Release Date: April 6, 2012
BUFFALO, N.Y. -- An independent monetary policy and aggressive fiscal policy during the recent financial crisis are among the factors contributing to an economic recovery in the U.S. that is outpacing the other G7 nations, according to a University at Buffalo economics professor.
Winston Chang, an expert on international economics, agrees with the new report by the Organization for Economic Cooperation and Development, a Paris-based think tank, which expects the U.S. and Canada to lead the G7 nations in economic recovery. Chang said part of the reason is that Europe is facing a different problem than North America.
"The Eurozone does not allow member countries to have their own monetary policy and, thus, their own exchange rate," said Chang. "The U.S., on the other hand, with its independent monetary policy, can also influence the value of the dollar."
Chang said a common currency, like the euro, is bound to have problems in the long run when member countries experience different degrees of productivity growth. U.S. economic, political and military power puts the country in a position to accumulate external debt that simply was not available to other countries, Chang noted.
"The fact that productivity growth in southern nations like Greece, Portugal and Spain can't keep pace with Germany and France in the north, coupled with the south's fiscal crisis, is the culprit and a drag to the Eurozone," said Chang.
The OECD report anticipates the U.S. economy will grow 2.9 percent in the first quarter, while the Canadian economy will grow at 2.5 percent. The robust North American growth compares to weaker European activity, where the outlook, according to the report, "remains fragile."
Gains in unemployment have not been strong anywhere within the G7, a fact that Chang says points to "structural unemployment."
"Today's labor-saving technological change is unprecedented," said Chang. "Workers without appropriate skills would be hard pressed to find suitable jobs, as they are now competing in world labor markets with significant growth of off shoring."
Chang also addressed Japan's surprising bounce back of 3 percent following last year's earthquake and tsunami.
"I think Japan's recent disaster affected mainly those export industries located in the affected area," said Chang. "Overall, I believe the disaster's effect is temporary and wouldn't be felt long-term."
Nevertheless, Japanese's economy lacks sufficient flexibility compared to the U.S. in economic adjustment, said Chang.