What’s Next? Reviewed by Bill Barnhart

What’s Next?: Unconventional Wisdom on the Future of the World Economy
edited by David Hale and Lyric Hughes Hale. Yale University Press, 2011.

The dismal science of economics has become even more dubious in recent years because the profession seems to have been hijacked by partisan politics. Paul Krugman on the left and Douglas Holtz-Eakin on the right may be skillful observers and analysts of economic trends. But they are best known as intellectual water carriers for Democrats, in Krugman’s case, or Republicans, who frequently cite Holtz-Eakin.

For business planners, a yawning chasm between the predictions of left- and right-leaning economists may help validate their personal political leanings or simply be entertaining. But it’s not particularly useful in setting strategy and allocating resources. The husband and wife team of David Hale, a Chicago-based economics consultant, and Lyric Hughes Hale, a writer and commentator specializing in Asian affairs, has addressed this problem by presenting an array of economic outlooks that avoids partisan advocacy and relies on objective evidence.

Their starting point is the global reaction to the Great Recession of 2008 and 2009, a process that is by no means concluded. The book’s 23 commentators comprise economists, institutional investors and journalists working in nearly all parts of the globe. In short essays, they offer forecasts drawn from data and their professional experience, not political ideologies.

As you might expect, the outlook is mixed. The corporate sector, especially in the United States, Canada and Australia, survived the recession fairly well and is primed for growth. Enterprises in Japan and Europe emerged in weaker shape. China is likely to become less attractive to foreign investment than before the recession, as the availability of cheap labor declines and government policy shifts toward stimulating consumption instead of exports. The consensus of the writers seems to be that short-term monetary and fiscal stimulus remains a proper tool for cementing economic recovery. The hard side effect of inflation has not emerged.

What can North American business executives and policymakers learn about stimulating economic growth from the recent economic policy mistakes in South Africa and successes in Canada and Australia? South Africa boosted welfare benefits but didn’t invest in education and infrastructure. Canada and Australia didn’t let their banks go wild but remain highly dependent on trading partners.

Will higher interest rates finally emerge after years of easy money? A possible “buyers strike” by bond investors looms. Will climate change create business opportunities or lapse into national protectionism? Probably both.

What’s the best way to compare the outlooks for economic growth in Europe and America? America looks better. What national tax policy is best in a global economy? Demographic trends favor a value-added tax, currently employed in much of the world. How is ethical business conduct best achieved and policed? Not by cutting the staffs of government financial regulators or by imposing bureaucratic burdens on businesses that don’t address the problem. If you stick to the facts, the questions and answers in global economics become far less dismal.

—Reviewed by Bill Barnhart