World economy upside cited by noted economist.

• Author: Heffes, Ellen M.
• Position: ECONOMY - Robert Aliber

Economist Robert Aliber, professor emeritus of international economics and finance, University of Chicago Booth School of Business, presented his annual economic update at the H.S. Grace & Co. Inc. fifth annual Mid-Year Economic and Governance Review Breakfast in New York City on Sept. 18.

Aliber expressed generally optimistic prospects for the U.S. economy, but cautioned there may be headwinds on the horizon in the form of increased axes, decreased government expenditures and Federal Reserve tapering of bond purchases. He referred to his points on the global economy as the "Andy Warhol Theory of Economic Growth," where every country grows rapidly for 15 years and goes off a cliff (a take-off on Warhol's notable 1968 comment that "In the future, everyone will be world-famous for 15 minutes").

Aliber cited three principles that contribute to his positions: energy, China and the U.S. economy.

Energy: The U.S. currently has a unique role in "balancing" oil exports, he said. The oil exporting countries have a trade surplus of dollar 450 billion; Germany, Japan and China import oil but have trade surpluses because of manufacturing exports. The U.S. therefore ends up in the balancing role for oil exports with a deficit since all surpluses must have an offsetting deficit.

But increased U.S. oil production is changing this role, and he predicts that within about two years energy prices will fall to the dollar 70-dollar 75 a barrel.

China: Aliber believes China's growth will follow the pattern of Japan, with some differences. Japan's economy grew significantly in the 1980s, then the bubble imploded and growth slowed much in succeeding years.

China's growth commenced when the government invited in multinationals, enticed by low wages, and drove rapid growth with demand for jobs as workers migrated from the countryside to the cities. As a result, China...