At 24/06/02 16:11 -0700, you wrote: >Roach's report sounds pretty reasonable. Does anybody have any >comments? >-- > >Michael Perelman >Economics Department
I don't quite understand why he puts such emphasis on contagious devalutaion in Latin America, but I suppose the main message is that the world is going into a deflationary mode. Such a mode can last a long time. What used to be called the Great Depression lasted much of the third quarter of the nineteenth century, much longer than what is now called the Great Depression. The first one was associated with great productivity gains. We could well see that now. Roach's emphasis on the deflationary impact of China's arrival suggests that we are in for a period in which the average price of labour power falls across the globe as the global economy becomes so international that the vast differential in wage rates is under pressure. In this climate he seems to assume that the US will not again be able to rescue global expansion as the "consumer of last resort" as it kindly condescended to do in 1998. Euroland may become stronger relative to the dollar again as a place for investments but that does not mean it will be able to become an engine of world growth. Perhaps in that sense we are heading for a more multipolar world in which the danger is competitive devaluations of currencies by default. As he argues, central banks will not be strong enough on their own to resist these forces. Posing that problem places on the agenda whether a more multi-polar world will have to consider a more rational central bank for its global capitalist economy. Among the functions of a world central bank would have to be to promote circulation of goods and services not just in one region but in the economy as a whole. Chris Burford
