Re The UN General Assembly Speaker Schedule is Here! I note that whoever will be speaking for Canada this year…
Global Economy & Globalization 2016
Written by Diana Thebaud Nicholson // December 6, 2016 // Global economy, Government & Governance // Comments Off on Global Economy & Globalization 2016
Global Economy 2015
SciDev.Net What is a knowledge economy?
George Monbiot: No country with a McDonald’s can remain a democracy
The best way to combat the likes of Trump, Le Pen and Farage and the politics they represent is to rescue power from the grip of transnational corporations
(The Guardian) A wave of revulsion rolls around the world. Approval ratings for incumbent leaders are everywhere collapsing. Symbols, slogans and sensation trump facts and nuanced argument. One in six Americans now believe that military rule would be a good idea. From all this I draw the following, peculiar conclusion: no country with a McDonald’s can remain a democracy.
In using McDonald’s as shorthand for the forces tearing democracy apart, I am … writing figuratively. I do not mean that the presence of the burger chain itself is the cause of the decline of open, democratic societies. Nor do I mean that countries hosting McDonald’s will necessarily mutate into dictatorships.
What I mean is that, under the onslaught of the placeless, transnational capital that McDonald’s exemplifies, democracy as a living system withers and dies. The old forms and forums still exist – parliaments and congresses remain standing – but the power they once contained seeps away, re-emerging where we can no longer reach it.
6 November
Complexity Economics Shows Us Why Traditional Economics Always Fails
Why markets are like gardens, not machines
By Eric Liu and Nick Hanauer
We aim to show that a modern understanding of economies as complex, adaptive, interconnected systems forces us to conclude that radical inequality and radical economic dislocation are causally linked: one brings and amplifies the other.
If we want a high-growth society with broadly shared prosperity, and if we want to avoid dislocations like the one we have just gone through, we need to change our theory of action foundationally. We need to stop thinking about the economy as a perfect, self-correcting machine and start thinking of it as a garden. …
it is now reasonable to assert that economic systems are not merely similar to ecosystems; they are ecosystems, driven by the same types of evolutionary forces as ecosystems. Eric Beinhocker’s The Origin of Wealth is the most lucid survey available of this new complexity economics.
The story Beinhocker tells is simple, and not unlike the story Darwin tells. In an economy, as in any ecosystem, innovation is the result of evolutionary and competitive pressures. Within any given competitive environment—or what’s called a “fitness landscape”—individuals and groups cooperate to compete, to find solutions to problems and strategies for cooperation spread and multiply. Throughout, minor initial advantages get amplified and locked in— as do disadvantages. Whether you are predator or prey, spore or seed, the opportunity to thrive compounds and then concentrates. It bunches. It never stays evenly spread.
10 October
Why two economists’ work in contract theory won them a Nobel Prize
(PBS Newshour) Economists Oliver Hart and Bengt Holmström developed a framework that allows us to understand and design better contracts. On Monday, the two U.S.-based economists were awarded a Nobel Prize in economic sciences for their contributions in contract theory.
8 October
This Was the Week the World Got Really Anxious About Globalization’s Future
Markets might never be the same again
(Bloomberg) Weak global trade, fears that the U.K. is marching towards a hard Brexit, and polls indicating that the U.S. election remains a tighter call than markets are pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization is poised to roil global financial markets—with profound consequences for the real economy and investment strategies.
From the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now.
7 October
World faces ‘reversal’ of global trade as populism wrecks deals
Gloom was descending over the annual meetings of the IMF as senior figures expressed pessimism about the chances of a new global trade deal being struck that stimulate an anaemic world economy
4 October
World Economic Outlook October 2016
(IMF) Although the market reaction to the Brexit shock was reassuringly orderly, the ultimate impact remains very unclear, as the fate of institutional and trade arrangements between the United Kingdom and the European Union is uncertain. Financial market sentiment toward emerging market economies has improved with expectations of lower interest rates in advanced economies, reduced concern about China’s near-term prospects following policy support to growth, and some firming of commodity prices. But prospects differ sharply across countries and regions, with emerging Asia in general and India in particular showing robust growth and sub-Saharan Africa experiencing a sharp lowdown. In advanced economies, a subdued outlook subject to sizable uncertainty and downside risks may fuel further political discontent, with anti-integration policy platforms gaining more traction.
IMF worried about growth at meeting in Washington
(NPR) The discussions are expected to center around how to accelerate global growth. Brett House, chief economist at Alignvest Capital, said there’s still a rut left over from the 2008 financial crisis.
“Christine Legarde, the managing director of the IMF, has been sounding a three-pronged message that we need to complement the really accommodative monetary policy that you’re seeing from central banks with more fiscal stimulus and structural changes,” he said.
Basically, the message is that countries need to spend more.
IMF study warns free trade seen as benefiting ‘only a fortunate few’
Policymakers must address needs of trade-affected workers, International Monetary Fund’s new World Economic Outlook says
(The Guardian) The International Monetary Fund has warned that free trade is increasingly seen as benefiting only the well-off and that help is needed for those whose job prospects have been damaged by globalisation in order to put fresh momentum behind removing barriers to international commerce.
In a chapter from the half-yearly World Economic Outlook study released ahead of its annual meeting next week, the IMF said the weakness of the global economy, rather than a wave of protectionism, had been largely responsible for the sharp slowdown in trade growth over the past four years.
But it said the uptick in protectionist measures since the financial crisis had “not been innocuous” and stressed that anti-trade sentiment could harden.
30 September
Deutsche Bank Troubles Raise Fear of Global Shock
(NYT) Germany’s largest bank appears in danger, sending stock markets worldwide on a wild ride. Yet the biggest source of worry is less about its finances than a vast tangle of unknowns — not least, whether Europe can muster the will to mount a rescue in the event of an emergency.
