In the Western world the need to deleverage the debt produced over 30 years by families, businesses, financial institutions and states is giving rise to that phenomenon which, to simplify things, is called “recession”, namely as an absence of growth of the gross domestic product. The GDP decreases because families consume less, businesses produce less, banks limit their intermediation. States aim to be less indebted. Available capital is scarce and more expensive, credit is less and, subjectively, costs more, because of the differences in the spreads. It will not be easy – nor in the short-term possible – to surmount the recession.
“Austerity” is the word that best describes this phase in the economy of the Western world. But the temptation to transfer it to other countries should not be ignored.
Europe and the United States, after years of productive delocalization must now be reindustrialized in order to sustain internal employment and to rediscover new competition. Yet, with less capital to invest reforms will be introduced to create greater productivity and leave less waste. As soon as possible an effort will be made to reduce imports and to reimport production. Envisaging any other scenario would allow one to foresee social tensions difficult to handle. Reaching the point of the devaluation of the currency and the protection of economic sectors deemed strategic cannot be excluded.
The wish to avoid reaping the consequences of the recession or to limit its impact could result in the transfer of the problems to the developing countries, those very countries, that is, to which in the recent past production was transferred, but striving to give an impetus to the true driving force of Western economic recovery: promoting the formation of the family.
The impact of these strategies on developing countries might be serious, because their still fragile economies might suddenly see their exports reduced with the consequent fall in revenue. These nations too will experience the fall in the GDP and must seek to increase internal demand. Yet this decision could produce such effects as the use of capital to increase internal investments and the growth of local purchasing power which, ultimately, also means the higher cost of labour. This is a process which, once initiated, will lead to an increase in the price of exports and hence to less competitive prices.
In the West, thanks to technology, production which demands cheaper labour will encourage new competition and this will require the developing countries to specialize in more expensive goods – which are not offset by technology – which will, however, increasingly be an object of competition between the nations themselves, with negative repercussions on those less well equipped. The wealthiest and technologically most advanced of the developing countries may try to penetrate the West, purchasing companies and producing on the spot. However, it will be indispensable that they accept rules which for them are quite new.
They represent risks, whose impact they will manage strategically in order not to weaken the more vulnerable sectors of the population and the poorest countries, which were on the point of entering the cycle of well- being, if with limited competitive skills.
In addition to the Western strategies of reindustrialization, therefore, the whole world must join forces if it is to emerge from the crisis and achieve an equitable distribution of wealth – which began with globalization – to be implemented without selfishness but rather with solidarity and justice. The global world cannot sustain further delocalization. Especially of the crisis and of poverty.
2012-02-24 L’Osservatore Romano
