The dominant “ economic culture” of the US and Europe has been for some years  based on two fundamental tenets. The first is that the economy is world-wide, the national boundaries being no more relevant. The second is that “globalisation”  rules , which means strong competition among countries and groups of countries. These two axioms  will bring two major consequences.  The first , that countries , or groups of countries , have to   compete with each other on the “global” market place. The second is that labour intensive industries will move to poor (or ex poor)  highly populated countries  while  capital and science intensive  industries   and services will rapidly grow in rich countries, who will bank not on the number of their workers, but on their skills and scientific culture. This is a somewhat simplistic   presentation of reality, as the newcomers find very soon the way to upgrade   their productions, often helped by he advanced production units created in their territory  by the “relocating” mature industrial companies. However,  let’s for the moment fully accept those tenets , and  see   what kind of policies, and politics,  should result from them.

The first and immediate consequences should be   that countries would compete, that is, they will make every effort to beat their competitors.  To that effect, the rich countries would pursue  two basic objectives : defend as much as possible  the old industries,  as they keep a lot of people in employment ; develop quickly  the advanced industries and services, moving large amounts of capital  in investments on science  and devices that increase productivity , like modern transport , electronics etcetera.

That would  help to get quickly out of economic downturns,  and to keep high the level of  internal demand , the basis for any economy. In short ,  all countries should do their outmost  to develop their economy , to muster as much as possible the  abilities and culture  of their workers  in order to maintain their leadership  in the “global” competition, and not to disappear  from the rich markets of the world. This is not utopic. The way the US has been  trying to climb back from  the bottom  of the crisis has given  the world and Europe a lesson  on how to get out of the crisis: bail out not only the banks ,  but also the “traditional” industries, like the car industry, reducing the loss of jobs   and giving  a strong competitive  answer  to the expansion of the once poor countries .

This is exactly  the opposite of what is happening in Europe.  The basic tenets are the same : there is competition  among countries, and consequent globalisation, but  the universally accepted answer in Europe is the opposite:  reduce public expenditure , increase the cost of capital , reduce the services given to the citizens irrespective  of their income level,  thus reducing consumer’s demand and investments. In a word, do nothing that would increase your capacity to compete  and let the speculators on bonds, currencies , raw materials  and  energy   to rule the roost . It  is difficult to understand on what economic and political principles this  strategy  has been dictated : it has a number of negative  political and economic effects. It implies a fight against the Trade Unions, which get involved in a rear-guard battle and are permanently mocked by the papers following the European  gospel of retrenchment  , and of the disappearance of the State. It therefore reduces the strength  of  the only instrument available  to keep internal demand high  by  avoiding wages from falling too low.

In Europe,  the capitalist entrepreneurs close their factories  and move them to cheap labour areas , with the effect of filling their original market  with  a flow of goods  that the original clients  have no money to buy, which pushes the prices down, cancelling a good part of  the advantage of the low labour cost. The financiers request the maximum possible freedom  to do whatever they want to do, which is to increase the income of investors that is, of the rich people,  whose contribution to aggregate  demand  is negligible. Finally, the State cuts the services  that it used  to give to  all citizens , increasing  the divide  between a small group of extra rich , and a large majority  of people on the verge of poverty .The latter   will reduce their spending  even  beyond the minimum , because of their fear of the future , and that  reduces further  the aggregate demand. To top it all, the States cuts  the education money , ignoring that the Universities and  the cultural institutions are  the only instrument to guarantee the long term  development of their economy.

All this will have a certain result in the medium term: it will lead  the old Europe to a definite economic defeat , and to a loss of political leverage. The old colonisers will from now on be colonised. Nor can Europe hope for a reduction of the aggressiveness of the poor, or former poor, countries of the world. China is looking  to a change the rhythm of its economy , catering more to the needs of its large population , to improve the difficult position of the peasants , to increase the level of consumption, in a word , to make China a modern country , with a reduced difference in the economic  level  of the various strata of the population. However , that country will still need  to export a large share of its production , in order to keep at work the great   investments operated until now , which will   grow exponentially in the next years. It stands to reason that China will not reduce the share of its production exported, actually, it will probably try to increase it.  Moreover , the Chinese economic plan is singling out  high technology and innovation,  the areas that the  US, Japan and Europe are , or should be,   jealousy nurturing. International competition will be stronger than before . China wants to become not only a rich country, but a modern one, and it will need even a bigger share of the world trade in order to keep all its productive capacity working.  
 
One final observation on a non marginal point .Among European Countries there is one, Germany, whose capacity to export  is solidly based on  a strong industry , with workers and entrepreneurs who  find , when needed,  the ability to share the pain  of any downturn , and therefore  to get back to growth  before everybody else. This country seems , at least in its printed press,  to follow the regressive lines of the other European countries. However, the impression it gives,  is that , behind  the words  and the lessons of economic  wisdom,  lies a different strategy,  based on industrial development , and on  maintaining internal demand satisfactorily high.