that proposes something that I have come to suspect: the downturn that the United States and Europe is experiencing is not part of a normal economic cycle, but points to a permanent, eastward shift of economic power. The primary cost is most of the west's inability to deal with crushing debt and unfunded liabilities. I believe that beneath the economic and political distress is a more serious cultural crisis; a voracious sense of entitlement has made large segments of the population resistant to pursuing necessary changes in policy, as well as personal conduct. Rather than living within their means, by reducing their consumption and / or increasing their productivity, too many individuals and nations have chosen the path of unsustainable debt. And many of our most educated citizens have adopted a world view completely divorced from basic economics and accounting realities. From this vision, the same failed policies are pursued year after year, consequences be damned. Traditional institutions such as family, community and the church have weakened, especially for marginalized populations, just when the social and economic support they offer are most needed. More subtle, but significant none the less is the fact that political correctness has greatly constrained public discourse, just when intellectual honesty and open discourse are most needed. Perhaps it's time for me to learn Chinese and Korean?
Across advanced economies, the average debt per person is $29,600 in 2011 and is expected to reach $40,400 in 2016, said Brookings Institution economist Eswar Prasad.
For Americans, the debt burden per capita is $34,200 in 2011 and will rise to $49,100 by 2016. Japan's is projected to hit $85,000 per person in 2016, the highest in the world.
Some of today's fiscal trouble is a consequence of the 2008 financial crisis, which drove millions of people out of work -- some of them permanently -- and shifted an enormous private debt burden onto the public sector.
The crisis struck at the worst possible time: at the leading edge of a retirement wave that will drive up healthcare and pension costs across virtually the entire developed world.
If public debt is not lowered to pre-crisis levels, potential growth in advanced economies could decline by more than one-half percent annually, the International Monetary Fund estimates. Project that out over a decade or so and it is easy to envisage both the United States and Europe limping through decades of Japan-style stagnation. It does not have to be that way.
Germany cut spending on welfare and jobless benefits in the 1990s which helped revitalize the country as the powerhouse of Europe. Canada and Belgium also offer examples of how to turn around debt-heavy industrialized nations.
Nonetheless, the challenges look immense. The U.S. economy nearly stalled in the first half of 2011. Data on Tuesday showed consumer spending fell in June for the first time in nearly two years. It is not clear what will generate healthier growth in the future.
In Europe, despite cuts in spending and tax hikes, concern is acute about the ability of countries to tackle debt. Italian bond yields hit their highest level in the euro's 11-year lifetime on Tuesday, prompting emergency government talks.
With interest rates at or near record lows in the United States, Britain and the
euro zone, policymakers have limited options to spur faster growth.
Reuters posed a crystal-ball question to economists and political scientists around the world: what happens if the 20th Century powerhouses can't pull their weight?
"Our society is in a mid-life crisis," said Allen Sinai, president of DecisionEconomics in Boston. "The jury is out whether we, as a nation, can come to grips with what is needed to find our way out of this in a reasonable way."
Three themes carried through the conversations:
* Debt burdens will weigh on economic growth in the United States and Europe for years to come, and Washington is still far from addressing the root causes of its fiscal problem.
* Emerging
markets have the growth prospects and the public savings to start to supplant the United States as the world's consumer of last resort, driving the global economy. What they lack is the political will and experience to set the agenda, which means the West won't merely fade into the background.
* It will take a long time to clean up the fiscal mess.
"Assuming both the U.S. and Europe can have multiple years of sound fiscal management, which is a huge assumption, it will still take probably the majority of the rest of my career -- and I'm not that old -- for them to bring debt levels down to stable levels," said Kenneth Akintewe, a portfolio manager with Aberdeen Asset Management in Singapore.
U.S. BUDGET BATTLE
The U.S. budget battle was symptomatic of a country deeply divided over the role of government, its responsibility to its citizens, and who should pay for which benefits.
Until those questions are answered, lawmakers cannot and will not address the long-term fiscal strains, which come primarily from rising retiree healthcare and pension costs.
Social Security and Medicare will gobble up an estimated $1.3 trillion this fiscal year and $2.3 trillion by 2021. In 10 years, those programs will account for 9.6 percent of gross domestic product, more than defense and discretionary spending combined, according to the Congressional Budget Office.
The U.S. deficit reduction package, which was signed into law on Tuesday, includes $2.1 trillion in cuts over the next decade, far short of the $4 trillion many economists say are needed to stabilize the U.S. debt-to-GDP ratio.
Yet if lawmakers had used a sharper knife, they might have inflicted more damage on the economy in the short term. Just as over-tightening of monetary policy is blamed for prolonging the Great Depression in 1937, some economists see a risk that deep budget cuts now will trigger a double-dip recession.
"Those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker," Nobel-prize winning economist Paul Krugman wrote in the New York Times.
In April 2009, at the depths of the global recession, President Barack Obama put the world on notice that it could no longer rely on "voracious" U.S. consumers.
A look at second-quarter growth shows the United States is far from fully achieving that goal. Exports and domestic investment accounted for virtually all of second-quarter growth, but a drop in non-defense government spending erased a third of that gain, underscoring the short-term economic cost of cutbacks.
EUROPE'S LOST GENERATION
European countries entered the 2008 financial crisis with higher government spending levels than in the United States, and will emerge with a smaller public sector, fewer civil servants, higher retirement ages, and elevated unemployment particularly among the young and old.
The region was already headed for slower growth because the baby boom generation, born in the years after World War Two, is hitting retirement age and life expectancy is rising.
