The Global Economy Faces Tough Choices

Humanity is at a crossroads and the world has to choose between higher growth that is not materializing due to resource shortages or a period of austerity, which means sacrifice, and painful personal decisions. To take the first option, policymakers around the world are realizing that it is no longer possible to keep growing infinitely because the resources necessary for higher growth are diminishing by the day. This has resulted in resource wars and battles over scarce resources as each country tries to garner the available resources for itself. This has meant that there is a race to the bottom as shortages mean civil unrest and strife.

The second option that is to practice austerity is not palatable to many since they have gotten used to the materialistic life that is part of the promise of globalization. The point here is that we are a point in our collective destiny where the choices we make today would determine the future of the coming generations.

Ever since globalization kicked into high gear in the 1990s, we have been used to easy money, access to whatever goods and services we wanted, and a global lifestyle that means more consumerism. The cost of this kind of living is becoming apparent now with most of the world’s resources being consumed and the high of easy money giving way to the painful realization that we have to pay the price of such excesses. Now that the debts are coming due and countries are no longer able to grow their way out of recessions, the world is awakening to the fact that we need a new paradigm and a new way of living that is sustainable and cooperative instead of being competitive. Though this might sound like a spiritual lesson, the reality is that even economics teaches us that once the underlying resources are used up, growth is only possible through consuming less and working more which until now was the other way around.

For instance, though the policymakers in the Eurozone claim that they have reached a solution with each summit, the problem gets worse as throwing more money leads to inflation in the absence of growth. Similarly, in India, the government has gone on record to state that money does not grow on trees, which means that high subsidies and welfare economics are outdated and the time has come to tighten our belts. Even in the United States, long considered as the bastion of consumerism, there is a growing realization that one cannot conjure growth like before and tough choices have to be made in the collective interest.

Finally, though we are not running out of resources anytime soon, the law of diminishing returns has set in which means that only incremental growth is possible with the available resources and that infinite growth is no longer possible on a finite planet. The sooner we realize this and act accordingly, the better it is for future generations to have at least a lifestyle that is comparable to what we have.


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Globalization