The world is undergoing a fundamental economic shift, with the United States and other Western nations in decline and a number of developing countries on the rise.
This was Gwyn Morgan’s assessment of the future during a presentation Wednesday evening as part of Red Deer College’s Perspectives: Canada in the World series.
The former CEO of Canadian energy giant EnCana Corp. described how the United States, the United Kingdom and many other nations have been spending beyond their means for years — both with respect to consumer goods imported from manufacturing countries, and oil and gas obtained from energy-producing countries.
In 2008, the U.S., the U.K., Spain, France, Italy, Australia, Greece and Portugal accumulated a current account deficit of $1.3 billion.
Meanwhile, China and the world’s oil exporting countries had a combined current account surplus of $1.2 billion.
“Money going from West to East,” summed up Morgan.
The United States is now struggling with an $8 trillion national debt, with this figure growing by more than $1 trillion a year.
Thirty-nine American states are technically bankrupt, he added.
“And there’s no prospect of turning it around.
“My perspective on the United States is that they’re in for a long, hard haul,” said Morgan, adding that the U.K. isn’t much better off.
China and India led the world in growth in 2008, and this year are among the only countries to continue moving forward. He listed Indonesia, Brazil and Vietnam as other nations poised to benefit from the economic shift.
“They will be the leaders of what will be the 21st century world order.”
Morgan said global economic imbalances have existed for the past decade. During this period, manufacturing and energy-producing countries have become bigger and bigger debtors of the United States, buying up U.S. treasury bills and other American assets.
This situation can’t continue, he said, with the U.S. and other Western nations nearing the time when they will be forced to balance their budgets and reduce energy consumption.
“That is going to be a very long and painful period,” said Morgan.
Canada is better positioned to deal with the new world order than most of its Western counterparts. Residents here are big consumers with a high standard of living, but the country is blessed with geological endowments that make it a resource exporter, said Morgan.
The threat to Canada, he suggested, is its huge trade volumes with the United States. Consequently, diversification of our economy and trade patterns are critical.
Opportunities might even exist, he added, noting how Canada’s relatively low tax rate and high quality of life make it an attractive option for companies looking to relocate their head offices out of the United States.
During a question-and-answer session that followed his presentation, Morgan offered assurances that the struggling natural gas industry — which Alberta is so dependent upon — will improve.
Energy prices always rebound faster than expected, he pointed out, because drilling activity grinds to a halt when the numbers are low and sets the stage for future shortages.
Morgan, who grew up on a farm near Carstairs, is well-positioned to assess the shifting global economy. After stepping down from EnCana in 2005, he joined the board of international banking and financial services firm HSBC Holdings, and also became chairman of SNC-Lavalin Group, a global engineering and construction company.
Now living on Vancouver Island, he told his Red Deer audience that he’s visited more than 75 countries.
Morgan was honoured as Canada’s Most Respected CEO and Canada’s Outstanding CEO of the Year in 2005.