Opinion

Chrystia Freeland

Inflation is inevitable counters Wolfensohn

Chrystia Freeland
Oct 12, 2010 23:08 UTC

While Laura Tyson thinks America has no intention to inflate away its debt, former World Bank President Jim Wolfensohn said in an interview today he believes inflation and a devaluation of the dollar are “inevitable”:

Countries that get into heavy debt find that other countries realize that their currency isn’t as valuable as it was because they owe so much money. So the currency devalues. As it devalues, you have an inflation. And it is my judgment that that is likely to be a very important element in how we unwind this whole issue of debt to income levels in the United States.

Wolfensohn has a similarly gloomy outlook for Africa, a continent whose development he championed during his tenure at the World Bank. African institutions and governance are less efficient and effective than their counterparts in India and China, he says, and growth will suffer as a result:

I think [a coming African miracle] will happen in some few countries, but I do not think it will be anywhere near the speed that it needs to be. And it worries me enormously that you’ll have 2 billion out of 9 billion people on the planet so far behind. And they’re not running around carrying spears and hunting — they all have cellular radios, they’re all linked with the rest of the world. It’s a very different Africa, and I think we spend far too little time thinking about our responsibilities to Africa but also the role that Africa is going to play in the world of my children.

Posted by Peter Rudegeair

Rise of the rest

Chrystia Freeland
Sep 30, 2010 21:01 UTC

Get ready for the next wave of globalization. The emergence of the emerging markets is old news, of course: after all, Tom Friedman discovered that the world was flat back in 2005. But even as much of the developed world is struggling with weak consumer demand and stubbornly high levels of unemployment, the emerging market countries are writing a new chapter in the story of the global economy.

We are accustomed to thinking of our economic relationship with the countries Fareed Zakaria describes as “the rest” as a two-way exchange between west and east or north and south: western companies setting up call centers in India or manufacturing their goods in China, for instance; and, more recently, savings-rich emerging market economies, especially China, investing in US treasuries, or Russian oligarchs buying London mansions.

That was Globalisation 1.0. In the next stage, some of the biggest deals and some of the most important capital flows will be between emerging markets, with no need to stop-over at Heathrow or JFK. Forget the last decade’s race-to-the-bottom rivalry between Wall Street and the City of London to be the world’s financial capital; the new motto of the moneymen, as one Manhattan banker put it to me this week, is “Mumbai, Dubai, Shanghai or goodbye.”

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