Most Americans know it’s a “global” economy now, with developments in Europe or China or Brazil affecting what happens here in the United States. Still, few people follow international events closely or see how they connect directly to their personal pocketbook issues.
Joel Naroff, founder and president of Naroff Economic Advisors, wants to change that. In his new book, Big Picture Economics, Naroff and his co-author Ron Scherer explain how faraway events that might seem arcane to ordinary Americans can end up having big consequences for them. More importantly, things can change in ways that require ordinary folks to change their thinking or behavior. “The standard view of things we may have had over 10 or 20 years may be different now,” Naroff tells me in the video above. “Every individual has to keep that in mind.”
Naroff sees three big changes taking place globally that could directly impact the U.S. job market and other facets of the domestic economy:
The expansion of the Panama Canal. The canal is being widened and deepened, to allow today’s huge cargo ships to pass through instead of taking the much longer route around the tip of South America. Once the work is completed in late 2015 or 2016, the expansion will significantly change the way goods are shipped to the United States and moved around once they’re here. There are already several big construction projects underway at ports along the U.S. East Coast as they prepare for a surge of new goods arriving. Naroff expects there will also be big changes at cargo distribution hubs in the Midwest. Will it create jobs? “I think it’s going to,” he says.
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Rising wages in China. “Ten or 15 years ago, it was a no-brainer to offshore manufacturing in China,” Naroff says. But the rapid growth of China’s economy has pushed wages there much closer to levels in the United States, erasing much of the cost advantage of producing in China. Other low-cost countries, such as Vietnam, Bangladesh and Cambodia, are getting some of that business, but some of it is returning to the United States, as well. That doesn’t mean the textile or furniture mills of the 1970s and ‘80s will return. Instead, new U.S. factories are likely to be high-tech and highly efficient, with jobs available for people trained in using the latest assembly-line machinery.
The proliferation of natural gas. It’s no secret than new “fracking” technology has helped open up vast U.S. reserves of oil and natural gas to drilling. But the consequences of this momentous shift in energy production are barely being felt yet. There’s obviously a boom in places like Minot, N.D., which sits atop the Bakken shale formation. What may be coming next, Naroff says, is a huge build-out of energy infrastructure to take advantage of the newfound energy. Eventually, we may see more cars powered by natural gas and other big changes that capitalize on cheaper, cleaner energy.
As the United States becomes more energy-independent, it could dramatically alter the entire geopolitical order. Less reliance on energy from turbulent regions such as the Middle East could reorder national security priorities. It could also give the United States more leverage over Russia, which is currently causing mischief in Ukraine that is unnerving much of Europe. Eventually this revolution will show up in your front yard, in one form or another. The big picture matters to the little guy.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.