Weeks of rhetoric and political maneuvering over the debt ceiling may have been resolved, but the larger question remains unanswered: how will America revive its economy?
We are at a precarious crossroads. America’s path to growth through higher consumption is blocked by high personal borrowing and negative equity. Another well-trodden road out of recession—a private investment spurt—has failed to materialize as businesses hoard cash in the absence of a growing home market.
And now that the debt deal will forestall the other traditional path—a stimulus from public investment—just one route to sustained growth remains that can prevent a decade of high American unemployment.
This is to do what America has always done best: mobilize its entrepreneurs and its producers of ideas, patents, and new technologies—and export its high-value-added, technology-driven consumer goods to the rest of the world.
But this trade and jobs boost cannot be achieved unilaterally. The climate for higher U.S. exports depends on higher growth elsewhere and on the rest of the world’s willingness to buy foreign goods.
So President Obama should now refocus his attention on securing a global growth pact that will free the world as a whole, and particularly the West, from years of anemic growth.
Instead of the dime-a-dozen “plans for America” that are no longer worth the paper they are printed on, November’s G20 summit should be presented with something far bolder: “America’s plan for the world economy”—to achieve for global trade and growth now what Gen. George Marshall’s plan did for the faltering world of the 1940s.
What I would call a “global New Deal” would create American jobs by playing to American strengths—enabling the country to exploit its still strong lead in ideas, high-tech and brand-name products, and its location as a global magnet for new talent, drawing thousands from around the world to enlist in its university campuses and to join its startup businesses.
This new deal is not just an option: it is a necessity. Today, 60 percent of China’s income comes from exports, while America’s export share is just 25 percent. This troubling gap has prompted the president to call for Americans to answer what he has coined the U.S.’s “Sputnik moment”—the realization that Americans have lost their global competitive edge—with a “man-on-the-moon moment”: America mobilizing its genius to once again lead.
The need is urgent because as Asia’s middle classes double in the next decade, its consumer market will dwarf all others, accounting for 40 percent of all global consumer spending. Without a bigger footprint in Asia, America will be left behind.
And if—as predicted—India, China, Brazil, South Africa, Mexico, Turkey, South Korea, Indonesia, and Russia, which today buy just 15 percent of U.S. exports, account for 70 percent of future global growth, then no American company can afford to stay at home.
How can Obama sell America’s global growth plan to other countries? By demonstrating that each country will achieve its own objectives only through a higher level of global trade and growth. To achieve its own aim of expanding its middle class and cutting poverty, China has to raise consumer spending and allow its people to import the brands they want. To take 500 million people out of poverty, India has to open its markets so that its poor can benefit from lower-cost goods and services. And Europe’s only hope of salvation from a decade of high unemployment is to export its way to growth.
Confidence in the future will breed confidence today. An America that is confident it can sell its goods abroad to pay for consumption at home—and an Asia that is confident it has a market for its products and can transform the poor of today into the middle class of tomorrow—will set in motion a virtuous self-reinforcing cycle of investment, trade, and growth.
I accept that this strategy is not an easy one. After all, making the world’s high-value-added goods will demand an up-skilling of America’s middle class and calls for U.S. public and private sectors to frontload investment in education technology and infrastructure. And a global growth pact will require America to agree to common global financial standards that can prevent future financial crises.
But the rewards over the long term are simply too important for the U.S. to walk away. Today’s booming Chinese market for Apple’s iPad is a timely example of how America can exploit worldwide demand for its brands: with each iPad sale, only $4 of profit go to its Asian manufacturers, while $80 go to its American (and British) designers. Add to that companies like Georgia Chopsticks, which is using U.S. wood to manufacture 2 million chopsticks a day for export to restaurants in Asia. Then there is the potential for American innovation to lead the worldwide growth in green technologies. And when I asked the International Monetary Fund to assess the global growth plan, they forecast 3 percent higher growth, with 25 to 50 million extra jobs, millions of them in the West.
Domestically, meanwhile, President Obama remains vulnerable, fighting opponents who ruthlessly exploit the politics of fear. He is already up against the same political fallout that I and British Labour suffered. From now until Election Day, the president’s opponents will frame his position as “burdening our children with debt.” Indeed, so adept have those on the right been at playing the politics of fear, on all continents, that even in Australia—a country with virtually no debt—the incumbent Labour government lost its majority when it was faced with a conservative onslaught about deficits.
Two thirds of a century ago, after the greatest of depressions and the worst of wars, General Marshall rejected the politics of fear for the economics of hope, and the Marshall Plan pioneered a global program that framed the new world order. It repaid itself many times over, doubling global trade and putting America’s flagging postwar economy on course for its most successful era ever. Now, with the same vision and by accepting that a global new deal is the only way forward, an America reborn can lead again.
Former British prime minister Brown is the author of Beyond the Crash: Overcoming the First Crisis of Globalization.