September 1, 2010
Dallas, Texas, USA
I’ve been on the ground in the United States for less than 48-hours, and it’s already become clear to me that this country is in need of some therapy.
The American public seems to be getting a steady diet of negativity from the media– headlines are incredibly gloomy, and advertisers are incorporating the recession into their TV and radio commercials. Even President Obama turned his Iraq speech last night into desperate rallying cry about the economy.
It seems as if a dark cloud of despair is draped over the country, and I can understand why the national mood is so dismal. If we’re told each and every day that we’re all screwed, sooner or later we’ll start believing it.
My assessment is that, for people who spend all of their time in the US, the constant barrage of gloom creates a bubble mentality; their imaginations get trapped in the negativity, and they erroneously begin to think that the rest of the world is in the same boat.
As a naturally a positive person, I dislike seeing so much pessimism… and I’m here to tell you that there’s a lot of reason to be optimistic.
First, there are a lot of countries in the world that are on much better economic footing; they don’t have the same structural issues that are causing so much economic and social chaos in the west, and they are much better positioned to deal with the downturn.
India, for example, posted annualized GDP growth yesterday of nearly 9% through the quarter that ended on June 30th. Now, I’ll be the first one to point out that any government’s GDP figures– India’s, China’s, or Brazil’s– are full of fanciful gorilla math.
The situations on the ground in these countries, though, are absolutely clear: an emerging middle class of roughly 1 billion people is busy scooping up all the things that developed nations take for granted– TVs, air conditioning, refrigerators, toasters, etc.
This is exactly the sort of thing that I witnessed with my own eyes when I was in Brazil 2-months ago, China a few months before that, and it is what I expect to see when I’m in India next month.
There are a lot of armchair analysts who will point out things like China’s real estate bubble as evidence for future economic chaos in Asia. (you know, sometimes I think that people purposely really look for reasons to be gloomy rather than investing that energy in finding solutions…)
Yes, it’s true that no economy goes up or down in an uninterrupted straight line. China, in particular, will have some serious restructuring to do as it eventually becomes the world’s most powerful economy. Clearly, the world’s most powerful economy cannot simultaneously be the world’s biggest low-cost manufacturer.
As its economy grows and people become wealthier, China loses its competitive edge in low cost production to places like Vietnam; this will have significant consequences to China’s manufacturing base, and there will have to be a period of restructuring. A bursting real estate bubble will have the same effect.
Regardless of the short-term consequences, however, the long-term growth fundamentals of many of the world’s developing economies are sound.
Long-term growth is ultimately driven by the accumulation of large pools of capital, and by technology; and even the greatest skeptic must admit that China and India have enormous financial and intellectual capital at their disposal.
One must also consider places like Australia, among most economically viable developed countries. Australia posted 3.3% annualized GDP growth, thanks in part to its vast natural resource wealth and strong trade relations with emerging Asia.
Speaking of natural resources, I would be remiss if I didn’t mention places like Mongolia and Kazakhstan, both of which are set to become wealthy beyond belief thanks to inordinate quantities of oil reserves and mineral deposits.
I could go on citing numerous places that are doing just fine in these difficult times… the bottom line, however, is that there are a lot of good news stories in the world– Chile, Brazil, Abu Dhabi, Qatar, Mongolia, Kazakhstan, Australia, India, China, etc.
It’s easy to be gloomy when the media is constantly telling us to feel miserable. Given the evidence, I would suggest rejecting that notion altogether.
Let us be absolutely realistic about what’s going on right now, though– we live in tumultuous times… probably the most economically tumultuous in modern history.
The next 10-years will see a complete system reset. Economic conditions will drive massive political and social changes in both developed and developing nations. Some places will see the rise of centrally planned police states, while others will become unlikely havens for productivity and prosperity.
We have to recognize the trend before us– the old system is defunct, and the rules are being rewritten. This is a situation to feel excited and optimistic about, not gloomy.
Some people will cling to the old system that worked so well for the last several decades… and they will have their lives turned upside down. For others who are willing to reject the old system and become more self-reliant, incredible freedom, wealth, and opportunity awaits.