In short, fears that Europe lacks the cohesion to avoid a financial crisis may be enhancing the threat of one.
The immediate source of alarm is the health of Deutsche Bank, whose vast and sprawling operations are entangled with the fates of investment houses from Tokyo to London to New York.
Regulations that took effect this year in the European Union standardize how member countries are supposed to handle the potential implosion of a large financial institution. Banks, too, have put aside more money to deal with potential losses.
Deutsche could pose the first test of the new arrangement. Recent challenges have underscored concerns about the limits of solidarity in Europe.
From the chaos of the sovereign debt crisis to the acrimony over an influx of refugees, European authorities have proved something less than an exemplar of coordinated government action.
22 September
From Our Chief Economist: Elephant in the room
(Economist newsletter) Income inequality has come firmly back onto the agenda of economists, policymakers and, indeed, the public over the past few years. The World Bank’s “Elephant Chart”—first made in 2012 but bursting into prominence on social media more recently—has captured the zeitgeist. This chart shows that income growth has apparently been very high in emerging markets and for the super-rich, but close to zero for the global poorest and the middle classes in richer countries. There is some truth to some of the obvious explanations behind this, such as the rise of China (and the fall of the Soviet bloc) and that globalisation increases the scale at which the super-rich can exploit the economic rents that they have access to. However, the simplicity of the Elephant Chart hides a lot of important detail.
The most important detail that could be missed is that the Elephant Chart is one of income distribution: it does not capture the fact that someone in the 50th percentile today earns a lot more in real terms than they did a decade or two ago. This ongoing trend is especially relevant for Asia. The region accounted for 25.6% of global consumer spending in 2015, but more than three-quarters of its consumers are still to reach the level of affluence that would make them part of the global mainstream consumer class. We expect that China, India, Indonesia and Pakistan will be leading the movement of consumer income in Asia in the coming decades.
13 September
World Bank’s US dependency has to end
It’s time to choose the institution’s president based on merit rather than geopolitical considerations.
(Politico) The World Bank is wary of losing support in the U.S. Congress if it releases its grip on the presidency, as Todd Moss, my colleague at the Center for Global Development, has cogently argued. But in practice, the U.S. will retain veto power thanks to provisions baked into the board rules — a bulwark against losing control of the institution.
Selecting the World Bank’s president on merit alone would revitalize development policy and strengthen the Bank as an institution. It would tap a pool of highly qualified development experts and managers around the world, people who are full of ideas on how to take the Bank in new and productive directions.
The World Bank’s Recipe for Irrelevance
By Devesh Kapur
(Project Syndicate) World Bank President Jim Yong Kim’s nomination for a second term is inexorably moving forward with a lack of transparency that has become all too typical. Many observers are once again gnashing their teeth at the United States’ continued monopoly over the top post, despite the poor performance of past US nominees.
Many people can stomach questionable means if they consistently generate positive ends, but this has not been the case with Kim, who is among the worst presidents in World Bank history. His administration has been marked by authoritarianism and capriciousness, and he has forced out senior managers at unprecedented rates, sometimes requiring the Bank to reach quiet settlements with those affected. In four years, the president’s office has had five chiefs-of-staff, and several of the Bank’s senior women have left, hinting at a wayward leadership culture.
Last month, in a letter to the Bank’s board warning of a “crisis of leadership” under Kim, the World Bank Staff Association wrote, “We preach principles of good governance, transparency, diversity, international competition, and merit-based selection. Unfortunately, none of these principles have applied to the appointment of past World Bank Group Presidents.”
12 September
David Jones and David Kilgour on the G20
David Jones addresses the The G20’s Display of Irrelevance
There were vague commitments such as to deliver more inclusive economic growth through coordinated macroeconomic policy, open trade, and innovation. In short, to “make globalization work for the benefit of all,” as summarized by one observer.
But its failure to address the proximate issues of the day was more telling: climate change/energy; a coordinated response to the Syria crisis; refugees and migration; terrorism; territorial and navigation challenges in the South China Sea. All went unremarked
David Kilgour: The G20 and World Lessons From Hangzhou
Citing Dan DiMicco’s book, “American Made,” David Kilgour also calls for “for American political and business leaders to focus on the real crisis they face: the 30 million jobs the United States needs to create by 2025 in part to close the trade and budget deficits. The other G20 members, including Canada, and many other countries should do likewise.”
6 September
Despite calls for action, G20 yields little more than talk
Was this outcome the result of political weakness within the G20 as U.S. President Barack Obama enters his last four months, European leaders face elections and are again absorbed by intra-European affairs, and Brazil, South Africa and Australia face significant leadership issues? Was it that bilateral and geo-political issues dominated broader economic concerns? Or was it that leaders don’t fully grasp the risks facing the liberal global economic system?
By Thomas A. Bernes
(Open Canada) The Hangzhou summit presented G20 leaders with the chance to reassure citizens that they are on top of the world’s pressing challenges, but this was an opportunity they failed to grasp.
… what are leaders going to do differently the day after the Summit? They have been told that, after five years, their G20 announced strategy is not delivering the necessary economic growth. If nothing is to be changed, then what are leaders doing?
Now to be sure, modest progress was registered on a number of issues during the year-long G20 preparatory process. These are mainly in the form of future work programs. The Summit can be a decision-forcing event that moves work forward but there are other means by which to record these decisions. They are undecipherable to the average person.
… what was needed from leaders, and what the world was waiting to hear, was a clear articulation that they understood the economic challenges confronting the world – even if they didn’t yet have all the answers. And that they had directed work to be undertaken to strengthen the toolkit of policy responses available to address insipid growth, lack of employment opportunities and growing inequality.
6 September
A Non-Contest at the World Bank
(NYT Editorial) The deadline for submitting nominations for the job of president of the World Bank is Sept. 14, about a week away, and so far the only candidate, and the likely winner, is the person who is already running the place: Jim Yong Kim.
