Allan S.B. Batuhan
Foreign Exchange

WHAT is money for when it isn’t spent?

This seems to be the mantra of the “new rich” when it comes to showing off just how far they have come in this world.

Previous to the difficult days of this current—or some would now say past—financial crisis, the world was treated to a spectacle of a spending orgy, stretching all the way from Mumbai to Moscow.

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The opening up of the Indian economy to foreign trade and investment, the explosion of China as the world’s manufacturing center, and the exploitation of Russia’s oil riches for the world’s benefit created newfound wealth for a new class of extremely rich individuals, and fueled a spending spree like no other seen in modern times.

What goes around does come around, as they all say.

In years past, it was Western companies and their interests that were buying up those in less developed areas of the world.

And when they were not buying companies, they were setting up their own in these far-flung locations.

Witness how fast-moving consumer goods markets in Asia are being dominated by foreign players like Unilever, Colgate-Palmolive and Procter and Gamble, for instance. This also explains the dominance of the “Seven Sisters” of the oil industry, in the global petroleum and fuel trade.

Today, it seems the pendulum has started to swing the other way.

When Arcelor, the giant French state-owned aluminum producer started bleeding itself to a certain financial death, who should step in but Indian magnate Lakshmi Mittal, who promptly added the French giant to his expanding global business portfolio.

Rover, the United Kingdom’s last domestically-owned car producer, was itself starting to keel over in a financial sense, when who should step in but Shanghai Automotive Industry Corp. (SAIC) of China, which bought the company’s intellectual property, and made sure that they were going to be the new manufacturers of cars for the country which first introduced the vehicle to them.

So the world has come full circle, in more than a literal sense.

But the rise of the new rich in previously deprived locations like India, Russia and China is not without its own set of unique problems, not only for these countries but for
the larger global community.

Wealth means more material things, and more demand for goods and services that money can afford.

Outside the United States, the appetite for cars and automotive vehicles of all kinds has now shifted to the newly emerging markets. Global warming be damned, the Indians, Chinese and Russians are not going to be deprived of the right to own the huge SUVs that for many years were the exclusive property of Americans and Westerners. Never mind that it may accelerate the pace of climate change in the process. If the Americans and the West enjoyed it in the past, they will also want to taste the same luxuries for themselves.

We can’t really fault them for this newfound appetite to spend like there’s no tomorrow. After all, to be deprived for so long, and to suddenly break free from this deprivation is something that can only be enjoyed by going on a historically unprecedented spending spree.

The financial crisis has put a damper on things for the moment, and in fact, may have actually bought the world some time. But the crisis is now supposed to be over, which brings us to the question: “Would the world have been a better place, if the recovery had not taken place so soon?”

(http://asbb-foreignexchange.blogspot.com & http://twitter.com/asbbatuhan)