New Core drives Globalization IV's growth more and more

COLUMN: "Protectionism Threatens Emerging Engine of Growth," by Frederick Kempe ("Thinking Global"), Wall Street Journal, 21 February 2006, p. A4.

Cool bit on how the New Core increases drives the global economy in terms of demand. So more and more it's not just the U.S. that drives global demand. The EU and Japan haven't driven demand in a while, and show no signs of doing so any time soon.

Instead it is countries like Brazil, Russia, China, India and the East European countries that used to belong to the Warsaw Pact that are accounting for an increasingly larger chunk of global imports (rising from about 28% back in 1980, when Globalization III began, to an estimated 40% by last year (I date Globalization IV from 9/11).

That's the percentage growth. The actual growth is more impressive: emerging markets accounted for about a trillion in global imports in 1990, but draw in four times that amount today ($4T).

Says one banker, "The baton of global consumption is being passed from the U.S. consumer base to the millions of consumers in developing nations."

Still think there's no money to be made in shrinking the Gap?

The big hitch? Congress' rising penchant for protectionism.

This is myopic in the extreme. As this article points out, "One-third of U.S. corporations' foreign-affiliate income, which is a proxy for their foreign earnings, came from emerging markets in the first three quarters of last year, a record high and up significantly from 25% in 2002."

As the same banker (Joseph Quinlan, chief market strategist at Bank of America) puts it at the end of the piece: "Bad trade policy could upset this emerging consumer class as a powerful consumption force just when we need them."

As I wrote in PNM: we shrink the Gap for the most selfish of reasons. Neo-Marxist bullshit (Iike Immanuel Wallerstein) says the Core needs to keep the Gap the Gap in order to stay rich, when history is amply proving the exact opposite is true--just as I argued in PNM and BFA.