Former British prime minister Gordon Brown takes to The Financial Times today to dispense advice on how the west can reverse its decade-long decline, as it reels from the global financial crisis. Europe and the U.S. may have controlled global output for two centuries, he argues, but the rest of the world is now surpassing them in terms of production, manufacturing, trade, and investment, though not consumption. America and Europe, according to Brown, are facing a future of meager growth and rampant unemployment unless they stir themselves from their slumber.
So what's his solution?
1) Recognize the Growing Power of Asia's Consumer Market
Within a decade, a richer Asia (alongside other emerging market countries) will be home to a middle class revolution equivalent to the consumer power of two Americas. Even if we exclude Japan, Asia’s consumer market will rise from 12 per cent of world consumption prior to the crisis, to about 32 per cent in 2020, becoming the main driver of world growth.
2) Export Superior Innovations and Brand-Name Goods to Asia's New Middle Class
Conventional 1930s retrenchment--and in particular cutting investment in science and technology, universities and education--will only see Europe and America miss out on huge opportunities in the east. The descent into trade and currency wars, bans on cross border takeovers, and excessive restrictions on skilled workers are also counterproductive, risking access to the world’s biggest new markets just at the time they could benefit us most.
3) Embrace Global Economic Cooperation
I believe the new chair of the G20, French president Nicolas Sarkozy, should ... advance a global growth plan which matches a faster rise in consumer spending in the east with space for targeted investment for new jobs in America and Europe, as part of the west’s multi-year fiscal consolidation.
Brown concludes that decisive action at the G20, coupled with American investment and reform, will usher in a period of prosperity for the west as it benefits from Asia's consumer revolution, creating 30-50 million jobs in the G20 over the next four years in the process.