Globalisation fruits

Comments on Michael Stutchbury “Globalisation's fruits sweet and sour”, 1/02/2011, http://www.theaustralian.com.au/business/opinion/globalisations-fruits-sweet-and-sour/story-e6frg9p6-1225997666249

In Australia we talk about the two speed economy associated with the mining boom.

The mining boom is a result of the two world speed economy, one booming large developing economies and the more industrialised economies.

The world economy is and will continue to display very different dynamics over the next two decades as Asian economies continue to achieve high growth.

This world economic dynamism has just caused a re-alignment of world prices including wages, but its impact on that process will be increasingly greater and accelerated over the coming years.

It is likely to be a significant change in wealth allocation in the sense that some developing countries will be able to buy assets world wide more cheaply while most industrialised countries will have to pay comparatively more for their needs.

The euro zone will pay a greater price for its inflexible monetary system than if it were not a monetary union of fiscally independent countries.

There will be larger labour movement from more problematic countries to more sound economies in the euro zone. That movement could be smaller under a more flexible monetary arrangement. That forced larger labour movement will cause more dislocation of other resources that is why it is suboptimal financial arrangement.

However, even if the euro zone can overcome this crisis without too much damage on itself, then in the longer run, its member countries will be forced to be more prudent in their individual fiscal affairs and possibly more coordination between the members.