The economic and real estate crisis has already become global. Different governments and societies, in accordance with their economic and political culture, are conceiving various strategies to fight the downturn. These strategies are large expenditures, investment liberalization, protectionism, and export-oriented policy.
The large and developed western countries have adopted the strategy of pouring enormous amounts of money into new infrastructure projects. This strategy has several advantages and drawbacks. On the positive side, the construction companies will be kept busy for the entire crisis. The infrastructure projects will increase or prevent a decrease in the real estate values, and therefore will prevent millions of falling into the debt because of falling home values. On the negative side, this additional governmental debt will have to be paid at some point, if not from this then from the next generation. The construction companies will become lazy and irresponsible to the market incentives.
Some developing countries, think China or Vietnam, are opening even more their markets for foreign investments. This strategy, alongside with its obvious advantages of pushing up the demand, is also plagued with drawbacks. Making the governments dependent on the amount of foreign investments is the closest thing of making the government dependent on foreign interests. From the western point of view, this may not look as bad, but in a long run a government that pays more attention to the foreigners than to the locals may become easy target of populist politicians.
Another group of not so market-friendly countries, think Russia and Belarus, are still trying to get out of the crisis without foreign aid and without large infrastructure projects. Their strategy is to try to limit the imports to their minimum, and thus stimulate the internal production pending the new increase in the oil incomes. As far as the oil is concerned, the future trends aren’t as predictable as they were a year ago. All the predictions then, of $200 and more for a barrel, are now in the dustbin. Unless the major industrial countries overcome the current crisis, no reason for such market levels would be warranted. Russia, therefore, is applying the same medication, as did the United States in 1929. The results of this medication may also be similar.
Last but not least, some small and marginal countries, think Bulgaria and Romania, are doing almost nothing and are just hoping for the best. They have no enough resources to pour into large infrastructure projects; they have already opened their markets to the limits for foreign investments; and they have no significant natural resources to speak of. Their strategy, therefore, probably would be to reduce the consumption in order to gain relative export advantages. The obvious drawback of this strategy will be the growing social discontent.