• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • BLOG
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Blogs » Think Tank » The Global Economy as Spaghetti Western

Think Tank
Think Tank RSS FeedRSS

The Global Economy as Spaghetti Western

July 30, 2012
Robert J. Bowman, SupplyChainBrain

What's in store for the U.S. and global economy? To Walter Kemmsies, chief economist of engineering firm Moffatt & Nichol, the next few years will bring "the good, the bad and the ugly."

The good: U.S. investment in infrastructure, such as it is, is being geared toward the increased movement of exports, with a particular focus on rapidly growing consumer markets in Asia. "Rail to either the West Coast or East Coast is offsetting under-investment in the Mississippi Waterway," Kemmsies said in an address to the annual meeting of the Agriculture Transportation Coalition in San Francisco. "Ports are beginning to step up."

So, one hopes, are politicians. The Obama Administration recently identified seven port projects (in Jacksonville, Miami, Charleston, Savannah and New York/New Jersey) as bearing "national and regional significance," meaning they'll be subject to expedited federal permitting and review schedules. Another 43 projects are due to receive an identical designation over the next few weeks.

Temper that observation, however, with the fact that the nation's inland waterway system is in dire need of repair and investment. "Channels have not been dredged," said Anne Landstrom, principal adviser to Moffatt & Nichol's Commercial Group. "Locks have not been maintained." Just because U.S. agricultural exports are shifting to an east-west orientation doesn't mean the big north-south waterways should be allowed to sink into disuse.

The bad: There's hope for economic recovery, but don't get too excited. Avoiding another recession doesn't mean we're in for a high rate of growth anytime soon. What's interesting, said Kemmsies, is the fact that the U.S. is heading what global recovery there is. That hasn't happened since 1999 - right before the bursting of the dotcom bubble. But with China's economy slowing down, and Europe's in a hot mess, the U.S. stands as the one bright spot - albeit a rather dim one - in the world today.

Only one catch, noted Kemmsies: that small measure of American-led recovery could vanish if Congress and the Administration allow another round of draconian budget cuts in 2013. Thanks to the poison pill contained within last year's budget deal, calling for at least $1.2tr in cuts to kick in if legislators can't agree on how to tighten the federal government's belt, the transportation projects needed to spur jobs, economic growth and American competitiveness might not happen. Kemmsies decried the "political brinkmanship" that has frustrated efforts to pass meaningful infrastructure funding legislation, at a time when the economy is so sensitive to negative influences. What's more, additional budget cuts could further threaten the nation's credit rating.

"It's the wrong part of the business cycle for that kind of behavior," he said. "The economy is not in a state where an attempt to reduce the budget deficit will stimulate the economy. It will lead to recession, as in Europe.

"The time to worry about getting in shape," said Kemmsies, "is when you're physically well."

The ugly: The U.S., he said, is headed toward stagflation, with masses of aging Baby Boomers in for intense economic pain made worse by their failure to save for retirement. The U.S., too, is struggling to live within its means, but that doesn't rule out the opportunity for spending wisely on critical transportation projects that would yield a long-term return. Kemmsies recommended that the money be directed toward promoting that sector where the country still has a clear competitive advantage: agricultural exports. Only a shift of subsidies from consumption to production can ward off stagflation, he said.

So what's the outlook for the rest of 2012 and into 2013? Low growth, said Kemmsies, with little chance of another stimulus rescue effort from the Federal Reserve. Inflation, fortunately, remains low for the moment. (Although Kemmsies is the one who predicted the return of 4- to 6-percent inflation by the end of this year. We're still holding him to that.) Prices for oil, natural gas and copper have stabilized, if not dropped. If not for those automatic budget cuts looming in 2013, Kemmsies' overall view of the coming year would be positive.

His stance on the financial sector is neutral. Not surprisingly, the big investment banking houses such as J.P. Morgan are doing just fine, but commercial banks are still struggling. (It might help if they were to resume doing what banks are supposed to do - lending money to businesses and consumers.) Meanwhile, the zombie-like real estate sector is still on the mend and won't recover fully until 2018 or so, "but it's no longer sapping the strength of the economy."

One of the biggest factors affecting the global economy is the aging of citizens in the developed world and beyond. In Japan, the population has actually begun to shrink due to natural causes. "We have never had a population decline because it got too old," noted Kemmsies. The trend promises to have serious, long-term economic consequences, including a decline in spending on goods and an increase in spending on services.

Kemmsies believes the U.S. is failing to respond to the shift in trade caused by aging consumers and rising wages in countries like China. "The problem is, we're not really jumping on this," he said. "We haven't emphasized moving our labor force into the right place." What the country ought to be doing, he said, is supporting a boom in agricultural exports "to a very hungry world."

There's hope for economic recovery, but the nation's problems won't fix themselves. On the contrary, they'll grow even worse if lawmakers, the Administration and business don't adjust to changing global realities.

"Agricultural exports are essential to the economic prospects of this country," Kemmsies told his audience of agricultural exporters, who in this case fit the definition of the choir. "You need to go out and educate everybody you can, particularly the politicians." Failing that, our economic landscape could end up looking like the closing scene of a spaghetti western.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article

RELATED CONTENT

RELATED VIDEOS

Get regular updates!
Subscribe to our newsletter

Enjoy curated articles directly to your inbox.

Popular Stories

  • 1115_chinarareearthminerals

    Podcast | Can China’s Monopoly on Rare Earth Minerals Be Broken?

    Sourcing/Procurement/SRM
  • 1111_makeorbreakblockchain

    The Element That Can Make or Break Blockchain for the Supply Chain

    Technology
  • 1125_themodernfactory

    The ‘Modern’ Factory Remains a Dream for Many Manufacturers

    Technology
  • 1118_howconsumerproductscompanies

    How Consumer-Products Companies Are Wasting Their Digital Spend

    Technology
  • 1122_forcedlaborinindia

    Podcast | This Campaign Is Out to Stop Forced Labor in India

    Sourcing/Procurement/SRM

Digital Edition

55746

Subscribe today and receive the latest issue

Start Your Subscription

Case Studies

  • Manufacturer Slashes Shipping Costs With AI Packaging Solution

  • Apparel Retailer Saves $45 Million With Reverse Logistics Solution

  • QuestaWeb Configures Fragrance Company’s Complex Procedures Into Its Advanced FTZ Software

  • Business Turnaround: Integrated Business Planning as a Management Tool

  • How a 3PL Reduced Rejected Deliveries Using LoadProof

Visit Our Sponsors

  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • The Magazine
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • 100 Great Partners Form
  • Resources
    • Newsletters
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us

All content copyright © 2016 - 2018 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing