Page 48 - Accelerating out of the Great Recession

THE DAMAGED ECONOMY

below 8 percent. Germany took a similar action, although it
committed far less money.
Yet, even with such programs in place, it is not easy to reori-
ent an economy.
Countries such as the United States—which increasingly
have shifted toward the service sector over many years—cannot
quickly return to a manufacturing-heavy economy. Nor can
other countries rapidly change their industry structure. In
Germany, for example, five core industries—automobiles,
machinery and equipment, chemicals, electronics, and metals—
employ 17.3 percent of the workforce. In a relatively benign
scenario in which the world economy experiences slow growth
over a period of several years, nearly a quarter of these jobs—
some 540,000 German jobs (equivalent to 3.8 percent of the
workforce)—will be at risk. The sheer number of workers in
these export-oriented industrial sectors makes it unrealistic to
expect Germany to change its business model to focus on
domestic consumption. It would be possible for Germany to
increase domestic consumption somewhat and reduce export
surpluses to a degree, but not by enough to make up for the
demand gap following the deleveraging in the United States
and several other countries.
What about China?
Given the size of China, its population (1.3 billion and
counting), its cash reserves of $2 trillion (resulting from its
trade surpluses of the past 10 years), and the impressive eco-
nomic stimulus program, many people expect China to succeed
the United States as the growth engine of the world economy.
There are, however, a number of factors that could militate
against this. The biggest chunk of the Chinese stimulus pro-

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