The Great Debate UK
from The Great Debate:
Today, the International Monetary Fund announced yet another a reduction in its global growth projections for 2014, with its estimate of U.S. growth also reduced (citing reduced government spending, but not the present U.S. government shutdown -- or the heretofore unthinkable notion of the U.S. government defaulting on its obligations). Despite the seeming urgency of global economic slowdown, when world leaders attended their annual fall confabulation at the United Nations in New York last month, they focused on the diplomacy of physical security (Syria, Iran, etc.). Thus another year has passed in which global economic security issues were on no one’s reported agenda.
Policy makers continue to fail to appreciate that the most formidable economic challenge today lies in the area outside the borders of any one nation or region -- and that multilateral action to address this challenge is arguably more important than efforts at increasingly less-effective internal stimulus.
Present-day economic imbalances -- particularly those stemming from the rapid emergence of the post-socialist nations over the past 15 years, with their associated supply of excess labor, productive capacity and global capital, relative to demand -- have hamstrung the economies of the advanced nations. Such economic dislocation can no longer be resolved by any one power, or even by two or three. Indeed, there is enormous risk today of unilateral or bilateral actions being viewed by players left out of such actions as economically threatening or even hostile, leading to economic countermeasures. The issue is compounded by the complexity of the relationships among and between developed nations on the one hand and emerging ones on the other. It is hard to imagine moving beyond a global economy that is just getting by, and therefore at material risk of new and deeper crisis, without a more open dialogue among the Group of 20 (G20) nations and proactive steps toward mutual accommodation.
Yet, since the central banks of the developed world have managed to more-or-less stabilize their economies -- however tenuously -- discussion of a global grand bargain focused on rebalancing international trade and finance has been all but absent. This is unfortunate, as it makes it unlikely that the advanced nations will be able to return to their potential growth trajectories for some time to come.
President Putin recently noted that Russia has emerged from the global financial crisis in a stronger position than before, and that average wages will increase by 60% by the year 2020. Traditionally, many people think of Russia as a provider of natural resources, and increasingly as a safe pair of hands for mega-events, such as the upcoming Sochi 2014 Winter Olympic Games, the Formula 1 Grand Prix from 2014, and the 2018 FIFA World Cup. Today the Russian economy is the sixth largest in the world, with an output which may potentially exceed US$ 2 trillion in 2012. Russia’s gross domestic product (GDP) expanded by 4.2 per cent in 2011, making the country the third fastest growing economy after China and India.
from The Great Debate:
By Gordon Brown
The views expressed are his own.
The build-up to the G20 summit has been dominated by the euro's failings. With Europe now the epicenter of the global crisis, its continued weakness will dominate the G20 discussions. Even now, uncertainties about Greece’s future -- and about the real strength of Europe’s commitment to its new stability fund -- has left little opportunity for a focus on the global economy as a whole.
But even if the state of the world economy has featured less than the euro in the preparatory work for the summit, the decisions world leaders will make on the global economy will dictate the mood of the coming two years. President Sarkozy has major global initiatives he will unveil to improve global food security, and may even force his plan for a global financial levy on the agenda. But there is a big choice the G20 must make. Either the world will come together and agree on a coordinated growth plan -- or we will retreat into a new, more acrimonious protectionism.
It is fairly commonplace at the moment for U.S. and UK financial analysts -- what continental Europeans call the Anglo-Saxons -- to predict the collapse of the euro zone, a project they were mostly sceptical about in the first place. MacroScope touched on this on two occasions in March.
The latest foray into this area comes from Alan Brown, global chief investment officer at the large UK fund firm Schroders. But he does it with twist, blaming what he sees as the eventual collapse of the euro zone not on the structure itself nor on the profligacy of peripheral economies, but on Germany's response to the crisis.
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