This is unfortunate on two counts. As has been true from the bank’s creation in 1944, an American, without having to contend with international competitors, would again occupy the top position for a five-year term, starting next July. In addition, the opportunity to use the selection process as an open forum to debate the institution’s mission and how it ought to evolve would be lost.
Running and modernizing an institution as big as the World Bank is a tough job. Mr. Kim, a public health expert and former president of Dartmouth College, has responded to these challenges by restructuring the bank along development areas like governance, health and education, rather than primarily along geographic lines as it had been for years. He also has set a goal of ending extreme poverty by 2030 and has emphasized public health and climate change projects.
Mr. Kim’s restructuring plan made sense on paper because it had the potential to foster deeper subject-matter expertise among staff members, but it became embroiled in bureaucratic fights and the abrupt departures of senior executives, including three top women. And several development economists say that this approach has not made the bank more effective at helping countries increase economic growth and create jobs.
Then there is the matter of the American lock on the presidency.
Academics, public interest groups and others have criticized this arrangement for failing to take account of the importance of Asian, Latin American and African countries in the global economy. In response, the boards of both institutions said in April 2011 that they would start picking presidents in a process based on merit. But in practice not much has changed.
18 August
Javier Solana: Taming the Populists
(Project Syndicate) In many Western democracies, right-wing populists, energized by self-proclaimed victories over “establishment elites,” are doubling down on the claim that globalization lies at the root of many citizens’ problems. For those whose living standards have stagnated or declined in recent decades, even as political leaders have touted free trade and capital flows as the recipe for increased prosperity, the argument holds considerable appeal. So it must be addressed head on.
To be sure, globalization has reduced inequality among countries substantially. But within countries, inequality has risen sharply. The largest gains from globalization have not only accrued to the middle and upper classes in Asia, but also to the top 1% of earners worldwide. In the United States, for example, the Gini coefficient (the most common measure of inequality) increased by five points from 1990 to 2013. Inequality has also risen, albeit more slowly, in China, India, and most European countries.
Despite rising inequality, the benefits of globalization have been more tangible in developing countries. Indeed, economic openness has helped to lift millions of developing-country citizens out of poverty, which is why the economist Branko Milanovic argues that globalization has driven “the greatest reshuffle of individual incomes since the Industrial Revolution.” …
National authorities must engage with one another to improve global governance. In recent years, the inadequacies of existing global governance structures, particularly with regard to issues like taxation and employment, have become starkly apparent. The agenda for next month’s G20 summit in China includes discussion of concrete measures to reduce inequality. But talk is not enough; leaders must ensure that discussion is translated into real action.
How the World Bank’s biggest critic became its president
After years of working with the poor, Jim Yong Kim thought he could lead the World Bank to fight global suffering. Then the organisation turned against him.
by Andrew Rice
(The Guardian) “The wrong changes have been done badly,” says Lant Pritchett, a former World Bank economist.
Pritchett argues that, beyond issues of personality and style, Kim’s presidency has exposed a deep ideological rift between national development, which emphasises institution-building and growth, and what Pritchett terms “humane” development, or alleviating immediate suffering. Kim, however, sees no sharp distinction: he contends that humane development is national development – and if the bank persists in believing otherwise, it could be doomed to obsolescence.
6 August
Globalization RIP?
Why is the goal of an open and increasingly integrated global economy coming under such fierce attack – and why now? If the ideal world of economists seems more distant than ever, blame the management of that process.
For many Project Syndicate commentators, globalization seems trapped in a pincer movement: assailed from one direction by those who claim that it has created a reserve army of economic losers lorded over by a small cadre of winners, the infamous 1%; and besieged from the opposite direction by unscrupulous politicians who, feeding on economic resentment, attack it in the once discredited language of nationalism, of blood and soil, of herrenvolk.
Beyond the rancor and taunts heard at last month’s Republican National Convention, something even more ominous could be heard: the last rites for globalization. To adoring hoots, Donald Trump, the party’s presidential nominee, denounced US participation in international trade deals, and the foreign policy he sketched would pull the plug on the entire US-led liberal international order within which globalization has flourished. Should Trump enter the White House, globalization would not undergo a retreat; it would suffer a rout.
Half a world away, G20 finance ministers met almost simultaneously in Chengdu, China, where they made revitalizing globalization a priority for 2016/2017. The fact that all of the major advanced and emerging economies fear for the future of global openness suggests the degree to which surging support for populist challengers has imperiled existing rules and structures.
1 August
From Brexit to CANZUK: A call from Britain to team up with Canada, Australia and New Zealand
A CANZUK alliance would allow its peoples to assert their very similar culture and values in the world as a major global player instead of secondary regional players ultimately subservient to others. It would allow enormous opportunities for mutual reinforcement and protection, trade growth, the flow of people and weight in global economic, regulatory and geopolitical decision-making. When CANZUK speaks, all would listen. Shall we try?
By Dr. Andrew Lilico, executive director and principal of Europe Economics, a fellow of the Institute of Economic Affairs, and chairman of the IEA/Sunday Times Monetary Policy Committee.
(Financial Post) Canada, Australia and New Zealand are closer to Britain, constitutionally and culturally, than anywhere in Europe. And their income levels are fairly similar: in 2014, the U.K. had a GDP per capita of about US$46,000, versus US$44,000 for New Zealand, US$50,000 for Canada and Australia a little higher at US$62,000.
… some close geopolitical alliance between these “CANZUK” countries could obviously work in terms of culture, constitutions, income and mutual regard. But would it be worth it in other terms, such as trade or defence? Well, in brute terms these four countries would obviously constitute a big global player. Between them they would control a surface area of more than 18 million square kilometres, the largest in the world, exceeding even Russia’s 17 million. Their combined population, at 128 million, would be the world’s 10th largest, just ahead of Japan. Their combined military spending of around US$110 billion would be the world’s third largest, behind the U.S. and China but well ahead of Russia.
