Global Economy & Globalization 2018-19

International Centre for Trade and
Sustainable Development (ICTSD)
Are You Ready To Consider That Capitalism Is The Real Problem?
Before you say no, take a moment to really ask yourself whether
it’s the system that’s best suited to build our future society.

31 December
The Global Economy 2020: A Positive Outlook Shadowed by China, Debt, and Trade Tensions
(Foreign Policy) Experts expect growth to rebound, but many of their projections are built on shaky foundations.
After a rocky 2018 and truly rough patches in 2019, especially particular sectors such as global manufacturing and U.S. agriculture, the consensus outlook for the global economy next year is surprisingly sanguine.
But those growth expectations are premised, in both cases, on a couple of potentially tenuous foundations: a rebound in emerging markets, such as Argentina and Turkey, that have been hammered in recent years, and a halt to further nasty surprises like trade wars, imploding markets, debt time bombs, and the like. Economists expect the wild cards for 2020 to point in one direction: downward.
“[D]ownside risks seem to dominate the outlook,” noted the IMF in its latest big report on the global economy’s prospects. Whether it’s still-simmering trade tensions, the ongoing Brexit saga, China’s economic transformation, worries about a sharp market correction, central banks with few bullets left to fire, historically massive piles of debt, or the usual geopolitical risks that could upend the best of projections, here is a look at some things to keep an eye on that could make or break the global economy next year.

2 December
Klaus Schwab: What Kind of Capitalism Do We Want?
(Project Syndicate) “Stakeholder capitalism,” a model I first proposed a half-century ago, positions private corporations as trustees of society, and is clearly the best response to today’s social and environmental challenges. Shareholder capitalism, currently the dominant model, first gained ground in the United States in the 1970s, and expanded its influence globally in the following decades. Its rise was not without merit. During its heyday, hundreds of millions of people around the world prospered, as profit-seeking companies unlocked new markets and created new jobs. But that wasn’t the whole story. Advocates of shareholder capitalism, including Milton Friedman and the Chicago School, had neglected the fact that a publicly listed corporation is not just a profit-seeking entity but also a social organism. Together with financial-industry pressures to boost short-term results, the single-minded focus on profits caused shareholder capitalism to become increasingly disconnected from the real economy. Many realize this form of capitalism is no longer sustainable. The question is: why have attitudes begun to change only now?

19 November
How the IMF Can Battle Gradual Irrelevance
Mohamed A. El-Erian
These days, the International Monetary Fund’s policy recommendations – especially as they pertain to the advanced economies – have little impact. Although this is partly a consequence of more inward-looking national politics in richer countries, the Fund itself is not blameless.
(Project Syndicate) Over the last few years, the official meetings have increasingly been overshadowed by the ever-growing number of parallel events, notably diminishing the gathering’s contribution to better policymaking. In fact, this year, I couldn’t find a single person who had paid much attention to a key policy output of the meetings – the communiqués issued by the two institutions’ top policymaking committees.This is in stark contrast to the past. I vividly remember the days, not so long ago, when officials prepared diligently for these policy discussions. Private-sector participants would eagerly await their outcome in the hope of gaining a better understanding of the global economic outlook and the prospects for key national and international policy initiatives. Markets were known to move on particular remarks, which is why officials would spend hours refining the communiqués, lest they be misinterpreted.

4 November
Joseph E. Stiglitz: The End of Neoliberalism and the Rebirth of History
For 40 years, elites in rich and poor countries alike promised that neoliberal policies would lead to faster economic growth, and that the benefits would trickle down so that everyone, including the poorest, would be better off. Now that the evidence is in, is it any wonder that trust in elites and confidence in democracy have plummeted?
(Project Syndicate) At the end of the Cold War, political scientist Francis Fukuyama wrote a celebrated essay called “The End of History?” Communism’s collapse, he argued, would clear the last obstacle separating the entire world from its destiny of liberal democracy and market economies. Many people agreed.
Today, as we face a retreat from the rules-based, liberal global order, with autocratic rulers and demagogues leading countries that contain well over half the world’s population, Fukuyama’s idea seems quaint and naive. But it reinforced the neoliberal economic doctrine that has prevailed for the last 40 years.The credibility of neoliberalism’s faith in unfettered markets as the surest road to shared prosperity is on life-support these days. And well it should be. The simultaneous waning of confidence in neoliberalism and in democracy is no coincidence or mere correlation. Neoliberalism has undermined democracy for 40 years.
The form of globalization prescribed by neoliberalism left individuals and entire societies unable to control an important part of their own destiny, as Dani Rodrik of Harvard University has explained so clearly, and as I argue in my recent books Globalization and Its Discontents Revisited and People, Power, and Profits. The effects of capital-market liberalization were particularly odious: If a leading presidential candidate in an emerging market lost favor with Wall Street, the banks would pull their money out of the country. Voters then faced a stark choice: Give in to Wall Street or face a severe financial crisis. It was as if Wall Street had more political power than the country’s citizens.

14-20 October
IMF to examine climate risk to financial markets -official
(Reuters) – The International Monetary Fund is examining the impact of climate on the world’s financial markets and whether it is priced into market valuations, the head of the global lender’s markets division said on Saturday.
“We are doing work on the pricing of climate risks and to what extent it is priced into stock and bond markets,” Tobias Adrian, financial counselor and director of the IMF’s monetary and capital markets department, told Reuters. “We are going to look at stock markets country by country, then by sector.”
The Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system. This year’s events will take place in Washington, DC, October 14-20, 2019.