There are fewer working-age people to support those retirees. Only
France and Britain boast growing populations among the biggest European economies.
Indeed, the demographic numbers are problematic across advanced economies. In 2008, there were 4.2 working-age people per retiree in the 34 countries that make up the OECD. By 2050, that figure will be cut in half.
The financial crisis cut Europe's economic growth potential by an estimated one percentage point from about 2.5 percent to 1.5 percent due to unemployment, cutbacks in public spending and investment and the shrinking of the financial sector.
In the hardest-hit European countries, youth unemployment is now around 40 percent of the 16-25 age group.
"Youth unemployment is becoming a huge social and economic problem. We are facing a lost generation," said Andrew Watt of the European Trade Union Institute.
By force or by choice, European countries are paring back government spending even further. Not surprisingly, bailed-out
Greece underwent the most radical adjustment and suffered the deepest recession.
Many European countries are ahead of the United States on the austerity path and have dared to raise taxes as well as cut spending, something that was beyond the politically riven U.S. Congress even though tax levels, especially on rich Americans, are lower than the European average.
Europe offers a glimpse of the battles that could come as Washington rewrites its social contract. Credit rating agency Moody's warned last year that the budgetary decisions facing advanced economies may "test social cohesion".
An angry mood of "why should we pay for them" has dominated the response to the Greek, Irish and Portuguese fiscal crises in northern European countries, particularly Germany, the Netherlands, Finland and Austria.
CAN IT BE DONE?
History provides a handful of success stories when it comes to repairing severely damaged public finances. In the early 1990s, Belgium's debt hit 137 percent of its GDP, and it faced the prospect of not qualifying for euro zone entry. It cut spending and raised taxes to hit its target.
Canada faced a similarly daunting task in the 1990s, exacerbated by the Mexican peso crisis, which sent the Canadian dollar tumbling.
"I went out for more than a year talking to Canadians so they could see how difficult the choices were and that everyone had to take part in the sacrifice," said Paul Martin, who was Canada's
finance minister at the time.
He told Reuters his strategy was to try to ensure there were no winners or losers. He made a point of not meeting with special interest groups individually.
"People also have to see there is an end point in sight, that their sacrifices are not in vain," he said.
U.S. policymakers have options for tackling longer-term fiscal issues without too much pain, such as raising the retirement age to 67 and they must invest more in research and higher education, said Sharyn O'Halloran, a professor of political economy at Columbia University.
"If you are not investing wisely in your infrastructure and your people you are undermining your ability to compete globally," she said. "We still have the most creative computer technology. You still have Googles and Apples in the U.S. rather than elsewhere."
STACKING UP THE BRICS
For Asia, the prospect of two of its best export customers trudging through decades of slow growth is not as problematic as it might have been just five years ago.
Although exports to the United States have soared in recent years, for most countries in the region it represents a shrinking share of the economy.
In China, for example, the exposure through U.S. exports has roughly halved since 2006 even though the dollar value of shipments has risen by 27 percent. For a graphic showing Asia's trade exposure to the United States, see
link.reuters.com/xem82sAs for Europe, the bulk of Asia's trade exposure flows to Germany, where growth has held up well.
The best hope for Asia's sustained growth lies within Asia itself. Household income is rising in emerging markets, creating a burgeoning middle class that can consume at least some of the goods the United States or Europe no longer want.
China's latest five-year economic plan included provisions to raise the minimum wage by some 84 percent by 2015.
Per capita average income is still far below Western norms but adjusted for purchasing power, private consumption demand in the "BRIC" economies of
Brazil, Russia, India and China is already 93 percent of the U.S. market, said Deutsche Bank global strategist Sanjeev Sanyal.
"Emerging markets as a whole and Asia in particular can now generate consumer demand on a scale that can compensate for stagnation, albeit not a collapse, in advanced countries," Sanyal said.
China has already replaced the United States as the world's largest automobiles market, Sanyal noted. China and India combined boast a movie industry that rivals Hollywood by some measures. In sports, the Indian Premier League for cricket is the second-highest paying sports league in the world, behind only the U.S. National Basketball Association, Sanyal said.
Emerging Asia has only begun to tap its potential. China's consumption accounts for just a third of its gross domestic product, less than half the level in the United States.
China showed off its potential in 2008, when it quickly ramped up a large stimulus program to counter the global recession, said Pieter Bottelier, a professor of China studies at Johns Hopkins' School of Advanced International Studies in Washington. Not only did its economy come roaring back, it was credited with helping to restore global growth.
"I was one of those who predicted prolonged unemployment" in 2008, Bottelier said. "I was dead wrong."
But China's current strength may be its longer-term weakness. The wage growth that lifts its consumption potential makes it less competitive as the world's low-cost factory. Even its population advantage is fading as the one-child policy adopted 30 years ago means it may begin facing labour shortages within five years.
The big emerging markets have so many domestic challenges that they are not yet prepared to take the lead on politics or policy. When the IMF sought a new leader this year, emerging economies could not agree on a candidate from among their own.
China's reaction to the U.S. debt crisis showed it does not relish the idea of a fallen superpower. State-run news agency Xinhua chided the United States for dallying with default and reminded its big trading partner that others would be hurt by inaction.
"Developing economies would suffer a traumatic blow, and the world economy would plunge into yet another recession on the heels of the one that struck in 2008, and (which) also originated in the United States -- only the mess could be much nastier this time," Xinhua said.
In Western societies, the cultural icon of Barbie as a symbol of female beauty seems to have some biological grounding 
