On June 24, 2012, Robert J. Samuelson writes in The Washington Post:
“We live in a world of broken models. To understand why world leaders can’t easily fix the sputtering global economy, you have to realize that the economic models on which the United States, Europe and China relied are collapsing. The models differ, but the breakdowns are occurring simultaneously and feed on each other. The result is that the global recovery flags, while pessimism and uncertainty mount.
“Take the United States. The U.S. economic model was consumer-led growth. From the early 1980s until the mid-2000s, what propelled the economy was rising wealth — stocks, bonds, real estate — that encouraged households to spend and borrow more. Feeling richer, people traded up for better cars, homes and vacations. Everyone could afford or aspire to “luxury.” Businesses responded by investing in more malls, restaurants, hotels, factories and start-ups.
“Feeling and being poorer, Americans have cut back. Their buying is muted. They’re trying to repay debt and rebuild wealth. A new study from the National Bureau of Economic Research found that declines in household balance sheets — that is, wealth — caused almost two-thirds of the 6.2 million jobs lost from March 2007 to March 2009. To grow faster, the U.S. economy can’t rely on large gains in consumer purchases.
“What’s to replace it? There are three possibilities: higher exports, more business investment and higher government spending. Weak economies elsewhere hinder exports. Businesses won’t invest unless there’s stronger demand. And more reliance on government means bigger budget deficits, a policy that inspires powerful political resistance.
“It turns out that, once your economic model goes bust, it’s not easy to build a new one. The obstacles are at once economic, social and political.”
