Rana Foroohar
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May 22, 2009 01:00 PM
That’s the premise of a new book by a longtime source of mine, Jeff Rubin, the former chief economist for CIBC World Markets in Canada. I remember back when oil spiked to $147 in July of 2008, I interviewed Rubin about how nosebleed oil prices would change the world. His take was that we’d see a major rollback in globalization, with manufacturing once again being done at home, flying becoming a major luxury, and dinner plates getting a lot more bland with staples like imported salmon or asparagus no longer affordable. Basically, life would be some sort of cross between the 1940s and the 70s, with gas lines, victory gardens, newly re-empowered American working men turning out steel, cars and appliances for sale here at home.
That’s still Jeff’s take, and his new book theorizes that the recession will only speed this trend (he still sees oil rising in the next couple of years, off the back of an economic rebound in China and India). But I have to say, I have my doubts. I’ve blogged and written lots about how we’re just not seeing the sort of Great Depression style trade protectionism that would be one of the main factors in a globalization backlash. Meanwhile, the wage gap between America and Asia, which encourages companies to move abroad, is going to get bigger. According to McKinsey research, the absolute gap between Chinese and U.S. labor costs per hour is projected to increase to more than $26 in 2013, up from about $17.50 in 1996.
Jeff’s response to this would be that high oil would negate that effect by making the costs of transporting cheap goods from Asia too high. But the oil price question, which is dependant on a complex and ever-changing set of variables (including global conflict, refinery capacity, the whims of dictators, and weather) is very much up for grabs. I had a briefing at the East-West Center last week with Fereidun Fesharaki, one of the world’s top energy forecasters, and he’s betting on long-term prices of $80 a barrel. Higher than now, but not enough to turn back the tide of globalization.
Katie Paul
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May 22, 2009 08:23 AM
The Banality of Tiananmen: Two decades after the protests at Tiananmen Square captured the attention of the world, a new generation of college kids is ambivalent about the grievances that drove Chinese students into the streets demanding democracy. But the flame hasn't been completely extinguished; students are economically satisfied, but they have little love for the Party line.
How Do You Solve a Problem Like California?: Nothing stirs a good debate like utter dysfunction. An op-ed writer in the Times thinks we should hold our noses and bail out the defunct Golden State. The WSJ, still celebrating what it sees as a triumph of fiscal conservatism, thinks that would be dumb.
Reaping Foreign Rewards: The Economist is getting a bad vibe from the rising tide of Arab and Chinese farmland purchases in dirt-poor countries, especially considering what just happened as a result of one in Madagascar. So am I.
All Good in the Hood: Europe's big businesses are in trouble, like businesses the world over, but its small businesses seem to be doing just fine by comparison, thank you. So is that all the more reason to help them weather the storm?
