Hledat v komentářích
Investiční doporučení
Výsledky společností - ČR
Výsledky společností - Svět
IPO, M&A
Týdenní přehledy
 

Detail - články
The Looming Lost Decade

The Looming Lost Decade

10.12.2013 17:00

As 2013 comes to an end, it looks like the world economy will remain stuck in low gear. For those reading the tea leaves of global recovery, the third-quarter GDP numbers offered no solace. While the United States is ahead of the pack, some of its gains could soon be lost, as accumulating inventories begin eroding profits. Despite glimmers of hope, the eurozone and Japan are struggling to cross the 1% threshold for annual economic growth. And the major emerging economies are all slowing, with Russia practically at a standstill.

Not surprisingly, a catchphrase in economic-policy debates nowadays is “secular stagnation,” the idea that excess savings chronically dampen demand. The economist Robert Gordon has also argued that the world is low on economically productive ideas.

But before we despair, there is work to be done. The coordinated fiscal stimulus that saved the world from economic collapse in 2009 disappeared too quickly, with governments shifting their focus to domestic politics and priorities. As domestic policy options have been exhausted, economic prospects have dimmed. A renewed emphasis on stimulus must be augmented by global coordination on the timing and content of stimulus measures.

The crisis was and remains global. Trade data tell the story: after increasing by about 7% annually in the decade before 2008, world trade fell faster than global GDP in 2009 (and more sharply than during the Great Depression). Once the brief stimulus-fueled recovery faded, growth in world trade again slowed quickly, falling to 2% year on year over the past 18 months. Disappointing export performance is largely responsible for the recent weakening of economic-growth prospects.

At the end of 2008, when the scale of the impending economic destruction was not yet apparent, Olivier Blanchard, the International Monetary Fund’s chief economist, boldly called for a global fiscal stimulus, stating that, in these “not normal times,” the IMF’s usual advice – fiscal retrenchment and public-debt reduction – did not apply. He warned that if the international community did not come together, “vicious cycles” of deflation, liquidity traps, and increasingly pessimistic expectations could take hold.

Fortunately, world leaders listened, agreeing in April 2009 at the G-20 Summit in London to provide a total of $5 trillion in fiscal stimulus. The US and Germany added stimulus amounting to about 2% of GDP. And China’s banks pumped massive amounts of credit into the country’s economy, enabling it to sustain import demand, which was critical to the global recovery.

But hubris rapidly set in, and parochial interests took over. Before the wounds had fully healed, the treatment was terminated.

The worst offenders were the US and Germany, which shirked the responsibility to protect the global common good that accompanies their status as economic hegemons. The United Kingdom, with its contrived rationale for fiscal austerity, was not much better. Fiscal stimulus by these three countries – together with smaller contributions from France and China – could have continued the necessary healing.

Countries now seem to think that monetary-policy measures are their only option. But, whereas fiscal stimulus boosts growth at home and abroad, enabling mutual reinforcement through world trade, monetary policy is guided primarily by domestic goals, and, in the short term, one country’s gain can be another’s loss.

America leads the world in monetary-policy ambition. The researchers Cynthia Wu and Fan Dora Xia estimate that the US Federal Reserve’s open-ended asset purchases (so-called quantitative easing, or QE) have led to an effective US policy rate of -1.6%. QE helped American exports by weakening the dollar relative to other currencies. Once the Japanese engineered their own QE, the yen promptly depreciated. That has kept the euro strong.

The weakest of the “big three” developed economies – the eurozone – has thus been left with the strongest currency. In the third quarter of 2013, Germany’s export growth slowed and French exports fell. After a spike earlier in the year, Japan’s exports have also contracted. Only US exports have maintained some traction, thanks to the weaker dollar.

In the 1930’s, after the gold standard broke down, world leaders could not agree on coordinated reflation of the global economy. In his book Golden Fetters, the economist Barry Eichengreen argued that the lack of coordinated action dragged out the global recovery process. Such delays are costly, and risk allowing pathologies to fester, prolonging the healing process further.

Now, despite unfavorable political circumstances, Blanchard should make an even bolder call. These are still not “normal” times, and the “vicious cycles” persist. Another global fiscal stimulus – focused on public investment in infrastructure and education – would deliver the adrenaline shot needed for a robust recovery.

More public investment is twice blessed. It can shake the world out of its stupor; and it can safeguard against “secular stagnation.” The US, Germany, the United Kingdom, France, and China should act together to provide that boost. Otherwise, a sustainable global recovery may remain elusive, in which case 2014 could end in low gear as well.

Ashoka Mody, a former mission chief for Germany and Ireland at the International Monetary Fund, is currently Visiting Professor of International Economic Policy at the Woodrow Wilson School of Public and International Affairs, Princeton University.

Copyright: Project Syndicate, 2013.


Váš názor
Na tomto místě můžete zahájit diskusi. Zatím nebyl zadán žádný názor. Do diskuse mohou přispívat pouze přihlášení uživatelé (Přihlásit). Pokud nemáte účet, na který byste se mohli přihlásit, registrujte se zde.
Aktuální komentáře
19.11.2017
16:45Šéf Morgan Stanley: Revoluce ve finančnictví? Pořád je potřeba mozek
9:46Víkendář: Proč průmyslová revoluce nepřišla už do Říma?
18.11.2017
20:02Za pár let se ukáže, jak dobře na tom USA jsou
14:34Revoluční změny v dopravě a pravý důvod zájmu automobilek o Uber a spol.
8:04Víkendář: Nová hedvábná stezka mění globální ekonomiku, vše je přitom jen na začátku
0:38Vyhrajte vstupenku za 4 999 Kč na největší konferenci o akciích v ČR!
17.11.2017
22:3617. listopad ŽIVĚ: Pocta na Národní, Koncert pro budoucnost, akce v Česku i na Slovensku
22:04Závěr týdne ve znamení mírného poklesu, Tesla představila svůj truck
18:26Totální dno. Co přijde nyní?
17:11CVVM: Většina Čechů daním nerozumí. Chtějí ale víc zdanit bohaté
16:57Summary: Na aktiva Twenty-First Century se těší kupci, Applied Materials zveřejnil výborné výsledky
16:35Americký dolar nezabral ani na příznivá makro data, ani na daňové změny  
16:30Perly týdne: Silná značka ČR, vodní nafta od Audi a kladivo od Tesly
15:59Tencent může předběhnout Facebook. V tržní kapitalizaci prý do konce roku
15:14Týden technicky: Euro se bez boje nevzdává
14:47Celosvětový objem aktiv pod správou se zdvojnásobí, pro jejich manažery je to výzva
14:46Spanilá jízda Applied Materials v číslech hospodaření pokračuje
13:59Ziskovost čtveřice největších bank v ČR je velmi dobrá. Pozor ale musejí dávat na náklady
12:55Rozdílné ceny práce v Evropě a brexit. Klíčové body summitu EU ve Švédsku
12:30ČR je třetí v Evropě v online nakupování potravin

Související komentáře
Nejčtenější zprávy dne
Nejčtenější zprávy týdne
Nejdiskutovanější zprávy týdne
Denní kalendář hlavních událostí
Nebyla nalezena žádná data