center for global leadership faculty accomplishments

Dr. Ted Chu teaches International Economics as an adjunct in the College of Management.  He is an economist for General Motors Corporation.  The article below will be published in the Swiss newspaper - Neue Zurcher Zeitung:

Preparing for the Upturn in Europe

I believe the global recovery is going to surprise on the upside. Economists and organizations such as the IMF and EU have been busy revising up their forecast, but the speed of the upturn may still shock people. (http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/business/2009/September/business_September312.xml§ion=business) With the Lehman Brothers collapse last September, we had a downward spiral of bad news. A credit crunch led to a wave of bankruptcies, which forced banks to tighten further. Then governments around the world doled out large sums of rescue money to prevent another Great Depression. It all left us to wonder if the recovery path would embark on a similarly speedy upward spiral.

 Nobody has the crystal ball, but there are a few things we know with a degree of certainty. First, this is the worst recession in at least half a century. Output, employment, trade, investment - everything was in a free fall for about six months. Second, the global economy most likely hit bottom this spring. The pace of EU GDP contraction slowed from -2.4% in Q1 to -0.2% in Q2, with Germany and France posting growth of 0.3% in Q2. Third, the impact of massive policy stimulus packages has yet to be fully realized. For example, although the highly successful German car scrappage program will not be prolonged (its effectiveness would diminish anyway), half of the German fiscal package will be implemented in 2010 (about 1.6% of GDP).

Given how much output and inventory have fallen, any uptick is likely to trigger a positive chain reaction in the economic system. For example, the "Cash-for-Clunkers" program in the U.S. caused a 40% jump of vehicle sales in August, which led automakers to increase production. That in turn caused steel makers to revise their plans, and so on through the supply chain.

Meanwhile, pessimists point to the fact that unemployment is still rising and consumer credit is still tight, which would seem to ensure a subdued recovery. What they're missing is that policy stimulus will be in place until we are clearly heading for a turnaround. One thing we don't have to worry about for now is inflation, which has been held in check by slack labor markets and plenty of surplus capacity.

I am optimistic about Europe's prospects compared with the U.S. Internally, Europe has not suffered a massive balance-sheet shock in this recession like the U.S. The EuroZone overall still has a small trade surplus. To be sure, there are imbalances within Europe, and we should expect Germany and France to recover more quickly than Spain, which had a massive housing bubble, and Italy, with its chronic competitive issues. Overall, Europe still has a high-quality labor force and good infrastructure.

Externally, China is emerging as the leader of this recovery and Europe is in prime position to benefit from that. Over the last few months, with demand elsewhere collapsing, China has become the top market for fine European products such as Swiss luxury watches and Mercedes S-class sedans. In this recession, the wealthiest Americans and Europeans have been hit hard. But the number of wealthy potential customers in China and other emerging markets continues to grow, and they have acquired a taste for name-brand European goods. An upturn of investment should also benefit European firms.

No doubt that even with a robust recovery in sight, there are still plenty of concerns - exit strategy, fiscal sustainability, and the rise of protectionism. This crisis has affected personal lives of millions around the world - out of work and seemingly out of hope. But from a longer term perspective, this may prove to be just a little shakeup in a broad upward trend. I would like to remind my students that things could have been much, much worse. People are fearful and delaying their purchases, but the global economic system has not been brought down. As long as this foundation remains intact, we can always build a better world on it, despite occasional missteps and setbacks.


Gyongyi Konyu-Fogel

Research and Teaching Fellow, made two presentations at the Midwest Business Administration Association (MBAA) International Conference in Chicago, IL on March 18-20, 2009: "Economic institutions in China: Reforms and transition" analyzes the economic institutional environment of China and proposes economic policy for strengthening institutional frameworks in the country's transitionary economy.
 
The paper "Globalization and Economic Development in Small Caribbean Nations: An Empirical Study" is based on secondary and primary research, evaluating the impact of globalization from the perspective of the Eastern Caribbean States (ECS) with a focus on economic, social, political, legal, and cultural dimensions of globalization. According to the study, economic integration helped diversify the  ECS's economies as globalization impacted tourism, informatics, and financial services positively while the manufacturing and agriculture sectors experienced declines as a result of deteriorating trade terms and increased global competition. The findings are used for policy recommendations to address economic development in the region. The paper is published in the 2009 Proceedings of the Academy of International Business Midwest.
 
In addition, Gyongyi Konyu-Fogel served as Session Chair of Just Visiting: Americans Abroad Session and was Paper Discussant of the Ethics and the Globalization of Health Care research paper at the Academy of International Business Midwest Conference on March 20, 2009 in Chicago, IL.
 
The MBAA International is a premiere academic conference geared to enhance scholarly research, teaching, and instruction in the various fields of business disciplines, including management, marketing, business economics, and international business.
 
On August 8-9, 2009, Gyongyi Konyu-Fogel, Research and Teaching Fellow, participated in the "Global Mindset and Global Leadership: Exploring their Relationship, Measurement, and Interventions" Professional Development Workshop at the Academy of Management Annual Conference in Chicago, IL. The workshop explored the relationship between Global Mindset and global leadership. Participants were invited to complete the Thunderbird School of Management Global Mindset Inventory that attempts to measure three types of leadership attributes of the Global Mindset: intellectual capital, psychological capital, and social capital.  Participants discussed theoretical and methodological concepts of Global Mindset and global leadership and suggested specific ways of improving one's Global Mindset profile.

 

 

 

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