01/20/2012
The Issues Facing the World Economy
The World Economic Forum is held each year in Davos, Switzerland, this time end of January, but beforehand they assembled various experts to put together an “Outlook on the Global Agenda 2012.”
Following are a few comments from the participants.
“A key obstacle to addressing global economic imbalances is the difficulty of achieving meaningful structural reforms in the respective economies including the United States and China. The U.S. and Europe have to adjust their economic and social models, especially against the backdrop of an ageing population and mounting welfare and healthcare costs.”
--Wang Jianye, Chief Economist, The Export-Import Bank of China, People’s Republic of China
“A year ago, we thought we were struggling with post-crisis problems; now, we seem back in crisis mode, but with a difference. The 2008 meltdown centered on excessive leverage in the financial sector, which threatened to tip the world into a depression, not just a recession. Governments did then what they had to do, and allowed fiscal policy to take the strain of sustaining demand. The consequence in many places was that the debt problem has been passed from the private to the public sector. Now governments, especially in Europe, are struggling to gain control of their fiscal positions at a time when the economy remains weak. That struggle may take some years to resolve.”
--Howard Davies, Professor of Practice, Fondation Nationale des Sciences Politiques
“With the sovereign risk rising in many advanced economies, we have a risk of double-dip recession, and we are running out of policy bullets. That makes for a most dangerous situation that can lead to global stagnation and a global financial crisis, one that could be worse than the previous one.”
--Nouriel Roubini, Professor of Economics, New York University
“After being lulled into a false sense of security during the so-called great moderation, the financial crisis of 2008 and 2009 was a shock to the way people viewed the economic world. With recovery in late 2009 and 2010, many thought the crisis had been contained and put behind us. Recent events and market activity, however, illustrate that the actual and potential volatility of financial markets is likely to remain elevated for some time. Neither the macroeconomic nor the regulatory policy responses have provided confidence that the official sector will mitigate, rather than contribute to, instability going forward. A reversal of the current focus on short-term fixes instead towards fundamental long-term, pro-growth reforms will be necessary to change the perception of a highly uncertain economic outlook.”
--Randall S. Kroszner, Professor of Economics, University of Chicago
“Arriving at effective international agreements on issues ranging from climate change to nuclear proliferation and to trade and financial regulation will require buy-in from both the North and the South; but the novel combination of rich economies having to strike bargains with much poorer but also bigger and more powerful emerging ones is likely to be the source of many genuine differences as well as misunderstandings.”
--Moises Naim, Senior Associate, International Economics, Carnegie Endowment for International Peace USA
“Emerging and developing countries currently account for 41% of G20 GDP and 30% of global trade. By 2050, these figures could rise to nearly 70% and six of the world’s seven largest economies may well come from the emerging world (Brazil, China, India, Indonesia, Mexico and Russia). This major transformation could profoundly alter the current balance of power in the international arena, triggering opportunities but also significant risks and potential conflicts.”
--Moises Naim
“Unemployment is one of the most serious issues facing the world today. Not only is it affecting the hundreds of millions of people out of work; it is hurting their families and breaking down the way societies function. When young people with education are unable to find employment, frustrations build. That can impact our world for generations to come.”
--Lars H. Thunell, Executive Vice President and Chief Executive Officer, International Finance Corporation USA
“We face a global social time bomb. Possibly it is more accurate to say a series of time bombs because it’s different in different countries and it’s derived from a shortage of enough jobs – enough good jobs to go around and widening social inequalities.”
--Stephen Pursey, Director, International Labour Organization, Geneva
Source: World Economic Forum, “Outlook on the Global Agenda 2012”
Wall Street History returns in one week.
Brian Trumbore
