Monday, October 13, 2008
Wall Street Journal Graphic Shows Economic Domino Effect
As I was reading the headlines in today's Wall Street Journal, I clicked on a tempting link that read: Interactive Graphic: Economic Danger Zones.
Here is the sobering description:
A Crash Heard Around the World:Financial Danger Zones Emerge in Many Corners as Investors Feed Global Downturn by Trying to Flee It.In the tightly interwoven global financial system, countries large and small have been affected by the dramatic slow-down in economic growth. Click on a country to see how its major stock index and its currency have fared in the last three months.
A quick analysis of the graphic reminded me of a map by Thomas P.M. Barnett.
(Image above is a combination of two maps from WSJ and Thomas P.M. Barnett) You may recall my post from last Friday, when I referred to his quote regarding the "league of capitalist partners" and the need to protect the middle and lower class.
For the record, Barnett is a senior managing director at Enterra Solutions. He has worked in national security affairs since the end of the Cold War and has operated his own consulting practice, Barnett Consulting, since 1998. Each day, Barnett blogs about current global events and his readership consists of representatives from all the major U.S. military commands, virtually all U.S. federal departments, numerous foreign governments, and major research and corporate entities the world.
Anyway, I found interesting parallel between WSJ's graphic and the "core" of a map Barnett drew in 2005, called "The Pentagon's New Map :A Grand Strategy revealed."
Barnett's map illustrates his viewpoint on globalization, which claims the world is divided by the functioning core and the “non-integrated gap". The "core" consists of economically advanced or growing countries that are linked to the global economy and bound to the rule-sets of international trade. The remainder of the world is the non-integrated gap – outside the global economy, not bound to the rule-sets of international trade. It also combines security, economic, political, and cultural factors to predict and explain the nature of war and peace in the twenty-first century.
Barnett's "Core" Nations- (interconnected in the global economy) that correlate with the nations highlighted in the WSJ graphic for major index change in the past three months:
- India: -24.40%
- Japan -36.6%
- U.S.: - 24.74
- Canada: -34%
- Russia: -61%
- Brazil: -40.90 %
Some analysts blame America's collapse as the catalyst for the downfall of Canada, Asia and Russia's markets, but as we've all learned, even the best planners on Wall Street and Washington couldn't predict the magnitude of the fallout. As for China,its 3-month currency fell 30.43%, but its trade surplus reached a record high in September, up from 21.5% to $136.4 billion. Last year, Barnett explained his version of grand strategy.
Grand strategy is not clairvoyance. It is not predictive but prescriptive. Its plausibility in prescription must be based on a systematic approach to thinking about the future.To the extent grand strategy cites future trends, it does so to lessen or eliminate gross surprise, not to project infallibility..it's adaptive planning according to fundamental rule sets enunciated in said strategy...The grand strategist gets what he wants in the end because he consistently plays favorable angles revealed to him by systematic analysis of the future.....and he builds it incrementally and with care (save me from fads and the persistent rumors of X's demise!), taking what the opposition and the environment provide him--event by event.
I agree with Barnett in one main area: we, the United States should take an incremental approach to repairing the current mess we're in. It's too early to tell if the bailout will prove to be a good course, but I personally think we failed to attack the problem with an incremental solution. As a result, we may have overreacted and inflicted even more harm on our already fragile economic system.
Posted By Matt O'Hern at 11:32 AM
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