The first step might be a new trade deal, perhaps encompassing all four countries together. Then we could add free movement of people — i.e., the automatic right to move to work. A special defence partnership might follow, perhaps including the U.K. providing a nuclear shield to Australia (more credible today than U.S. guarantees) and naval support to Canada to enforce its claims on the increasingly important Northwest Passage. We could develop mutual recognition of our economic, environmental and health and safety regulations, along with our labour standards. Perhaps we might agree to committees or other institutions to develop future regulation together.
24 July
G-20 Ministers Renew Vow to Promote Growth After Brexit Shock
Ministers said they would use all available policy tools to encourage world-wide economic expansion
(WSJ) Global finance ministers redoubled their commitments to use all available policy tools to boost economic growth, wary that myriad headwinds risk pushing the world economy into a low-growth rut.
Among the most prominent of problems the Group of 20 largest economies cited is the U.K.’s surprise decision late last month to leave the European Union.
“In the future, we hope to see the U.K. as a close partner of the EU,” the G-20 finance ministers and central bankers said in their official communiqué after two days of talks.
The U.K. and EU delegations both agreed on the need to reduce global uncertainty surrounding Brexit, but appeared to differ on timing.
22 July
The G20 tackles Brexit. Starting Saturday, finance ministers and central bankers will convene for two days in Chengdu, China, to discuss Britain’s plans to exit the EU, global exchange rate policy, and China’s weakening currency.
7 July
Brexit or no, former central banker says global financial system needs fixes
(PBS Newshour) The pound and European markets took big hits when the United Kingdom voted to leave the EU. Economics correspondent Paul Solman talks to Mervyn King, the former head of the Bank of England and the author of “The End of Alchemy,” who offers a longer view — and a less alarmed one — about what Brexit means for global banking and financial stability.
“Economies have a habit of being pretty resilient in the longer run. When people and countries want to trade with each other, they find ways to do so. And I’m sure that will happen now.”
29 June
Carmen Reinhart: Brexit’s Blow To Globalization
(Project Syndicate) With its systemic negative effects on finance, trade, and labor mobility, Brexit marks a major setback for globalization. The fallout from Brexit probably won’t spread as quickly as in outright financial crises, such as the 2008 financial meltdown or the 1997 and 1998 Asian episodes. But the aftereffects also won’t subside anytime soon.
The UK’s trade, finance, and immigration arrangements are far too complex and entrenched to be renegotiated quickly. In the meantime, many cross-border transactions in goods, services, and financial assets are likely to be placed on hold. Even if there are no other “exit” moments elsewhere in Europe, a protracted period of uncertainty in global capital markets seems likely.
27 June
The world’s losers are revolting, and Brexit is only the beginning
Globalization didn’t create a lot of losers, but the ones it did were concentrated in the countries that were the driving force behind it.
(WaPost) If rich-world workers were losing ground even when times were good, what would happen if we got hit by one of the financial crises the new global economy seemed to spawn every few years? Well, things would get ugly. Although, in truth, they had already started to. Right-wing populists like Pat Buchanan in the United States, Jean-Marie Le Pen in France and Jörg Haider in Austria had scored surprising near-victories, if not actual ones, in the late 1990s and early 2000s by focusing the working class’s incipient ire on a “foreign” enemy besides outsourcing: immigrants.
It didn’t take long, then, for the West’s triumphal globalism to fuel a nationalist backlash. In the United States it’s Trump, in France it’s the National Front, in Germany it’s the Alternative for Germany and, yes, in Britain it’s the Brexiters.
17 June
Anatole Kaletsky: Brexit’s Impact on the World Economy
(Project Syndicate) The febrile behavior of financial markets ahead of the United Kingdom’s referendum on June 23 on whether to remain in the European Union shows that the outcome will influence economic and political conditions around the world far more profoundly than Britain’s roughly 2.4% share of global GDP might suggest. There are three reasons for this outsize impact.
First, the “Brexit” referendum is part of a global phenomenon: populist revolts against established political parties, predominantly by older, poorer, or less-educated voters angry enough to tear down existing institutions and defy “establishment” politicians and economic experts. Indeed, the demographic profile of potential Brexit voters is strikingly similar to that of American supporters of Donald Trump and French adherents of the National Front.
… the second reason why the Brexit result will echo around the world. The referendum will be the first big test of whether it is the experts and markets, or the opinion polls, that have been closer to the truth about the strength of the populist upsurge. For now, political pundits and financial markets on both sides of the Atlantic assume, perhaps complacently, that what angry voters tell pollsters does not reflect how they will actually vote…. the third, and most worrying, implication of the British vote. If Brexit wins in a country as stable and politically phlegmatic as Britain, financial markets and businesses around the world will be shaken out of their complacency about populist insurgencies in the rest of Europe and the US. These heightened market concerns will, in turn, change economic reality. As in 2008, financial markets will amplify economic anxiety, breeding more anti-establishment anger and fueling still-higher expectations of political revolt.
Austerity policies do more harm than good, IMF study concludes
Economists give strong critique of neoliberal doctrine ushered in by Ronald Reagan and Margaret Thatcher in the 1980s
In an article seized on by the shadow chancellor, John McDonnell, the IMF economists said rising inequality was bad for growth and that governments should use controls to cope with destabilising capital flows.
The IMF team praised some aspects of the liberalising agenda that was ushered in by Ronald Reagan and Margaret Thatcher in the 1980s, such as the expansion of trade and the increase in foreign direct investment. But it said other aspects of the programme had not delivered the expected improvements in economic performance. Looking specifically at removing barriers to flows of capital and plans to strengthen the public finances, the three IMF economists came up with conclusions that contradicted neoliberal theory.
