The U.S. Leadership Challenge in an Evolving Global Economy - October 9, 2012
Featured speaker: John Lipsky
Former Deputy Manager Director, International Monetary Fund
Distinguished Visiting Scholar, Johns Hopkins University
Former IFM Leader Foresees Manufacturing Renaissance
In a wide-ranging speech at the Federal Reserve Bank of Atlanta on October 9, former International Monetary Fund (IMF) executive John Lipsky detailed a grim short-term economic outlook but voiced optimism about the longer-term prospects for the United States.
Lipsky discussed an array of concerns facing the global economy. In particular, the former first deputy managing director of the IMF noted that international economic cooperation has flagged in part because of a lack of leadership from the United States. Lipsky, now a distinguished visiting scholar at Johns Hopkins University, contrasted the present day with the unprecedented cooperation among leading industrial nations in tackling the global financial crisis. The 2009 London Summit of the G-20 countries produced coordinated fiscal and monetary stimulus, along with moves to bolster financial stability, he noted.
"I fear that that process is losing momentum," he said.
For example, the G-20's November 2010 gathering in Seoul produced a commitment to increase the voting power of emerging economies in the IMF. That agreement has yet to be instituted in large part because the United States, for one, has still not formulated legislation to approve the measure, Lipsky said.
Amid the uncertainty of an election season and congressional gridlock, little progress on global economic cooperation is evident, he remarked. And he lamented the lack of serious discussion of international economic policy during the presidential campaign. Lipsky said he has learned during his many years in Washington, D.C. that in world economic affairs, nothing happens without the United States, and nothing happens if only the United States is involved.
Lipsky listed several other worldwide concerns:
- "A worrisome dichotomy" of slow economic growth and high energy prices
- A view among some serious observers that China is worse off than it appears to be
- Japan's apparent inability to rekindle sustained economic growth
- Europe's fiscal woes
- Uncertainty surrounding the United States' fiscal problems
- Negative public attitudes toward the financial sector
- The growing possibility of protectionism in many countries
"There's no reason for great optimism, so it would seem," Lipsky said.
A coming U.S. manufacturing renaissance
Nevertheless, he expressed confidence that the United States will lead the world's recovery. Sluggish though it may be, America is outperforming other major developed economies, and will likely continue to do so for the next few years. The United States, Lipsky acknowledged, faces serious and well-documented challenges, including widening income disparity, legislative gridlock, housing woes, fiscal problems, and concerns about the stability of the financial sector.
On the other hand, he listed three major forces that bode well for the country. First, U.S. corporations boast strong balance sheets and are by and large profitable and positioned to remain so. Second, domestic oil and gas production is rising and is forecast to rise more rapidly in the next three to five years. Third, Lipsky said he is "convinced we're on the edge of a manufacturing renaissance in the United States."
This manufacturing resurgence, he believes, will be fueled by advanced technology, mainly three-dimensional (3-D) printing. This technology will lead to "mass specialization," allowing smaller enterprises rapidly to design and build unique prototypes and products, Lipsky said. In 3-D printing, a computer-aided design image is fed to a special printer. Instead of spraying ink onto paper, the printer's syringe shoots a substance such as wax, plastic, or a composite material onto a surface, building an object by depositing the material layer upon layer.
This technology-driven manufacturing renaissance won't happen without some other elements in place. Lipsky said it will require considerable private-sector investment, a wave of start-up companies, and improvements in education.