The Great Debate UK
from The Great Debate:
Stubborn national politics drag down the global economy
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.
Only now are there signs that the long-overdue shift in national macro-economic policies may be taking place. The new Japanese government is backing up a "minimum inflation target" with a multi-billion-dollar stimulus designed to create 600,000 jobs. In what some call the “reverse Volcker moment,” Ben Bernanke has become the first head of a central bank for decades to announce he will target a 6 percent level of unemployment alongside his inflation objective. And the new governor of the Bank of England, Mark Carney, has told us that "when policy rates are stuck at the zero lower bound, there could not be a more favorable case for Nominal GDP targeting.” Side by side with this shift in policy, in every area but the Euro, there is also policy progress in China. It may look from the outside as if November’s Communist Party Congress simply re-announced their all-too-familiar but undelivered wish to re-balance the economy from exports to domestic consumption, but this time the promise has been accompanied by a time-specific commitment: to double average domestic income per head by 2020.
The intellectual case for change is obvious. A chronic shortage of demand has developed for two reasons. First, as the IMF announced at the end of 2012, the adverse impact of fiscal consolidation on employment and demand has been greater than many people expected. Secondly, the effectiveness of quantitative easing has almost certainly started to wane. As former BBC chief Gavyn Davies has put it, “the supply potential of the economy is in danger of becoming dependent on, or ‘endogenous to,’ the weakness of domestic demand. ...With demand constrained in this way for such a lengthy period of time, supply potential is beginning to downsize to fit the low level of demand.” It is a new equilibrium that can be reversed only by boosting demand.
But why is there so little optimism when the paradigm shift sought in 2009 is finally starting to materialize? Why do experts continue to downgrade their forecasts for 2013 and even 2014, while discussion so often drifts toward talk of a lost decade? It is, I suggest, because while countries are today adopting national growth strategies, they have missed out on the other part of the 2009 decision -- the necessity of coordinated global intervention. And the big question is whether the momentum for growth can be sustained by national initiatives alone in the absence of global action or will instead melt away once again under the pressure of narrow, self-defeating national policies.
from Breakingviews:
Global economy not as healthy as it looks
By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The global economy is not as healthy as it looks. The International Monetary Fund now predicts 4.4 percent growth for 2011. But inflation has reared its ugly head across the globe, suggesting that many economies are growing faster than can be sustained without structural changes. Spurring on reform should be the main focus of the annual World Economic Forum shindig this week in Davos.
from Breakingviews:
The crisis isn’t global, it’s peripheral
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
LONDON -- First Greece, then Ireland, next Portugal? It would be easy to think the whole world is sinking. It isn't. Small euro zone periphery economies are in deep trouble. Spain, if it sinks, which it might, is larger and would force a more expensive and problematic rescue by the euro zone. But for the global economy the periphery is a side show. For now world economic prospects don't look bad at all.
from The Great Debate:
Two cheers for the walking wounded
-- Mark Hannam is a guest columnist, the views expressed are his own. He formerly worked at the Bank of England and Barclays. He is currently chairman of Fair Finance, a microfinance company --
Some banks have come out of the financial crisis in better shape than others. We should encourage them rather than lump them together with the failures.
Not what the economy’s doctor ordered
– James Saft is a Reuters columnist. The opinions expressed are his own –
Besides being a human tragedy, a deadly pandemic is, quite literally, the last thing a global economy suffering a huge drop off in trade and activity needs.
from The Great Debate:
Mobile industry stimulus, strings attached
-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --
Some of the world's biggest mobile operators say they can stimulate the global economy by luring $550 billion in new investment, but only with the implied trade-off that they retain their monopoly market powers.
AT&T, Deutsche Telekom, NTT DoCoMo, Telefonica and Vodafone are among the carriers who have called on national regulators to provide a "minimally intrusive" regulatory environment to encourage new investment.