“The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries,” they said. “The costs in terms of increased inequality are prominent. Such costs epitomise the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
“Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.” (27 May 2016)
18 May
Fighting the Next Global Financial Crisis
By Robert J. Shiller
(Project Syndicate) Regulators must counter the risks implied by structures that are intrinsically destabilizing, as the money market funds were. But the most urgent regulations will always be time- and context-specific, because narratives change. And how these narratives resonate with the public may once again reveal chinks in our financial armor.
17 May
The World Bank is eliminating the term “developing country” from its data vocabulary
In the 2016 edition of its World Development Indicators, the World Bank has made a big choice: It’s no longer distinguishing between “developed” countries and “developing” ones in the presentation of its data.
The change marks an evolution in thinking about the geographic distribution of poverty and prosperity. But it sounds less radical when you consider that nobody has ever agreed on a definition for these terms in the first place.
The International Monetary Fund says its own distinction between advanced and emerging market economies “is not based on strict criteria, economic or otherwise.” The United Nations doesn’t have an official definition of a developing country, despite slapping the label on 159 nations. And the World Bank itself had previously simply lumped countries in the bottom two-thirds of gross national income (GNI) into the category, but even that comparatively strict cut-off wasn’t very useful.
9 May
Economists Say No Justification for Tax Havens in Oxfam Letter
(Bloomberg) Nobel laureate Angus Deaton and bestselling author Thomas Piketty joined more than 300 fellow economists in arguing there is “no economic justification” for tax havens as policy makers prepare to meet in London for anti-corruption talks.
In a letter organized by the charity Oxfam, the economists said “territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there are distorting the working of the global economy.”
Such offshore holdings undermine the ability of governments to collect taxes, and politicians should respond by requiring companies to report taxable activities in every country they have operations in.
22 April
The Brazil Syndrome
Renowned economist Anders Åslund engages the views of Dani Rodrik, Nouriel Roubini, Joseph Stiglitz, and others on the growing turmoil in emerging markets.
(Project Syndicate) Slumping growth, if not outright contraction, in most of the world’s major emerging economies has been rightly attributed to China’s slowdown and plummeting commodity prices. But weak external conditions have also exposed profound governance failures – and not just in Brazil.
In a sense, all of the major emerging markets – with the revealing exception of India, where economic growth is not dependent on commodity exports – are reliving the lesson of the 2008 global financial crisis. As Warren Buffett famously summed it up: “Only when the tide goes out do you discover who’s been swimming naked.” For much of the last generation, buoyant commodity prices served as a fig leaf for emerging markets’ profound governance failures. Now the fig leaf has been stripped away, and their leaders must face the beach.
12 April
IMF Sees the World Economy Heading The Wrong Way
In its latest growth projections released Tuesday, the IMF estimated that the global economy would expand by 3.2 percent this year. The projection is 0.2 percentage points lower than the January forecast, 0.4 percentage points lower than the October 2015 forecast, and and 0.6 percent points down from its July 2015 estimate. It sees expansion in 2017 of 3.5 percent, down from a previous prediction of 3.6 percent.
The outlook for all major advanced economies, including the the U.S., Canada, the eurozone, Britain, and Japan are all trending down. The United States is expected to grow by 2.4 percent this year, down from a 2.6 percent projection in January. The IMF blamed the downtick on a strong dollar, which makes American goods more expensive overseas.
IMF Warns Brexit Could Deal Blow To Global Economy
“A Brexit could do severe regional and global damage by disrupting established trading relationships.”
The IMF listed Britain’s June 23 referendum on EU membership as a key risk, along with instability in China and other emerging markets, volatile share prices and a loss of long-term growth potential in advanced economies.
“The planned June referendum … has already created uncertainty for investors,” the Fund’s chief economist, Maurice Obstfeld, said as the IMF published a half-yearly assessment of the world economy on Tuesday.
“A Brexit could do severe regional and global damage by disrupting established trading relationships.”
9 April
Panama Papers: Act now. Don’t wait for another crisis
Thomas Piketty
Financial secrecy represents a huge threat to the fragile global system, and we won’t solve the problem by politely asking tax havens to stop behaving badly
(The Guardian) It is the political fragmentation of Europe and the lack of a strong public authority which puts us at the mercy of private interests. The good news is that there is a way out of the current political impasse. If four countries, France, Germany, Italy and Spain, who together account for over 75% of the GDP and the population in the eurozone put forward a new treaty based on democracy and fiscal justice, with as a strong measure the adoption of a common tax system for large corporations, then the other countries would be forced to follow them. If they did not do so they would not be in compliance with the improvement in transparency which public opinions have been demanding for years and would be open to sanctions. …
why have governments done so little since 2008 to combat financial opacity? The simple answer is that they were under the illusion that there was no need to act. Their central banks had printed enough currency to avoid the complete collapse of the financial system, thus avoiding the mistakes which post-1929 led the world to the brink of complete collapse. The outcome is that we have indeed avoided a widespread depression but in so doing we have refrained from the necessary structural, regulatory and fiscal reforms.
6 April
The Rise of the Autocrats
The autocrats have risen again in response to the very specific anxieties and displacements born of an increasingly globalized and digitalized world economy.
(World Post) Across the world, nations are seeking out leaders who promise strength. What explains the sudden resurgence of the autocrats, 25 years after the end of the Cold War appeared to have heralded the final triumph of liberal democracy?
The answer unquestionably lies in the specific economic and political transformations that the world has undergone since.
… the currents of the global economy have instead served to reduce the power of nation-states. The ability of capital to flow across borders has meant states struggle to maintain sovereign monetary and fiscal policies; the ability of individuals to cross the same borders has meant the notion of national community and shared values faces constant challenges; and the internationalization of ideas, whether of religious fanaticism or of “godless” popular culture, threatens shared national beliefs. The turn to national saviors in country after country reflects, perhaps, a desire to reinvent national power and salvage national pride in a world where nations seemed to be becoming irrelevant.
