Winners & Losers

Throughout the term, there has been a consistent theme in our discussions: with a macroeconomic change, there will be winners and there will be losers. Initially we talked about this concept on a broader scope and reviewed Wolf and Stiglitz's perception of the win/loss relationship as it relates to globalization. Wolf acknowledges that some developing countries have not exactly benefitted from globalization, but reminds readers to reflect on the worse conditions in the past. Globalization, however, is not the only political/ economic trend producing winners and losers. In fact, I've applied this concept to a majority of current events/ news articles, and expanded upon the idea by constantly asking "what if" or questioning "the other side".

The plummeting price of oil is a current and perfect example of winners and losers resulting from an economic change. Obviously, oil importers see this as a positive opportunity, while exporters mourn over lost profit. Importers=winners, exporters=losers. The question: which effect is stronger? Will this result in a global net gain or loss? I came across an article in the Wall Street Journal that outlined the win/ loss relationship in the oil price drop, and even offered a hypothesis to my question.
While most oil price drops have been associated with economic downturns and recession, economists are saying that this time is different. According to IMF MD Christine Lagarde, "There will be winners and losers, but on a net-to-net basis, it's good news for the global economy." Researchers estimate that the price decline could add almost 1 percentage point to global growth over the next 2 quarters. The picture below quantifies the wins and losses...

I'm still not fully convinced: if oil price declines have been associated with economic downturns in the past, then why is this time so different? The article says, "part of the boost comes from lower transportation and manufacturing costs, particularly for energy-intensive industries such as airlines and steelmaking. The primary benefit is more cash in consumers' wallets as they spend less of their paychecks fueling their vehicles, spurring more consumer spending." This makes sense, but I don't see how this is different than previous major oil price declines; wouldn't a boost in consumer spending happen every time? The Wall Street Journal explained that the difference partially results from the supply/ demand ratio for oil, with a higher percentage attributed to supply causes. However, JP Morgan predicts a much narrower margin, or lower ratio, between the two causes, suggesting uncertainty in the accuracy of this ratio. Also, as Rosenberg explained, one reason the US is having trouble reaching the inflation target is because of the falling commodity prices. The world is experiencing slow growth, with continued deflationary pressures in Europe, Japan in a recession and loosened monetary policy in China in response to its "worrisome" slow growth in the 3rd quarter. While I want to be optimistic about the global impact of oil price declines, I can't help but to be curious. I wonder if maybe this growth statistic is overstated, shielding us from the overall weak global economic conditions and issues, especially in key regions/nations, and from historical trends in oil price drops/economic downturns. We've heard on numerous accounts that deflation should be treated as vigorously as inflation, and these oil prices reflect global deflationary trends. So, how optimistic should we be? Why are we ignoring the past?  In the words of Richard Clarida, "The US is the best student in a very mediocre class."