How self-sustaining has developing nation growth become?
How self-sustaining has developing nation growth become? This is one of the most interesting economic and political questions of our times. We’re going to find out the answer (or answers) pretty soon.
The US is more or less in a recession. Europe isn’t far behind in growth dropping to de minimis levels — and that’s without factoring in the strains, sure to increase, between the Club Med countries and Germany and others regarding monetary and fiscal policies in the Eurozone. The Middle East can of course continue its outsized expansion as long as the oil bubble remains intact, but its history and traditions have not to date demonstrated that that region has developed the attributes to sustain indigenous economic growth, including innovation, labor force participation, or other characteristics that are typical among affluent economies.
It is unknown, as of this writing, whether the BRIC countries, and in particular China, can sustain their phenomenal growth rates in the current global environment. (We tend to believe not, as you know, and some of the evidence is beginning to point our way.) No less an official source than the Peoples Daily has said that China is 70% dependent on foreign trade for its growth, so we shall soon see just how self-sustaining the Chinese economy has become during its remarkable transformation of recent years.
General Electric has a large exposure to GDP growth rates in the developing world. (BTW, it only covers 63% of its CP with bank lines.) Its orders were up 8% in the quarter, though earnings disappointed. Its “infrastructure” segment, the company’s largest, had $15 billion in sales was 23% higher than a year ago, principally due to orders from Asia and Latin America. The company would appear to be a good window into trends in the developing countries, so from now on, we’ll be watching it a little more closely to see if it sheds any light on the question of just how self-sustaining developing nations growth has become — when the consumers of the US and Europe slow down their spending.