26 February
OECD calls for reforms at G20 meeting in Shanghai
The OECD has called on governments to tackle reforms at a G20 meeting of finance ministers in Shanghai. Germany’s Wolfgang Schäuble weighed in, saying continued regulation was needed to make markets less volatile.
In its “Going for Growth” interim report, the OECD proposed several reforms to policymakers at the start of a G20 finance ministers and central bank governors meeting in Shanghai. It added that many of the recommended proposals could kickstart growth in their countries.
Promoting entrepreneurship, labor mobility and higher productivity were said to be among the OECD’s proposals. Attracting private investment for public infrastructure and changing unemployment benefits were also on OECD’s list.
The OECD added that promoting entrepreneurship and making good use of knowledge and technology were a “reform priority,” acknowledging that many of the reforms could improve growth quickly, save governments money and improve the global economy.
Failure to promote growth
The group then criticized governments for failing to reverse a slowdown in reforms in 2013 and 2014, adding that many countries had not done enough to promote growth. It added that Japan, China, India and Mexico had fared well in tackling reforms, but said that Northern European countries weren’t as proactive as Southern European countries.
Vital to food output, bees and other pollinators at risk
“Pollinators are critical to the global economy and human health,” Zakri Abdul Hamid, chair of the 124-nation report, told Reuters of a finding that between $235 billion and $577 billion of world food output at market prices depended on pollinators.
(Reuters) Bees and other pollinators face increasing risks to their survival, threatening foods such as apples, blueberries and coffee worth hundreds of billions of dollars a year, the first global assessment of pollinators showed on Friday.
Pesticides, loss of habitats to farms and cities, disease and climate change were among threats to about 20,000 species of bees as well as creatures such as birds, butterflies, beetles and bats that fertilize flowers by spreading pollen, it said.
The food sector provides jobs for millions of people, such as coffee pickers in Brazil, cocoa farmers in Ghana, almond growers in California or apple producers in China.
Ever more species of pollinators are threatened, according to the study, the first by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) since it was founded in 2012. It was approved in talks in Kuala Lumpur.
23 February
Martin Wolf: No simple solutions for the global economic imbalances of today exist, only palliatives
(Financial Times) The main point is this. The economic forces that have brought the world economy to zero real interest rates and, increasingly, negative central bank rates are, if anything, now strengthening. This is what the world economy is showing. This is what monetary policy is indicating. Increasingly, this is what asset prices are demonstrating.
Policymakers must prepare for a new “new normal” in which policy becomes more uncomfortable, more unconventional, or both. Can the world escape from the chronic demand weakness? Absolutely, yes. Will it? That demands greater boldness. When one has exhausted the just about possible, what remains, however improbable, must be the answer.
18 February
OECD calls for less austerity and more public investment
(The Guardian) One-time deficit reduction supporter slashes growth forecasts and urges richer countries to exploit cheap borrowing to spend more on infrastructure
The OECD has called for its rich-country members to ease up on austerity and collectively agree to spend more on infrastructure projects to boost flagging growth.
The Paris-based Organisation for Economic Cooperation and Development expressed concern about the state of the global economy as it cut growth forecasts made three months ago and warned that low interest rates and money creation by central banks were no longer enough for a lasting recovery.
28 January
The Shipping News Says the World Economy Is Toast
(Bloomberg) The traditional global shipping measure is called the Baltic Dry Index. Shipping purists (who rival gold bugs in their dedication to minutiae) will tell you it mostly reflects how many vessels are afloat on the world’s oceans; a glut of shipbuilding means more boats available, which drives down the cost of shipping bulk raw materials such as iron ore, steel and coal. But given the fragile state of the global economy, it’s hard to shake the feeling that the index has been trying to tell us something important about global demand in recent years
J. Bradford DeLong: Economics in the Age of Abundance
(Project Syndicate) … the number one priority for economists – indeed, for humankind – is finding ways to spur equitable economic growth.
But job number two– developing economic theories to guide societies in an age of abundance – is no less complicated. Some of the problems that are likely to emerge are already becoming obvious. Today, many people derive their self-esteem from their jobs. As labor becomes a less important part of the economy, and working-age men, in particular, become a smaller proportion of the workforce, problems related to social inclusion are bound to become both more chronic and more acute.
Such a trend could have consequences extending far beyond the personal or the emotional, creating a population that is, to borrow a phrase from the Nobel-laureate economists George Akerlof and Robert Shiller, easily phished for phools. In other words, they will be targeted by those who do not have their wellbeing as their primary goal – scammers like Bernie Madoff, corporate interests like McDonalds or tobacco companies, the guru of the month, or cash-strapped governments running exploitative lotteries.
Problems like these will require a very different type of economics from the one championed by Adam Smith. Instead of working to protect natural liberty where possible, and building institutions to approximate its effects elsewhere, the central challenge will be to help people protect themselves from manipulation.
Too much stuff, with no one to buy it: Is this the future economy?
23 January
(Quartz weekend edition) Markets are tanking and economies are faltering. Good thing, then, that this week the global elite assembled in Davos, under the World Economic Forum’s mantra of “improving the state of the world.”
It’s easy to scoff at the annual spectacle in the Alps as long on rhetoric and short on reality, which isn’t wrong. But while much of what is said at the panels and plenaries is vague, and quickly forgotten, even the tiniest spark of inspiration among a crowd this powerful has the potential to flare into action.
Indeed, at a private lunch for a group of CEOs (and a Quartz reporter), an exec said that business conditions are much more positive than the past few weeks’ brutal stock-market performance suggests. “Also, if we keep telling each other that, it becomes reality,” he added.
