Economic Growth

A 0.2% overall decline in April retail sales masked divergent patterns in U.S. consumer spending. While auto spending decreased by 2.8%, spending on non-auto goods actually rose by 0.5%, a larger than expected increase. With consumer spending accounting for over 70% of the U.S. economy, some see this resiliency as a sign the economy may be closer to recovery than previously thought. Others say it's a statistical blip and expect continued contraction throughout 2008 as gas prices and inflation increase.

Snapshot asks, will high gas prices and weak auto sales further drag down consumers in 2008?

Pacific Daily News (05/07) analyzes Parag Khanna's hypothesis of the decline of U.S. hegemony.
US News (05/06) quotes Sherle Schwenninger on the cost of doing business in the U.S.
AFP (05/06) cites Steve Clemons discussing the negative impact of Clinton's comments on Iran.
Hard News (05/06) discusses Peter Bergen's research on the link between education and terrorist recruitment.
The People's Daily (04/25) quotes Steve Clemons arguing against a boycott of the Beijing Games.

US News & World Report (04/11) asks Sherle Schwenninger about economic policy and the U.S. government.
The National Interest (04/10) quotes Steve Clemons on the subtlety of realist politics.
Bloomberg (03/24) quotes William Hartung on the benefits to contractors in Iraq.

Steve Clemons, director of the American Strategy Program here at the New America Foundation held a media conference call Friday with George Soros to discuss his new book, New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. The book is available in electronic form, here. To listen to the MP3 of the call, click here.

In the book, Soros examines the financial roots of the current financial crisis and what to do about it. After the call on Friday, my colleague Sam Sherraden looked at Soros' market analysis and policy prescriptions in this special edition of Global Economic Snapshot. I will take a little more time to examine the geopolitical roots of the crisis, focusing on his concept of the Superbubble and extracting some strategic lessons for the United States.

Bubble of Damocles

Italy is moving towards another election and subsequent new government. The economic challenges facing the victorious political coalition will be daunting. With declining international competitiveness and a rising euro, a huge and growing budget deficit and a rapidly aging population, the Italian economy faces overwhelming obstacles to growth. To complicate the recovery, there is no consensus on reform proposals, which range from privatizing state-owned assets to deregulating labor markets and downsizing government payrolls.

Snapshot asks, what are Italy's best options for economic reform?

Reuters - The Italian Deficit
Wall Street Journal - The Italian Fix
Guardian - Italian Manufacturing
Adnkronos - Italy as Seen by a Chinese Correspondent
BNP Paribas - Italian Business Confidence Continues to Deteriorate

In each formulation of American grand strategy since World War II -- until we inexplicably stopped such planning in 1992 -- the President and Congress relied on the power of the American economy to do the strategic heavy lifting. Sixteen years, however, is far too long for even the American economic engine to coast without a strategic re-alignment, and the stimulus, bailouts, subsidies and even military operations that naturally ensued have forced even Martin Wolf of the FT to declare the "dream of global free market capitalism" dead. Writing in the upcoming issue of The Nation, Sherle Schwenninger, looks to the architects of the New Deal and finds three lessons essential for re-tooling the American economic engine and bring market capitalism back home to America's shores.

Joining the chorus of U.S. recession-watchers, the World Bank and the U.N. jumped in with their own analysis. The World Bank sees a finite global impact, as "emerging markets will act as shock absorbers for the global economy, cushioning the impact of the US downturn and ensuring the world continues to grow at a decent rate this year," according to the Financial Times.

The U.N is not so sanguine, writes AFP: "A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years."

World Bank - Global Economics Prospects 2008
Financial Times - Emerging markets 'to help ease downturn'
U.N. - World Economic Situation and Prospects 2008
Agence France-Presse - US slowdown could spark global economic recession
Financial Times - U.N. warns of US recession threat