The political philosophies of Ronald Reagan and Margaret Thatcher are starting to wither and die as financial and political power moves from Western countries to emerging economies, says HSBC global economist Stephen King.
King’s new book “Losing Control, The Emerging Threats to Western Prosperity,” HSBC’s argues that the growing power of emerging nations has all but written an epitaph for the Reagan/Thatcher assumptions that Western living standards could only go up.
“No one knows what’s going to happen over the next two or three years,” King says. “I suspect that in the Western world, it will be a period of ongoing austerity,” King told CNBC.
The U.S. government has failed to tell consumers that costs are bound to go up because of the massive imbalance between the Chinese and U.S. economies, King asserts.
“What you are seeing in the U.S. is particular congressmen who are concerned about losing votes in their own constituencies,” King says. “The clear focus in the U.S. is ‘what the hell happened to our economy … and who’s to blame?’ and that focus drifts to the rest of the world.
“The truth of the matter is, that in the U.S., if you’re a worker, you may be a bit more vulnerable than you were previously because of more competition coming through from the elsewhere in the world, but if you’re a consumer, you clearly win from this process of globalization.
“The big difficulty is that most people are both workers and consumers.”
The International Monetary Fund has tripled the amount of money it can deploy in a crisis, drawing more heavily on commitments from emerging economies such as China and Brazil to establish a pool of more than half a trillion dollars that officials hope will help deter future problems.
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