political and economic decision-making, or a retreat to a period of disintegration and re-building. Few leaders today are willing to present the stark consequences to their people.
The Arab Spring, that generated the Arab promise of a liberal and less vindictive society, now seems to suggest that we may just get the Arab damp squib. Even countries where the fighting has ended are struggling to understand what shared governance means.
Each country needs to travel along a new learning curve and that will cause a lot of heartburn. So let us not hold our breaths expecting a miracle there. The new leaders are not looking very different from the old, for that is where they got their training.
What about the big elephant in the room? China is at a critical time too, with its leadership transition in the offing. As power groups position themselves to get a share of the pie, the economy is slowing.
It cannot but slow down, since China is critically dependent on increased consumption in Europe and America, its two big clients. And China’s leaders, who have been able to take an ISS view in the past, have dropped down to the helicopter level.
A time of transition is one when people are in a mood for major change. Any move for more political freedoms or autonomy for Tibet will energise the country, but this is also a time when no one has the courage to be bold. The Communist Party functionaries are busy protecting their legacies and bank accounts.
Relying on expectations
Finally, as India comes into view, we are back in a mode of thinking about what could be, rather than what is. The leaders who plough through traffic with flashing lights cannot even see the garbage all around due to the tinted glasses in their windows.
Corruption adds to costs and inefficiencies, while the reservations and social schemes have created an entitlement society adding further to costs and inefficiencies. People have learnt to expect less and accept bad leaders as their karma.
As we settle back in the weightlessness of the ISS, the solution becomes clear. What people need is hope and that can only come from new ideas about the future. We need leaders with integrity who paint a vision of the future and are prepared to explain the hard choices to their followers.
Societies function on expectations. Firms invest and hire people based on expectations about the future. Research is conducted with expectations about its potential impact. Well, let’s hope and expect a new leader to emerge somewhere. For, we cannot get off this orbit and ride an asteroid to another planet to find this leader that we need.
(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. email@example.com)