NEW YORK – The global recession now underway is the result not only of a financial panic, but also of more basic uncertainty about the future direction of the world economy. Consumers are pulling back from home and automobile purchases not only because they have suffered a blow to their wealth with declining stock prices and housing values, but also because they don’t know where to turn. Should they risk buying a new car when gasoline prices might soar again? Will they be able to put food on the table after this year’s terrifying rise in food prices?
Decisions about business investment are even starker. Businesses are reluctant to invest at a time when consumer demand is plummeting and they face unprecedented risk penalties on their borrowing costs. They are also facing huge uncertainties. What kinds of power plants will be acceptable in the future? Will they be allowed to emit carbon dioxide as in the past? Can the United States still afford a suburban lifestyle, with sprawling homes in far-flung communities that require long-distance automobile commutes?
To a large extent, economic recovery will depend on a much clearer sense of the direction of future economic change. That is largely the job of government. After the confused and misguided leadership of the Bush administration, which failed to give any clear path to energy, health, climate, and financial policies, President-elect Barack Obama will have to start charting a course that defines the American economy’s future direction.
The US is not the only economy in this equation. We need a global vision of sustainable recovery that includes leadership from China, India, Europe, Latin America, and, yes, even Africa, long marginalized from the world economy, but very much part of it now.