Peter F. Drucker is almost the only economist I like to read, and that is because, of course, he isn’t an economist. In this essay for The National Interest, Drucker maintains that the U.S. is no longer the world’s single dominant economy.
The emerging world economy is a pluralist one, with a substantial number of economic "blocs." Eventually there may be six or seven blocs, of which the U.S.-dominated NAFTA is likely to be only one, coexisting and competing with the European Union (EU), MERCOSUR in Latin America, ASEAN in the Far East, and nation-states that are blocs by themselves, China and India. These blocs are neither "free trade" nor "protectionist", but both at the same time.
Even more novel is that what is emerging is not one but four world economies: a world economy of information; of money; of multinationals (one no longer dominated by American enterprises); and a mercantilist world economy of goods, services and trade. These world economies overlap and interact with one another. But each is distinct with different members, a different scope, different values and different institutions.
While almost everything he says can be argued with I bet, it is an interesting and thoughtful piece. His understanding of the EU and its policies, and his warning about how they are exporting their regulations, I found especially interesting. Also note his emphasis on the U.S. deficit.
I’m glad the old guy is still alive and thinking!
Drucker’s piece is thoughtful, but I think it’s always a mistake to assume that macroeconomic phenomena will dominate the future. Back in the 1980s most experts warned us of coming Japanese hegemony, and yet it didn’t happen. Just so, I’m not convinced that 1) the EU will ever ’gel’ as a viable economic unit, 2) that either India or China can really beat us at information processing or manufacturing management, or 3) that regional protectionist blocs will benefit anyone. As always, I think the microeconomic incentives built by differences in terrain/ product cycle/culture/ transportation technology will dominate, and that the future of the global economy will therefore be dominated by ’organic’ regions that are especially vital (e.g., parts of England in the 1800s, the Great Lakes region in the late 1800s).
Moreover, I think his division of globalism into four subsystems (information, money, multinationals, and mercantilism) is inventive but flawed. Information and money are lubricants of the other two...a bit more attention to architecture would have been helpful.
Also, I think dismissing the national state as an actor is a mistake, particularly for very large states like the US and China. They will continue to matter because production isn’t as ’footloose’ as people assume, and large domestic markets (either consumer or labor) have leverage in the global economy. So, bottom line, I think Drucker has written a thoughtful piece, but he’s trying too hard to be a Cassandra. The U.S. will be just fine so long as it pursues sensible, (enlightened) self-interested policies.