Around the world, two stories have been consistent since 2008 – the developed world is struggling with a depression while the developing world largely charges ahead. The two worlds have never been so far apart as the careen towards similarity. But in this hemisphere, three stories have come to show where it all comes together – how “wealthy” is what a nation feels more than how it is.
Forget how Japan and Europe are wallowing in desperation for a while – on this side of the big ponds things are happening. It may be slower than anyone wants, but change is happening. The reactions to that change show that my favorite saying is still true – that while people are people, cultures are cultures. Wealth, or at least the feeling of wealth, is a state of mind.
We’ll start with the US, where a roll of good economic data has caused stock investors to temporarily forget about the tremendous threat from China’s implosion. Home prices are up, consumer confidence is spiking, and employment seems at least stable. We’ll analyze how Barataria’s predictions for 2013 are holding when all the data for 2Q13 are in, but for now the big picture is clearly moving ahead – the psychological part of the “depression” is being left behind as opportunities appear to be opening up.
Normalizing the (weak but real) growth is the economic story of 2013, and it’s critical. Things don’t move ahead until the economy learns to shrug off the crisis du jour from overseas and charge ahead as if everything’s gonna be allright. It’s the foundation of any potential good times that could result when we all really turn the corner. Are things really good? As long as people feel good, they spend money and a serious rebound starts to actually happen. Attitude is a big part of economic cycles, which is why terms like “depression” hit the common lingo.
That’s not to say that good times automatically result from economic improvement. In Brazil, hundreds of thousands of people have taken to the streets to protest government corruption and inefficiency. It’s not that corruption is new to anyone there, but a rising middle-class is tired of being held back. Brazil’s taxes are the highest in the developing world, 36% of GDP. The social programs and infrastructure development that guided Brazil onto the world stage were funded in part by this excess, but the new generation that feels wealthier is now demanding more.
Spending $30B on the 2014 World Cup and 2016 Olympics might make for one Hell of a party, but it’s three times what the nation is spending to combat poverty. Their poverty rate is down around 20%, a big improvement over the nearly 50% 50 years ago, but it’s not viewed as good enough. The nation feels wealthy and is demanding that it work like a wealthy nation for once. It’s the next stage in their development, and a critical one. Brazil is starting to think like a fully developed nation. It’s all about a change in attitude.
But to change the latitude again, the situation is not quite as cheery in Mexico. That’s not because they aren’t doing well economically, however. Despite the ongoing bloodbath of drug lords servicing the insatiable US demand, Mexico is doing pretty well. Improvements in the US economy are helping, sure, but trade is improving to their south faster than to the north. Poverty, which had been as high as 80% just 50 years ago, is now below 50%. A new middle class is emerging in the cities, fueled by improvements in education opportunities and a lot of hard work.
What’s the problem? Mexico, after all, is not supposed to be a wealthy nation. Poverty has defined their culture for so long that it’s hard to imagine a nation that is any different. Despite a middle class that is now 40% of the population, they are struggling to get out of survival mode and into thriving mode. The same sense of working together for national success that propelled Brazil is just not catching on. They don’t feel wealthy because, well, they are Mexican. But the truth is that the generations of hard work have been paying off, finally. They are on the verge of being a lot more like us, if only they want to be.
These stories of national action or inaction may seem unrelated, but they show how much people are alike even as they are different. Wealth is how you feel. How that feeling develops and is expressed varies a lot from one situation and culture to the next, but changes in attitude ultimately matter more than changes in latitude.