Vulnerable green shoots

Business Daily looks at those emerging green shoots of recovery and at what might kill them off - triggering another nose-dive. We hear why some people think the whole rescue plan was a mistake. And we have a surprising story: the American who's given up manufacturing in China and is moving production back to the USA.

This week, finance ministers from the G20 - the world's 20 most developed nations - meet in London with prospects seemingly far less grim than at their last get-together in April. They may even find time to raise a glass to the long-dead British economist John Maynard Keynes, whose name is suddenly on everyone's lips.

Keynes is credited with helping end the Great Depression of the 1930s. And the emergency measures most governments are using today - slashing interest rates, printing money and so on - are right out of the Keynes's repair manual for economies on the rocks. But not everyone is cheering Keynes's memory.

Hunter Lewis is the author of a new book: Where Keynes went wrong. He says present day policymakers are making a mistake in following his prescriptions - and pumping so much new money into the system:

It's not surprising that the huge sums governments and central banks have injected are causing concern. Around the world, government debts have been soaring. In America last week, the White House predicted the US budget deficit would be around four times as big as last year. And they reckon the red ink will be flowing freely for most of the next decade.

The bigger a government's deficit, the more its finance minister is likely to come under pressure to cut back - because of the burden on future generations and the fear of inflation. But cutting back has dangers too - because that could trigger another downward slide.

Fred Bergsten of the Peterson Institute in Washington DC is a seasoned observer of the delicate balancing acts the finance ministers meeting at the G20 this week have to perform.

And now, a business "man bites dog" story: about the American manufacturer who's shutting up shop in low-cost China and is moving back home to the USA. Palestinian-born Farouk Shami built a billion dollar business in hairdressing equipment. His hair irons are sold around the world and, unsurprisingly, he ended up making them in China. But not any more.

Farouk Shami has decided to move all his production to Houston, Texas. Partly, he says, because he's concerned about counterfeit hair irons - and hopes a "made in the USA " label might help. And also because he wants to give something back to his adopted country. But in the highly competitive hairdressing business, can such a move really make business sense? After all it was the hunt for lower and lower costs that led him to China in the first place.

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18 minutes

Last on

Tue 1 Sep 2009 07:32 GMT
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