Chrystia Freeland

At this morning’s Newsmaker “Thriving in the New Global Economy,” Alcoa CEO Klaus Kleinfeld and McKinsey Global Managing Director Dominic Barton told Chrystia their outlook for the world economy. From his perch atop one of the world’s leading aluminum producers, Kleinfeld was “really positive” about global growth prospects. Coming off a strong year in which aluminum demand rose 13 percent, the Alcoa chief forecast that aluminum demand will grow at a slightly slower rate of 12 percent this year thanks to China’s efforts to slow down its economy:

While also bullish on global growth, Barton noted that there was a sense of fragility in the world economy that concerned him. Specifically, the McKinsey head was worried about the government’s response to looming inflation, which he predicted would rise to the range of 6 to 7 percent. Mounting government debts and the rising cost of capital, which Barton believes will be “up fairly significantly” as savings rates in the emerging markets decline, will exacerbate the inflation problem:

“We’re in a slack period if you just look at what the cost of money is. It’s an incredibly unique period. I think that’s going to go away, and that’s going to make it challenging.”

Posted by Peter Rudegeair.

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