US economy slows as global consumer debt rises

08/09/04

Sociologist available to discuss the global consumer economy and US economic policies

WASHINGTON, DC--The U.S. Presidential candidates George Bush and John Kerry promise very different economic policies. But research sociologist and consumer debt expert Robert Manning argues that the expansion of the global consumer economy will necessarily lead to the diminished economic power of the United States, including slower economic growth due to higher interest rates and excessive public and private debt burdens. Manning, a professor at Rochester Institute of Technology, finds that if the U.S. model of credit is adapted globally, it can be expected that household savings rates will plummet while credit card market penetration will continue to soar and average consumer debt will continue to rise.

In a presentation at the American Sociological Association Annual Meeting, Manning will discuss globalization and the international expansion of consumer debt. He argues that "the reconfiguration of the international 'Neoliberal' trade regime fueled by consumer debt--with downward pressure on wages, corporate taxes, and public services--will lead to greater economic power of regional trading blocs and the rise of U.S. capital borrowing as a major foreign policy issue. Hence, if current US economic policy is not dramatically changed, the United States faces diminished political influence and a lower overall standard of living."

Manning's research finds that even with record deficits and tax refunds, the U.S. economy is rapidly decelerating. Last month saw the sharpest decline in consumer spending since the recession and there has been ominous wage growth stagnation in the last year and a half along with large trade and national deficits.

Manning's paper examines the role of globalization, as a world-historic process, in the expansion of international household consumption. He shows how the structural tendencies of the Neoliberal trade regime produce underconsumption trends that lead to increasing consumption in the developed countries while reducing wages and effective demand for exports in developing countries. His research has found that the United States cannot maintain its long-term share of global consumption, which has been falling since 2001, due to a low savings rate, modest job growth since the end of the recession, massive public-sector indebtedness, slumping wages, and falling corporate taxes.

The key question concerns how future growth in global exports will be absorbed at the systemic level. Manning's research asks, "What is the debt capacity of Western developed countries like the United States and how long can they sustain massive levels of foreign imports?" His research examines how U.S. structural economic change, together with banking deregulation, produced an enormously successful mass marketing campaign in the late 1990s that dramatically altered American attitudes and behaviors toward consumer credit and debt. His research proceeds to examine how the European Union is responding to surplus capacity problems and low levels of household indebtedness. He concludes by considering whether the primary threat to the Neoliberal trade regime is continued industry "protectionism" or cultural resistance to Western attitudes toward credit and debt.

Source: Eurekalert & others

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