John Phipps: Will Growing Global Income Spur More Ag Exports?
We have passed some nearly unbelievable global economic benchmarks in the last few years. For example, after being as high as 305 at the turn of the century, extreme poverty –income under about $2/day in the world has fallen to less than 8%. More impressive to me, however, is over 50% of the world’s population now can be considered to be middle class or higher–about $10-100per day. Economists like this definition because it’s when discretionary spending becomes possible.
When farmers hear these numbers, they usually translate income growth to customers with more to spend, which in turn will increase demand for our products. It’s a reasonable assumption but bears frequent re-examination. Managed trade, such as Phase One, changes how this income market signal reaches our farms. I’m sure our market experts are working furiously reading the fine print and government procedures to clarify this new wrinkle.Meanwhile, ag technology has shown it can easily keep up with the need for more output.But for me, the good news about global income isa far broader consequence. While income has been growing and spreading, the world economy has demonstrated increasing resilience and remarkable momentum.To be sure, there haven’t been any flashy growth rates, but like the U.S., most of economies are sort of plugging along. Our GDP seems to sleepwalk at about 2% per year, despite all the fiscal and monetary stimuli we throw at it.
The global economy is not dominated by the U.S. economy to the degree it used to be just a few years ago. The rise of the rest, as one observer called it, means global grow this being driven by those new consumers in new countries, along with the developed world. This could be a stabilizing influence for all of us. It takes a lot more individual decisions to shift the economic trajectory of the global economy, instead of just consumers in the West alone. It’s even possible the U.S. or EU could go into recession without pulling the world down to a halt.Losing overwhelming global economic dominance may be a blow to American pride, but it is not without a considerable benefit: more economic stability.
The more logs you tie together, the steadier the raft, so to speak. Before we cut more ties to the rest of the global economy we need to look back and recall how little we enjoyed more frequent recessions and a more volatile business cycle.