It is posed as a growing global confrontation ending in deepening trade and currency wars, but perhaps it is just a robust challenge that global elites will sit out. A world of difference between these outcomes, and their implications for us. Global growth has become very slow, to the point of regression, world trade stagnating, global integration being slowly unwound in places, rising anger among many classes of people being left behind, fretting about what to do if another major macro-demand crisis were to hit.

For some, the slow global growth recuperation is a reflection of too much debt deadweight that has not been cleared. Write it off and see animal spirits revive. I suspect that is too simplistic, for which part reason central banks are not at all prepared to impose such net welfare loss, on the assumption that the ship will not right itself straightaway.

Too much isn't right. Global confidence has been given a fearful reality check, inviting much greater caution, lessening private business risk-taking. But also structurally there is too much missing in action to make a quick getaway. And so the long lingering central bank support drip, keeping things ticking while waiting for nature to takes its course. A slow makeover and recuperation until ready again for a faster pace.

The diagnosis is that indefinite central bank accommodation may be too excessive in distorting global monetary and financial conditions. Much better to add a fiscal-prop to the effort,too. Thus pushing for infrastructure modernization everywhere.

If that focuses on propping up demand, there is an overdue case to be made for structural interventions to improve supply-side capacity. If in Japan it is labour force demographics, in the West it may be schooling and vocational training. In EM it may be old-fashioned infrastructure (electricity, roads, railways, airports) and human capital enhancement (education).

Unfortunately, the choices and trade-offs encountered fiscally and structurally create enormous resistance to overcome the obstacles involved. Every country had its set of political reasons why certain things just cannot be done.

By default, the fallback on central bank largesse support, and the fear of falling into trade and currency wars, given half a shove & push.

Though this is a risk, elites may be better in trading-off the unpalatable than what is perhaps always allowed in breathless observer analysis.

The world isn't going down in a heap. It is slowly, unevenly, progressing. It is a process akin to recuperating after a major shock experience, which is exactly what the past decade gave us.

Slow recuperation is not without redemption. It gradually rebuilds platforms for improved future performance, even if accompanied by much adjustment pain and anger observed everywhere â€" US, UK, France, Italy, Brazil, parts of Africa.

Though on the margin there will always be angling for trade and currency value advantages, this isn't the main reality, other than robust competition.

The main effort is by central banks keeping us afloat through generous liquidity, encouraging communication, incentive structures or actions. They can't manufacture growth but they can keep ticking us over while slowly the world economy reinvents itself. This applies as much to America as China, to Europe as to Japan (perhaps), while EM and other commodity producers all have their own individual inner mechanisms with which to respond to this changing, recovering global reality.

So far, so good. And in case of another major crisis blowing up, expect yet more ingenuity rather than less in containing and guiding it.

For SA this isn't necessarily the worst outcome to events of recent years. There may not be a quick pickup in global demand growth favouring our exports, but we do tend to be supported via capital flows. That easy prop doesn't necessarily give us a strong incentive to reinvent ourselves and also prepare for faster growth down the line. The more is the pity.

Like many others, we have to find it within ourselves to want to change. If not, we will just keep following the global lead, wherever it may go, slowly. That is opportunity foregone, but trade it off against the “difficulty” of changing things. 

Cees Bruggemans

Bruggemans & Associates, Consulting Economists 

Website www.bruggemans.co.za

Email  economics@bruggemans.co.za

Twitter  @ceesbruggemans

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