Dear Colleagues,

If you are interested in an outstanding news bulletin covering
current world topics, I recommend subscribing to Nadia McLaren's
newsletters.

Nadia McLaren is an Australian ecologist who works in Brussels at the
Union of International Associations. She has been a central figure in
the International Encyclopedia of World Problems, and project
director for several extraordinary European and international
projects.

Every day or so, Ms. McLaren gathers important news items that cover
the state of the world, with special emphasis on sustainability,
economics, environmental issues, democracy, and global politics.

Bulletins usually include links to sources and resources for those
who wish to look deeper.

One of the most interesting series in terms of design research is
McLaren's coverage of shifting global economic conditions. She has
recently posted a series of stories from Le Monde Diplomatique on
shifting trends in world trade and manufacturing. A recent example is
Philip Golub's analysis of the threat that American fiscal policy
poses to the global economy, copied below.

Recent collections have covered such important issues as:

(EU) Pacal Lamy's account of the Cancun WTO talks contrasted with
(World) multiple accounts of the talks.

(UK) the death of Dr. David Kelley,

(Australia) attempts by the Howard administration to limit and
distort press coverage of Parliament,

(Iraq) CPA order number 39 by administrator Paul Bremer allowing
investors to buy Iraqi companies with full control and immediate
repatriation of profits in violation of the Hague treaty of 1907
governing the occupation of nations by foreign powers,

(US) an analysis of neoconservative policies,

(UK) a review of Robin Cook's new book,

This is a bulletin for people who want to cover the news from several
angles. In terms of sprit, news coverage, and breadth, it has much in
common with Phil Agre's currently quiet Red Rock Eater.

You will find carefully selected items from sources as diverse as the
New York Times, The BBC, Al-Jazeerah, and ETAN

If your research field involves design management, manufacturing
economics, industrial policy, sustainability studies, or world trade,
you will find it a valuable resource.

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Best regards,

Ken Friedman




WORLD'S TRADE AND MANUFACTURING CENTRES SHIFT EAST

US: the world's deepest debtor

By Philip S Golub

Le Monde diplomatique, October 2003

http://MondeDiplo.com/2003/10/09debt

ONE of the curious features of US hegemony is that it depends on the
apparently limitless willingness of US allies - and even of some
future competitors, such as China - to finance the apparently
limitless budget and trade deficits of the US. Over the past 20 years
the US has become the world's leading debtor, its net foreign debt
rising from $250bn in 1982 to $2.2 trillion in 2001, 23% of GDP -
almost equal to the $2.5 trillion owed by five billion people in the
whole of the developing world.

Thanks to President George Bush's $600bn budget deficit (although he
actually inherited a surplus from Bill Clinton), a persistent trade
deficit with Asia and near zero savings rates, US net debt is
growing, requiring daily inflows of billions of foreign- sourced
dollars to cover the difference. These public and private flows are
invested in sovereign debt instruments or the equity markets. As the
US Federal Reserve noted in its latest quarterly report, foreigners
now own 38% of US Treasury securities, more than twice the amount a
decade ago.

This means that the US has mobilised an ever-greater share of world
savings to finance US consumption, economic growth, living standards
and military expansion. Most of those savings are from East Asia.
Japan, China, the newly-industrialised countries and middle-income
countries, such as Thailand, have accumulated vast resources that are
not locally consumed or used for productive purposes but invested in
dollar paper assets. Flows into these assets keep US interest rates
low and boost the value of the dollar, allowing the US to import
cheaply from the rest of the world. East Asia finances US debt in
return for continued unrestricted access to the US market. This
arrangement suits Asian exporters but inhibits the use of resources
in other ways.

The mutual dependency was built up during the cold war and is
underpinned by the strategic bonds between the US and its main Asian
allies. Despite intensified regional integration, the developed and
developing countries of East Asia still depend heavily on the US
market to maintain their export, hence their growth momentum. Despite
talk by nationalist politicians of withdrawing from dollar assets,
Japan and the other East Asian allies of the US have never really
challenged the arrangement.

But there have been some signs of change: over the past two years
East Asian central banks have partly divested from dollars and
diversified their foreign currency holdings, investing more heavily
in the euro. This has raised a few eyebrows in the US but the trend
is not yet a structural shift in East Asian investment, much less a
reversal of flows. China, which was never a part of the US cold-war
regional security system, is also dependent on the US market to fuel
economic growth: it accounts for about 21% of China's exports. China,
which is in the middle-phase of an economic transition, has a vested
interest in keeping the US market open and in maintaining stable
political relations with Washington.

How long can this situation last? As the New Economics Foundation
pointed out in its Real World Economic Outlook in September, in the
longer run Asia will divest itself of some dollars and the US will
have to pay increasingly punitive premiums to attract foreign
investment (1). Investors will want higher returns to cover the
rising risk of dollar depreciation. Higher interest rates will curb
US economic activity and have deflationary global repercussions by
increasing the debt service load of developing countries. As domestic
consumption rises in East Asia, savings will decline, reducing the
available reserves to service US debt.

Stephen Roach, the chief economist of Morgan Stanley, argues that
empires are not built on debt and that the explosion of the US asset
bubble in the late 1990s revealed the unsustainability of the US
position: "This saga is not about the bubble. It is about the
unwinding of a more profound asymmetry in the global economy, the
rebalancing of a US-centric world . . . History tells us that such
asymmetries are not sustainable.

"Can a savings-short US economy continue to finance an ever- widening
expansion of its military superiority? My answer is a resounding no.
The confluence of history, geopolitics, and economics leaves me more
convinced than ever that a US-centric world is on an unsustainable
path" (2).

--

Philip S Golub is a journalist and lecturer at the University of Paris-VIII

See : China: the new economic giant and Thailand rebuilds its reserves

(1) See www.neweconomics.org

(2) Stephen Roach, "Worldthink, Disequilibrium, and the Dollar",
speech given in New York, 12 May 2002.

Translated by the author

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