Newspaper article THE JOURNAL RECORD

A Lesson on Mutual Dependence

Newspaper article THE JOURNAL RECORD

A Lesson on Mutual Dependence

Article excerpt

NEW YORK -- The United States and European nations are now the importers of last resort, the major marketplace in which producers in other countries can sell their goods and try to revive their own failed economies.

It is a situation still developing, one that in the short term might mean lower consumer prices but which will inevitably ignite a crescendo of complaints from domestic producers. In fact, the noise already is being heard.

The situation demonstrates the advantages and disadvantages of a global economy, a world marketplace of mutual dependence which many Americans have known more in theory rather than in practical application. A clear lesson is upcoming. It begins with the economic and monetary problems of Asian nations, combined with Russia's transitional difficulties in converting from a central economy. These countries cannot sell within their own broken economies. To recover, they must export. The big importers are the United States and Europe, in that order. The Japanese economy, which until recently was thought able to sponge up some of the exports, has now fallen into recession. Moreover, its anxious consumers have decided to save more and buy less. Japan had been a strong importer from the rest of Asia, with 38 percent of its imports coming from that area. But now, says economist Ian Sheperdson, "slumping domestic demand means it is unable to suck in goods and services from the afflicted Asian countries." It means, says Sheperdson, chief economist of HSBC Securities, part of an international banking and financial services organization, "the prospects for recovery in Asia depend on the two other great trading blocs, the United States and Europe." As the larger importer, the United States is the country that potentially can offer the most help. And that provokes the question: Does the United States have a responsibility to dig these failed economies out of their mess? Even at the expense of its own economy? Inexpensive imports help keep prices low, an especially important consideration at a time in the economic expansion when inflation generally shows up. …

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