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.
It was only a few days ago that George Osborne declared victory on economic malaise saying that the UK economy has turned a corner. The economic data has improved dramatically in the last six months, which gave Osborne a battering ram to launch a political attack on the Labour Party. Osborne used his moment in the sun to prove Ed Balls and all on the other side of the political bench wrong, saying that his austerity programme is right for Britain.
However, a little over 24 hours after Osborne’s speech a report from the Local Data Company made for uncomfortable reading as it detailed grim conditions on the UK’s high streets. High Street vacancy rates remain stubbornly high; out of 650 town centres in the UK the average vacancy rate is 14.1 percent, which is basically unchanged since February.
By Nick Hostler, tax expert at BDO. The opinions expressed are his own.
Following the recent loss of the UK’s AAA rating, Chancellor George Osborne will be keen to show real progress and dedication towards eliminating the UK’s structural fiscal deficit, but must balance this with ensuring that the UK is a highly competitive and attractive location for multi-national businesses. The Budget should mark a watershed moment for the coalition government as Osborne, with an eye on the next general election, treads a fine line while demonstrating an understanding of the pressures faced by individuals and businesses across the country.
Whether he strikes this balance remains to be seen, but here is what I believe the Budget will have in store.
By Laurence Copeland. The opinions expressed are his own.
Budget Day again, and the pressure on Chancellor George Osborne is rising ominously. There is little agreement about what needs to be done, but complete agreement that something has to change because the state of Britain’s economy is simply awful.
Yet just look at the facts in the table below (all the data are taken from Eurostat, the EU’s own statistical agency). For the latest quarter, the UK economy contracted by 0.3 percent – but France’s performance was just as dismal, Germany’s economy shrank by twice as much, as did the euro zone as a whole. Only the USA achieved a significantly better outcome, a dazzling growth rate of zero – but at least it didn’t shrink. Year-on-year (Y-O-Y, as the pros call it), the picture is even clearer. Britain’s economic growth, a miserable 0.3 percent, was not significantly lower than Germany’s, but better than France’s minus-0.3 percent, or indeed the euro zone as a whole, which was down by 0.9 percent. Only the USA grew to any significant extent – and there are signs that it may now be starting to slow down, even before the impact of the fiscal cliff and the sequester are felt.
–Darren Williams is Senior European Economist at AllianceBernstein. The opinions expressed are his own.–
Bank of England governor-elect, Mark Carney, has raised hopes that the central bank may soon switch to a nominal GDP target. Although the costs seem to outweigh the benefits, the attractions of a radical new approach will grow if the economy remains stuck in the doldrums.
By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
Boris Johnson's intervention in the European debate reduces the chance of a British exit from the European Union - or Brexit. The Mayor of London, a popular Conservative politician, says he will campaign to keep Britain in the EU provided it can negotiate a pared-down relationship based on the single market.
By Kathleen Brooks. The opinions expressed are her own.
China is often berated for providing unreliable economic data. Behind every release there are some who believe officials in Beijing have been at work to manipulate the data for the government’s benefit. But is China alone in this and can we trust the data coming from other economies in the West?
The Office for National Statistics (ONS) has a fairly patchy record at providing accurate data on the UK economy. For example, the first reading of Q2 GDP for this year was -0.7%, this was then revised up to -0.4%. A 0.3% discrepancy in a $2.5 trillion economy is no small chunk of change. The ONS even revealed that the Q2 data was more difficult to calculate than usual due to the extra Jubilee bank holiday and that GDP could be overstating the weakness in the UK economy.
By Adam Matthews, Secretary-General of Global Legislators Organisation (GLOBE). The opinions expressed are his own.
One of the great advances in the past century in economics is the understanding that there is such a thing as human, social and intellectual capital. We have come to realise that a well functioning judicial system and an excellent education system are as much a part of the wealth of a nation as its roads, ports and factories. The irony is that economists and economies have not caught up with the most important capital of all — natural capital – upon which we all depend.
During the first day at the World Economic Forum yesterday, we witnessed delegates arriving with two things on their minds — how heavy the snowfall was and the realisation that new business models are needed to overcome global economic pressures. (It goes without saying that the mood at Davos hasn’t been helped by the IMF downgrading world growth targets). We all agree that we’re living in a volatile world and it cannot go ignored that there are many uncertainties we face, including currency volatility and high unemployment.
The euro zone crisis will undoubtedly be at the centre of the discussions concerning “uncertainty” but what the attending business leaders, governments and global organisations must understand and discuss, is what they can do together to put in place measures to transform and change, so we can better safeguard our future.
By Kathleen Brooks. The opinions expressed are her own.
For the last three years talk about the global economy has been decidedly negative. Firstly there was the sub-prime housing crisis in the U.S., then the sovereign debt crisis, now we wonder whether the euro will survive and whether China will suffer a “hard” economic landing.
But amidst all of this doom and gloom, there seems to be a bright spot: Sub-Saharan Africa. For the bulk of the last thirty years the focus has been on famine, civil war or piracy, which has left a decidedly negative impression of the continent. However, in recent weeks there has been a growing number of optimistic reports about Africa, with some even thinking it could continue to grow while the rest of the world stagnates.