The Financial Express

Has the economic spring arrived?

| Updated: April 04, 2018 21:01:34

Has the economic spring arrived?

As the composite international economy surges, particularly in hitherto regressive Atlantic markets, emerging and frontier economies should find buoyancy, while a field-day awaits hitherto shy stock-brokers if they take the plunge. Springtime 2018 could supply the only window we have seen in a decade to make those moves most efficiently.

Without being the cause of this upturn, Donald J. Trump may have unleashed the largest flock of investors through his tax-rebates and infrastructural promises. True, infrastructures still remain on the drawing-board, but if some projects get announced in the rest of this year or next, those galloping investors will be able to swallow any opportunities in their stride, and the ripple effects would be both global and substantial.

Of course, that does not necessarily paint a glowing picture: Trump's trade tariffs dangle over all else, but they too seem to be exposing a greater Trump willingness to compromise and backtrack from his promises, as evident in how his administration is seriously negotiating trade relations with China behind the mutual tariff-slapping up-front gestures of the two countries. China can still reap a US trade bonanza each year even with new tariffs, as too West Europeans, Canada, and Mexico; and the United States still sees many Chinese markets or franchise-welcoming opportunities in China. Trade pains, much like gains, rarely come so suddenly: the slow build-up invites negotiations.

One other positive note the Trump administration may be associated with is the simultaneous sparks in non (or questionable) democratic countries across the world: Saudi Arabia leads that list, with its 12 per cent gross domestic product (GDP) growth-rate, followed by such impressive figures as 6.0  per cent in Pakistan, 7.4 per cent in Vietnam, and so forth - in such countries hitherto not considered important enough for global-level salience. Far from these countries alone, the region's they represent also show an economic vitality that is hard to miss given the decade-long global economic stupor, with the additive impacts of these regions capable of changing the global picture.

There may be a reason for this spurt. China's active economic presence in these areas, literally right across the world, may be serving as the shock-absorber of that decade-long Atlantic downturn and the spark of what has since been dubbed the 2008-11 Great Recession. Just like the United States displaced Great Britain as the world's pre-eminent country after the 1929-39 depression, China may be doing likewise to the United States today. 'Scopus' has long harped on that possibility, only this time it is not the subject.

Even as an implication, it demands attention for the article's subject: the sudden springtime bloom in the global economy. We can see how the US piggybacking of China's economic presence globally is helping resuscitate not just the US economy, but also the globe's. For example, China has put so much money into building Pakistan's economic corridor into China across the formidable Himalayan peaks that the otherwise unpredictable economy just happens to be in a growth-phase currently. So too for China's investment in South-east Asia (particularly Cambodia and Myanmar), not to mention Latin America (Argentina is now boasting an enviable 4.1 per cent growth), and right across Africa, where the unlimited growth potential is spilling from country to country, from Algeria, Egypt, and Morocco in the north to Angola, Congo, Ethiopia, Kenya, Nigeria, Senegal, and Uganda, among others, further south. If we look hard and deep enough, we will see the United States, or the World Bank, discussing parallel projects too, so much so, in fact, that the term 'Marshall Plan' is being revived more often now than ever since the early 1950s.

Part of the spurt may be attributed to oil-prices climbing once again, but the even larger part to China's huge infrastructural investments and resource extraction that is also attracting western attention. Led by the United States and the World Bank, western investors and creditors may be coming out of their slough, but to continue progressing, Trump's protectionist policies need to also be softened or silenced.

That growth was rebounding elsewhere even as Trump was fiddling with his policies throughout 2017 suggests he was not the cause of this spurt: seeds sown by Barack Obama were beginning to flower even before Trump could settle into his Oval Office. Yet, part of the credit must also go to Trump for reawakening the  (at least US) business community.

Any relapse must also be partly shared by him. For example, many non-democratic countries have embarked on a huge militarisation programme, as with Saudi Arabia, in turn, spending massively to import hardware from the United States. This cannot constitute the course of a long-term economic growth. Another is how even rebounding oil-prices cannot be compared with previous outbursts: the renewable energy component of global energy is far bigger today than ever before, and growing. Finally, China's global extensions cannot but be near their own financial limits, given that China's growth-rate no longer climbs, merely struggles to hold on to the previous year's rate, even then at considerably lower thresholds than ever before.

Given the cyclical nature of this spring's economic growth, its Autumn, perhaps even another Winter, cannot be ruled out: Sri Lanka defaulted on its Chinese loans, Pakistani retailers are finally up against Chinese imports, India is locking horns with China in Bhutan (over Doklam), the Maldives (over whose candidate should govern the island), Nepal (dissuading the well-entrenched communists from China), and quarrels now even in Bangladesh (over infrastructural project financing); while Middle East militarism can eat into reforms unleashed by Prince Muhammad bin Salman and Hassan Rouhani in Saudi Arabia and Iran, respectively. There is also tension from China confronting the big-wigs, Japan and the United States, elsewhere across Asia, for example, through the budding Quadrilateral Security Dialogue, on one front, or counterpart infrastructural projects to roll-back China's mammoth Belt Road Initiative, on another. Yet, that does not mean we should fasten our seat-belt for a boom-time Summer. It looks like a sunnier season than many we have seen of late, even though politics is a nasty unpredictable beast, although this glow is also poised to fade given all the irritants in the atmosphere.

 Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.

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