I think a recession in E.U. & USA- a scenario which creates fear and panic in financial markets of the entire world- can be somewhat beneficial. The world leaders in terms of economy have lived beyond their means for a long time, promoting over-consumption which was not supported by their fiscal conditions and aided by ill-regulated financial markets. Their system was well functioning when the rest of the world served as their colonies (neo-colonialism)- where they could sell their high end, high tech products because of their inherent technological advantages and enjoy in fictional perpetuity the benefits of this lead. But, their own system, their own working style & their self-created mechanisms like WTO, Globalization, etc have started becoming larger than their imagination. The technological flatness that this world has attained and the speed with which it has happened has not given these economic behemoths to even respond effectively to the situation. The rise of assertive powers as a result of this in the form of - China, India, etc has created rippling effects in politico-military and strategic spheres. Further, the saturation caused by demographic & structural constraints has enhanced the pace of gap-filling between these economic leaders and others by enhancing the relative speeds of the 'Emerging ones'.The story of globalization is appearing like the story of a group of ministers who positioned a Puppet King on the world throne but the subjects became so smart that they started forcing the King to take impartial decisions and hence started challenging the unaccounted power of the ministers, thus bringing them to scrutiny and forcing them to play fair. All this has resulted in a relative shift of power from the traditional power centers (in terms of last one and a half centuries) towards the more traditional centers of power(15th to 18th centuries). But this shift which is underway is not 'Total' nor is this 'Irreversible'. The 'emerging powers' have a long way to go, they have shown all the right signs so far, but they are so far behind that one weakness can easily derail their economic train. Now how this economic recession may even be beneficial to the world at large-
- Firstly, another recession will force a rethinking, refocus and realignment of financial and economic policies in US & E.U. economies. In short term it may be painful, but a structurally supportive and fiscally appropriate economic scenario will be in the interest of the world in general and the developed economies in particular. I think developed economies are suffering from something similar to reduced vigour. They need to be re-energized with opening up of newer sectors of growth and framing of more effective regulatory mechanisms.
- Secondly, another recession will force the 'emerging economies' also to become more vigilante and develop stronger institutions which can help avert similar crisis in their countries. It will also help domestic consumption led growth and promote diversification of trade markets all over the world. The emerging economies will also face severe heat of another recession but their medium to long term prospect will remain intact. Also, the reduction in prices of commodities like oil, food items, etc will help reduce inflation which is troubling most emerging economies. If a recession can also give boost to another push for renewable sources of energy and help change the coal & oil led development model, I will be welcoming the recession.
- Thirdly, a recession may help evolve more effective governance institutions at the global level and may help evolve more representative, equitable and just structures. It may help bring serious focus on the strengths & weaknesses of globalization - what it can achieve, what it cannot achieve & what it should not be allowed to achieve. Good governance, better coordination, better utilization of resources - all can become the focal points if an economic tragedy strikes the world.
