Larry Summers: Can We Keep Spending Like Americans?
What’s the Big Idea?
Last year some 212 million Americans spent over $45 billion over Black Friday Weekend. To put that in perspective, Americans spent more than the 2010 GDP of North Korea in one weekend. Sure, that represents the clear triumph of American capitalism over North Korean communism. And yet, according to former U.S. Treasury Secretary Larry Summers, the story that will be written in the history books 50 or 150 years from now will be about “the rise of Asia and the developing world,” where living standards are rapidly increasing.
The problem is not everyone on the planet can consume like Americans. We would need more like four planets to sustain that. So what is Summers’s advice for the present? We need to save, while other countries, like China, need to spend. (Summers points out that China currently spends less than 40 percent of its GNP.) The immediate benefit of increased spending in the developing world will be more global prosperity. And Summers says more global prosperity means greater global stability.
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What’s the Significance?
Summers says we need an international solution to two existential threats facing the world right now—global warming and nuclear proliferation. That means the United States will need to take a leadership role as part of a “global steering committee” that supports more inclusive democracy and more inclusive prosperity.
Take China. The country has functioned more or less as America’s ATM while investing very little in increasing the living standards of its own people. China is laying waste to the environment and its long-term stability is suspect. Take North Korea. The insular and incredibly paranoid regime in power there is armed with nuclear weapons.
Unless we are able to create more inclusive democracy and more inclusive prosperity in these areas, we will never be able to tackle the dual threat of global warming and nuclear proliferation, issues that Summers says “have the chance to profoundly change the terms of life on earth 50 or 100 years from now.”
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