Monday, October 27, 2008

Economic Lessons USA Can Learn From Ukraine

American's should view the IMF bailout of Ukraine as a forewarning of a darker economic future if we fail to improve our industry and restore confidence in our government. 

The International Monetary Fund rescued Ukraine's bankrupt economy with a $16.5 billion dollar loan, which is eight times the amount Iceland received. Parmy Olson's article in Forbes said that Ukraine is fortunate for the financial rescure because:

The behavior of the country's government has been as chaotic as the financial markets....the country has promised the IMF that it will set a balanced budget and reform its banking sector in exchange for the loan... its currency has tumbled, its large steel industry has been hit by a fall in steel prices, and its property boom (particularly in the capital, Kiev) has turned into a bubble on the verge of bursting.

Do any of those themes sound awfully familiar?

• Lack of confidence in political system
• Unbalanced federal budget
• Collapsed real estate market
• Downsized manufacturing industry 

In the U.S.,we have suffered a four-year free fall of our real estate, our nation is divided over who our next president should be and manufacturing plants are closing left and right.  Analysts will argue whether or not those three factors are interrelated or just coincidences. Instead of dwelling on the problem.but we should really be formulating a solution, otherwise, the United States may look like a third-world country within the next five to ten years.

It's no coincidence that many of the poorest parts of the world are also the nations known for political instability. It's also important to remember what I pointed out two weeks ago, inter-dependence can also lead to a domino effect. If you look at the Wall Street Journal's graphic of the countries hit hardest by the economic crisis during the past three months and the nations that fall into the"core" category (economically advanced or growing countries that are linked to the global economy and bound to the rule-sets of international trade)of Thomas P.M. Barnett 's map - you'll notice a direct corellation.

In the WSJ map and Barnett's core, the Ukraine was essentially on the border between the core and the rest of the world, but they've obviously felt the devastating impact from the spreading financial crisis. The same principle applies to marketing and business: Alliances can prove to be a great assett that quickly and significantly increase your value and status,but if you're too dependant on your partner(s), they can pull you down just as hard and twice as fast.

Considering all of these facts, it's hard to determine the nations at highest risk for financial collapse. Just be careful what you say about Ukraine. As Kramer and Newman found out, Ukranians are proud of their heritage.

Posted By Matt O'Hern at 01:50 PM
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