Global Outlook and Minority Businesses

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This is the first segment of a two-part article.  Developments in the global economy are examined in the first segment.  Part two describes how those developments are likely to affect minority business owners.

The Global Outlook

The uncertainty that is plaguing global markets bleeds directly into minority business opportunity in the US.  Therefore, anyone operating a minority business or small business would be wise to pay attention to the global economy.

The time is long past when the small business owner’s major competitor was the retail establishment down the street or the manufacturer in its local market area.  The digital platform has changed all of that.  The nearest competitor is now any business throughout the world whose website is reachable via the web.

Major corporations have been forced to respond to global competitive pressures by cutting costs and streaming supply chain operations. The downsizing of corporate workforces reduces consumer income and tax revenues. Therefore, globalization has also contributed to the fiscal challenges of local governments. In short, whether a minority business works in a corporate supply chain or provide goods and services to a government agency, it is revenue stream will be influenced by the new global uncertainty.

What’s Causing the Global Turmoil?

Today, there are three main drivers of the world’s  economy.  The strength of the US, economic developments in the China and growth in emerging market economies.

The US is still the strongest economy in the world accounting for 17% of global output.  China accounts for almost the same amount of global production as does the US. However, China was responsible for 30% of the world economic growth over the last five years.

Since World War II ended, the US economy has grown about 3.4% annually.  Now, its current growth rate is only 1.4% and between now and the year 2020, the US economy is expected to average only 2.1% annual growth.  This lower growth trajectory has substantial implications for minority business opportunities with governments, corporations, and consumers. We discuss this in our next segment.

While growth in the US economy is substantially below the long-run trend, China’s economic outlook is dismal and concerning.   For a quarter century, the country’s growth rate easily exceeded 10%.  Now, it is struggling to achieve 6.5%.  The inexorable forces of the free market are finally playing out in China.  The ups and downs of the business cycle are as endemic to a free market economy as pollution is to a factory powered by coal.  In other words, recessions cannot be avoided. Instead, they can only be managed.

In China’s case, the world is increasingly less confident that the leaders of the country are attempting to manage the economic slowdown properly, instead of suppressing political opposition and calls for greater freedom of expression.

The euro zone countries never recovered from the great recession.  Collectively they are growing at 1.5% annually.  At the same time, Russia and Brazil are mired in recession and political chaos. In the past, they were two stalwarts of the BRIC economies.

The bright spots in the world economy are India, Nigeria, South  Korea and a few other selected countries in South Asia and sub-Saharan Africa.  With weaknesses abounding in the global economy, everyone is looking to the US to carry growth forward.  However, the US economy recovery, which has lasted for six years,  is beginning to lose steam.

Wise minority business owners should start approaching the future with more caution. They must either plan for future declines in sales or identify more innovative ways of generating revenue.

Last modified: June 20, 2017

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