So what can the elites do to reboot global growth? At a panel moderated by Quartz during the conference, the tone was hopeful. “You can bring a country out of a mess” by investing in people, Irish prime minister Enda Kenny said, speaking from experience. What’s important is the “quality, not quantity” of growth, added Nobel economist Joseph Stiglitz, reacting to questions about what blunt measures of GDP have to do with inequality, happiness, and protecting the environment. And all agreed that governments and business should harness the huge potential of new technologies while being mindful of the equally huge disruption to jobs and incomes.
Yes, Davos is dense with fuzzy promises, empty platitudes, and naïve utopian fantasies. But it also features a high-intensity dose of dreaming about how to make things better. And who better than Davos man, and occasionally woman, to give it a go?—Jason Karaian
(WorldPost Weekend Roundup) As global elites gathered in Davos this week, the World Economic Forum released a daunting survey that estimates that 5 million jobs will be lost across the world in coming years to robotic automation.
While globalization and rapid technological advance empower some with unprecedented possibilities, they dispossess others, causing growing gaps in power and wealth that lead in turn to fear, resentment and violence. In this one world a race is on between the two consequences of change. As Jo Confino writes from Davos, “rapid advances in technology are pulling the world in opposite directions.”
The fearful and fearsome reaction against growing inequality, social dislocation and loss of identity in the midst of vast wealth creation, unprecedented mobility and ubiquitous connectivity is a mutiny, really, against globalization. It could spell the demise of the worldwide march in one direction we’ve seen in recent decades. Indian novelist Rana Dasgupta links economic exclusion to the resurgence of radicalism: “Many people across the world are falling out of our global economic system, which does not need them. The spread of radical ideologies … is also about this simple fact.”
Marc Benioff, chairman and CEO of the cloud computing company, Salesforce, makes the case for businesses to engage as platforms for positive change. He cites WEF’s Klaus Schwab: “Unless public- and private-sector leaders assure citizens that they are executing credible strategies to improve people’s’ lives, social unrest, mass migration, and violent extremism could intensify, thus creating risks for countries at all stages of development.” Artificial intelligence researcher Dileep George embraces the future wholeheartedly: “Technology has the power to transform society. The most significant human innovations have rewritten our capacity to help and heal … Superintelligent AGI [artificial general intelligence] has the capacity to solve many of the most significant problems facing humanity today, like addressing climate change or curing diseases … more than any other invention that has come before it, AI has the capacity to help humanity thrive.” Futurist Vivek Wadhwa lists the six technologies that will define 2016, including the Internet of Things. Steven Hill takes on the notion of the sharing “Uber economy” as a hope for the future. Instead, he argues, it is a race to the bottom where workers are exploited without benefits or protection while the networking companies profit.
Writing from Singapore, Parag Khanna sees some hope in the resilience of the emerging economies in a world of “many wheels, different speeds.” “From China to Singapore to Dubai,” he argues, “it is clear that upgrading infrastructure and improving capacity — supply leading demand — is a crucial strategy in rapidly urbanizing societies. If everyone plays their cards right, we can finally achieve the synchronized global growth hoped for since the financial crisis.”
18 January
(Quartz) The global business elite arrive in Davos. Fire up the private jets: attendees of the World Economic Forum are heading to Switzerland ahead of the annual confab, which begins on Tuesday. World markets are off to their worst start in more than four decades, but WEF founder Klaus Schwab is optimistic that technology could bring us together.
A world divided: Elites descend on Swiss Alps amid rising inequality
(Reuters) Just 62 people, 53 of them men, own as much wealth as the poorest half of the entire world population and the richest 1 percent own more than the other 99 percent put together, anti-poverty charity Oxfam said on Monday. [Sixty-two people have the same amount of wealth as half the world, says Oxfam]
Significantly, the wealth gap is widening faster than anyone anticipated, with the 1 percent overtaking the rest one year earlier than Oxfam had predicted only a year ago.
Rising inequality and a widening trust gap between people and their political leaders are big challenges for the global elite as they converge on Davos for the annual World Economic Forum, which runs from Jan. 20 to 23.
But the divisions go far beyond those that exist between the haves and have-nots. In the Middle East, the divide between Shi’ites and Sunnis has reached crisis point, with Iran and Saudi Arabia jostling openly for influence in a region reeling from war and the barbarism of Islamic extremists.
The conflicts there have spilled over into Europe, causing deep ideological rifts over how to handle the worst refugee crisis since World War Two and – with Britain threatening to leave the European Union – raising doubts about the future of Europe’s six-decade push towards ever closer integration.
Doing well by doing good?
Davos’ humanitarian moment
By Raj Kumar, chair of the WEF’s humanitarian council, a voluntary collective of NGO heads and corporate executives.
(Devex) The annual meeting in Davos has long been a part of the global development calendar, and NGO executives and U.N. chiefs have been going there for years. What’s new is the WEF’s particular focus on humanitarian issues as a top priority for the global agenda. And what might come from the WEF’s beating the humanitarian drum? Perhaps a higher bar. Corporate CEOs in attendance will be asking themselves and their deputies what their own companies are doing about humanitarian crises. WEF member companies that have stepped-up — UPS and MasterCard come to mind, but there are several others — will become case studies for those who haven’t yet determined how they can support a humanitarian system stretched to its breaking point by the growing number and severity of crises.
And this higher bar isn’t just about more corporate philanthropy. The WEF’s humanitarian council has identified at least two major areas where companies can invest, build business, and make a game-changing difference for humanitarian response. One area is humanitarian payments; the other is leveraging the tools satellites give us; and there are many more.
14 January
What are the top global risks for 2016?
(WEF) From the environment to international security and the coming Fourth Industrial Revolution, the World Economic Forum’s Global Risks Report 2016 finds risks on the rise in 2016.
