First it was the Asian flu, followed by the India and Pakistan nuclear threats, and just last week a near collapse of Russia’s financial markets. Almost by the day, the world is becoming increasingly unsettled, both politically and economically and contrary to conventional wisdom just a few months ago, the United States economy could very well get jostled in the process.
That includes not only the Boeings and Arcos of the world, but any company large or small doing business overseas. More fundamentally, it also includes American consumers, workers and investors all of us, really.
The evidence so far is fragmentary but striking. Last week, the stock market suffered several unusually turbulent sessions on renewed worries about Asia. Also last week, Boeing Co. unexpectedly announced that it was scaling back long-term production plans for 747 jumbo jets due to weakness in Asian orders. Just a few weeks ago, company executives predicted only minimal fallout from the so-called Asian contagion.
What happened? Reality probably sunk in. South Korea, Thailand and even Japan face major economic overhauls, and while the changes will be positive in the long run, they won’t happen overnight. That means U.S. companies doing business in Asia and other hotspots either need to ride out the storm resigned to several years of instability and lost business or reduce their overseas exposure.
But the economic storm is only one cause for concern. There also is the specter of political turmoil, whether it’s India and Pakistan setting off underground nuclear bombs, or Russia running out of money, or Indonesia adjusting to a weakened, post-Suharto government. And let’s not forget the Middle East, where political turmoil is almost a matter of course.
Any of these trouble spots could easily escalate into something far worse, setting off investor panic around the globe and perhaps even a world recession.
For U.S. business people enjoying years of prosperity virtually unmatched during the post-World War II period prospects of such a panic might seem remote. Even Wall Street’s recent skittishness is hardly creating a stir; investors have grown accustomed to significant drop-offs, only to be followed by significant gains. To many, it’s inconceivable that the good times won’t last. That’s a worrisome attitude.
Perhaps more worrisome is Washington’s often confused response. The futile, behind-the-scenes effort at trying to prevent Pakistan from detonating its own nuclear devices is illustrative of the administration’s inability to persuade or cajole. So is India’s defiance of U.S. threats concerning economic sanctions.
In fairness, it’s not easy being the world’s guardian these days. The issues are complex and the answers sometimes elusive. Even the International Monetary Fund, which for years acted in relative anonymity, is being questioned for becoming the global lender of last resort.
One thing that’s become increasingly clear is that the world has gotten scarier not only from a foreign policy standpoint but in strict dollars-and-cents terms. Business owners need to be aware of the risks inherent in a global economy and start figuring out their options if things get out of hand.
