New Threats to the World Economy

NEW YORK, March 23, 2011- The New York launch of Asia Society's latest task force report, Coming Together Beats Falling Apart: Making Asian Economic Integration Work for Asia, the United States, and the World, welcomed Professor Lawrence Summers as keynote speaker last Thursday afternoon.

Asia Society Executive Vice President Jaime Metzl opened by noting that the global economy remains at a tipping point right now, paradoxically coming together through globalization while falling apart based on the challenges of protectionism and nationalization. Add the tumult in the Middle East and the Japanese tsunami, and the future of the world economy is increasingly unpredictable.

Summers addressed these issues with a positive outlook on the economy's future for both the United States and Asia.

"What is going on in Asia is literally without precedent in human history. It took from the time of Pericles, Athens, in the 400s B.C., until 1800 — nearly 2,300 years — for living standards to increase by 50-100%. At the time of the most rapid growth in US history, around 1900, it took a generation — more than a generation — for living standards to double. At growth rates that have prevailed in recent years in China, growth rates double in 8 or 9 years, implying that in a single human life span it may increase by 100-fold, or more, if those growth rates continue."

Summers went on to predict that this will change everything in world economics: "How well this is managed will be the central historical story of our time."

The outcome of this story is, of course, unpredictable. It could be a benign one; but that is by no means the only potential outcome. Summers emphasized the need to get away from "beggar thy neighbor" policies in order for all countries to benefit.

"If two companies are in an industry, they are by definition, competitors. [...] There is a tendency to carry that metaphor over to the interaction between nations [...] But it is terribly important that the competitiveness metaphor not confuse us into thinking that a major threat to our prosperity is the success of other nations. It is true that a major threat to Pepsi's position is the success of the Coca-Cola Company. It is not true that the prosperity of one country has a major deleterious effect on the growth of another."

Summers went on to note his hopefulness for the US in this important time. "My hope would be that as one crucial component of how we engage with Asia, this will be a period of renewal in the United States."

Summers is the former Director of the White House National Economic Council for President Barack Obama, and is President Emeritus at Harvard University. He was joined in a panel that included William R. Rhodes, President and CEO, William R. Rhodes Global Advisor, LLC; Kathleen Stephansen, Managing Director and Head of Economic Strategy, AIG Asset Management; and Jaime Metzl, Executive Vice President, Asia Society.

Reported by Rachel Rosado