In this year’s annual survey, almost 750 experts assessed 29 separate global risks for both impact and likelihood over a 10-year time horizon. The risk with the greatest potential impact in 2016 was found to be a failure of climate change mitigation and adaptation.
The number one risk in 2016 in terms of likelihood, meanwhile, is large-scale involuntary migration, followed by extreme weather events (2nd), failure of climate change mitigation and adaptation (3rd), interstate conflict with regional consequences (4th) and major natural catastrophes (5th).
Such a broad risk landscape is unprecedented in the 11 years the report has been measuring global risks. For the first time, four out of five categories – environmental, geopolitical, societal and economic – feature among the top five most impactful risks.
11 January
Klaus Schwab: Shaping the Fourth Industrial Revolution
(Project Syndicate) Of the myriad challenges the world faces today, perhaps the most overwhelming is how to shape the Fourth Industrial Revolution that began at the turn of the century. New technologies and approaches are merging the physical, digital, and biological worlds in ways that will fundamentally transform humankind. The extent to which that transformation is positive will depend on how we navigate the risks and opportunities that arise along the way.
The Fourth Industrial Revolution builds on the Third Industrial Revolution, also known as the Digital Revolution, which entailed the proliferation of computers and the automation of record keeping; but the new wave of transformation differs from its predecessors in a few key ways. First, innovations can be developed and diffused faster than ever. Second, falling marginal production costs and the rise of platforms that aggregate and concentrate activity in multiple sectors augment returns to scale. Third, this global revolution will affect – and be shaped by – all countries, and have a systems-level impact in many areas.
The Fourth Industrial Revolution has the potential to empower individuals and communities, as it creates new opportunities for economic, social, and personal development. But it also could lead to the marginalization of some groups, exacerbate inequality, create new security risks, and undermine human relationships.
5 January
The Global Economy in 2016
IMF chief economist, Maury Obstfeld
(IMF Survey Magazine): What are the other key issues we need to pay attention to in 2016?
Obstfeld: China will remain high on the list. Its economy is slowing as it transitions from investment and manufacturing to consumption and services. But the global spillovers from China’s reduced rate of growth, through its diminished imports and lower demand for commodities, have been much larger than we would have anticipated. Serious challenges to restructuring remain in terms of state-owned enterprise balance sheet weaknesses, the financial markets, and the general flexibility and rationality of resource allocation. Growth below the authorities’ official targets could again spook global financial markets—but then again, time-honored methods of enforcing growth targets could simply extend economic imbalances, spelling possible trouble down the road.
What else to watch? The crisis of refugees fleeing Iraq and Syria offers a major challenge to the absorptive capacity of EU economies and labor markets, but even more so to political systems. The project for common policing of the EU perimeter and the related tensions concerning free mobility of people within Europe bear watching. But we should not forget that countries such as Lebanon, Jordan, and Turkey are on the advanced front line of the refugee crisis. And even apart from refugee issues, Europe faces other political and economic challenges—from the Iberian Peninsula, to Greece, to Ukraine.
Climate change and the struggle to limit CO2 emissions is a slow-moving crisis but one that we ignore at our peril. The COP21 agreement in Paris was a triumph for international cooperation. In 2016 we will see how national capitals react and get an initial take on whether the agreement promotes effective international cooperation.
Finally, there is international trade—which has had setbacks in recent years as global trade growth has slowed relative to GDP growth. Will the Trans-Pacific Partnership (TPP) pass the U.S. Congress? We may know this spring. If so, will it be a prelude to a deal between the United States and the EU? The Doha round was effectively scrapped in Nairobi last month. If comprehensive multilateral trade agreements are off the table, can trade liberalization still proceed usefully on a more limited scale? The answers are important across the Fund’s membership.
Simon Baptist of the Economist: Of the world’s largest 50 or so economies, the one with the biggest turnaround coming in 2016 is Iran, which I’ve written about a few times in the last year. Political change there should have a big impact. Russia, Brazil and Japan also improve in 2016, although the first two will remain in recession.
Joseph Stiglitz: The Great Malaise Continues
(Project Syndicate) … some of the world’s most important problems will require government investment. Such outlays are needed in infrastructure, education, technology, the environment, and facilitating the structural transformations that are needed in every corner of the earth.
The obstacles the global economy faces are not rooted in economics, but in politics and ideology. The private sector created the inequality and environmental degradation with which we must now reckon. Markets won’t be able to solve these and other critical problems that they have created, or restore prosperity, on their own. Active government policies are needed.
That means overcoming deficit fetishism. It makes sense for countries like the US and Germany that can borrow at negative real long-term interest rates to borrow to make the investments that are needed. Likewise, in most other countries, rates of return on public investment far exceed the cost of funds. For those countries whose borrowing is constrained, there is a way out, based on the long-established principle of the balanced-budget multiplier: An increase in government spending matched by increased taxes stimulates the economy. Unfortunately, many countries, including France, are engaged in balanced-budget contractions.
Optimists say 2016 will be better than 2015. That may turn out to be true, but only imperceptibly so. Unless we address the problem of insufficient global aggregate demand, the Great Malaise will continue.
World Economic Situation and Prospects 2016 – Chapter 1 (.pdf)
The report is a joint product of the United Nations Department of Economic and Social Affairs (UN/DESA), the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions (Economic Commission for Africa (ECA), Economic Commission for Europe (ECE), Economic Commission for Latin America and the Caribbean (ECLAC), Economic and Social Commission for Asia and the Pacific (ESCAP) and Economic and Social Commission for Western Asia (ESCWA)). The United Nations World Tourism Organization (UNWTO) also contributed to the report.
The Fourth Industrial Revolution — What It Means and How to Respond
By Klaus Schwab
(Foreign Affairs) We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres. (December 2015)