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A Look Back on the Decoupling Debate

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The US is too big to be "just another nation," but it is too weak to be one-half of a couple.

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Back in March of 2008, I wrote a brief commentary on the then-active discussion of "coupling" and "decoupling" titled Global Decoupling Underway. In it, I wrote:

The current debate over whether or not emerging market economies are "coupled' or "uncoupled" to the US misses the point. It suggests that this is an "either/or" situation. Nonsense. This is a transition from one to the other. The economies of emerging markets haven't decoupled from the US economy, they're decoupling. It's a waste of our time to argue whether the transition is over (is a transition ever really over?), but it's worth our time to accept that it's underway.


It's been nearly three years now. The old debate fades. The word "couple" refers to two partners. Back in the days of the Cold War, most nations found themselves "coupled" with either the US or the Soviet Union, whether they liked it or not. Those days are over. Coupling is no longer an appropriate term. Markets are "globalized," "networked," "inter-connected," or whatever term you like, but being "coupled" is no longer relevant for much of the world. The US is still the biggest market. It is a wealthy market. It is a troubled market. It is a debt-ridden market. It is many things, but it is not what it once was and I see no good reason why that should change any time soon.

Having spent more than four decades working in more than 40 nations, I have quite a network of friends and associates in business in many locations globally. I have watched a progression that might be summed up as follows:

1. What's going in the US?
2. Man, they really have screwed up.
3. Is this going to be a disaster for our firm? (Are we "coupled" with the US?)

There were basically three results:

1. We've been hurt, but not that much.
2. We've been hurt a lot, but we've scrambled to find new market opportunities outside the US and have found them.
3. We've been hurt a lot and haven't found replacements (we are coupled).

The last group is nowhere near as large as some had predicted and as many of these firms had feared in 2008. Life moves on, business moves on, and coupling is not a term used these days.

None of this comes as a big surprise from my perspective. It's all just part of that "transition" I spoke of. What has surprised me is how rapid the transition has been. You can hear it in the casual conversation of non-US business executives. In 2007-08, the conversation often revolved around understanding the severity of the US housing bust. Then it centered on the presidential election. For a few months in 2009, it focused on the new US president and what he chose to do. Then it started to die out as a topic rather quickly. There was an occasional burst of interest in the Tea Party movement, but nothing dramatic.

Nowadays, the US economy and its politics rarely are the focus of conversation, if the topic is raised at all, unless there is a very specific reason to raise it. The US is like the eurozone and European Union. They've gotten themselves in trouble. They don't seem to have any clear direction. There isn't anything we can do about it, anyhow. When they make up their minds as to their futures, we will be interested. In the meantime, we're busy. No one wants to be "coupled" with someone else's disaster, even in general conversation.

The State of the Union message didn't help clarify matters at all. Most non-US businesspeople did not hear it or read it, they only heard a little about it in media summaries. The one thing that seems to have caught their attention is the "Sputnik moment." How odd that a US president considered to be "young" would reach back over half a century to offer inspiration. The great majority of the world's population wasn't even alive in 1957.

I was amused by the number of younger businesspeople who asked, what is Sputnik? Others, the middle-aged, often vaguely remembered that it was a Russian satellite, but what was this "Sputnik moment" about? I do my best to explain President Obama's reason for mentioning it, but that only gets me bored looks. If the Americans have had their "Sputnik moment," we will only know it by its results. It may be awhile before we see any, so life moves on and business moves on.

For now, and likely for some time to come, "coupling" is a non-issue. Of course, if the Americans (or Europeans) do something really stupid, it may arise again, but it will be an old issue resurrected, not a new one, and those outside the US and Europe (the folks with the money) will simply have to deal with it. But the concern today is nowhere near what the fear was three years ago.

In other words, the transition continues, although a bit faster than many had anticipated, including me. If it has to pick up steam in the future, it will. If not, it will keep rolling along as it is now. The US is too big to be "just another nation," but it is too weak to be one-half of a couple.

No positions in stocks mentioned.
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