17 October
Lawrence Summers: The world has changed. The G-20 needs to change with it.
What does the future hold for the G-20? Any happy prospect depends on a very different U.S. approach than we have seen for the past three years. This is necessary, but it is not sufficient. If the G-20 is to be a strong and constructive force, it will need an agenda rooted in current political and economic reality. That is a challenge for all its members.
(WaPost) On Wednesday, I participated in a discussion in Quebec with Paul Martin, the former Canadian finance and prime minister, marking the 20th anniversary of our work together founding the Group of 20. He has always been visionary in the importance of global institutions having truly global governance. Like many anniversaries, it was an occasion to look both forward and backward and gave cause both for celebration and some expression of regret.

12 October
Georgieva’s brave new agenda at IMF threatened by economic storm clouds
Trade wars are likely to dominate discussions in Washington despite new leader’s passion on inequality and climate crisis
(The Guardian) The world’s finance ministers and central bankers will be in Washington this week for the annual meetings of the International Monetary Fund and World Bank amid growing concerns that the global economy is heading towards stagnation.
Predictions of a sharp downturn fill policymakers with anxiety, knowing that job losses and lower tax revenues can only lead to social unrest. Last week the IMF’s new leader, Kristalina Georgieva, asked nations involved in tit-for-tat trade wars if they dare ignore warnings of the most serious threat to the global economy since the financial crisis.
Georgieva, previously number two at the World Bank and a Bulgarian national, is known for her commitment to tackling the climate crisis after starting work in academia lecturing on development issues before securing a post at the World Bank as an environmental economist.

7 October
IMF accused of ‘reckless lending’ to debt-troubled states
Jubilee Debt Campaign says the Fund broke its own rules by not ensuring sustainable debt burden
The JDC said the IMF was creating a moral hazard because lenders knew that they would be bailed out no matter how risky their loans might be.
Debt sustainability has come into the spotlight over the past year after the IMF controversially lent a record $56bn to Argentina even though its annual debt repayments far exceeded the Fund’s own limit. The IMF said Argentina, the second biggest economy in South America, was a special case.
But the JDC said Argentina was merely the most acute example of a wider problem, with the IMF also encouraging reckless lending in 17 other countries: Afghanistan; Angola; Cameroon; Central African Republic; Chad; Ecuador; Egypt; Ghana; Jordan; Mauritania; Mongolia; Pakistan; São Tomé and Príncipe; Sierra Leone; Sri Lanka; Tunisia; and Ukraine. The campaign group said that credit agencies had rated Egypt, Pakistan and Ecuador to be high risk.

2 October
Yes, capitalism is broken. To recover, liberals must eat humble pie.
Richard V. Reeves
The potential for well-structured, centrifugal capitalism to bring prosperity and choice continues to be demonstrated on a global scale. But this potential is not being realized within many of the countries that currently dominate the international economic scene.
Capitalism in its liberal variant is under serious pressure. But an inwards turn, away from markets, away from trade, away from competition, away from dynamism, would spell dark times indeed, not least for the very people currently most attentive to the bugle call of retreat from the populist movements of left and right. Capitalism may be broken, at least in places. But it is not beyond repair.
(Brookings) Capitalism reigns. But capitalism is in trouble. Therein lies the paradox of our age. For the first time in human history, a single economic system spans the globe. Of course there are differences between capitalism Chinese-style, American-style and Swedish-style. Close up, these differences can seem significant. But viewed through a wider lens, the distinctions blur. As the economist Branco Milanovic writes in his new book, Capitalism Alone, “the entire globe now operates according to the same economic principles – production organized for profit using legally free wage labor and mostly privately owned capital, with decentralized coordination”.
Capitalism without democracy was assumed to be at most a passing phase. Eventually, so western liberal thinking went, China and other Asian nations adopting what Milanovic calls “political capitalism” – free markets, but authoritarian politics – would have to adopt liberal political institutions, too. But, so far, the liberalization thesis remains unproven. China has successfully adopted a market system – and, even more importantly, a market culture – without liberal democratic institutions.
Editor’s Note: This article originally appeared in the Guardian on September 25, 2019, as part of the Guardian series on Broken Capitalism.

26 September
The unusual new leaders of our unusual new world
Their arrival could bring a flood of fresh new thinking, but could also leave the world’s most important financial decisions up to folks who are not up to the task
(Axios) The new leaders:
Fed chair Jerome Powell is not a lifelong central banker or even a PhD economist. He’s a lawyer and former private equity manager, who became the first Fed chair without an economics pedigree since the disastrous William Miller whose tenure from 1978—1979 led to U.S. stagflation.
Christine Lagarde, the incoming ECB president, is also a lawyer by training and became managing director of the IMF after a career in politics with no real background in central banking.
David Malpass, president of the World Bank, is best known for his time in the Reagan administration and at Bear Sterns where months before the financial crisis he wrote an op-ed titled, “Don’t Panic About the Credit Market.”
Kristalina Georgieva, incoming IMF managing director, is a well-respected economist with significant experience. But the first ever person in that role from an emerging country is a night-and-day change from outgoing director Lagarde and the prototypical leaders of the fund.

25 September

Newly selected International Monetary Fund (IMF) Managing Director Kristalina Georgieva arrives to speak at a press conference at the IMF headquarters on September 25, 2019, in Washington. – The IMF on Wednesday formally selected Georgieva of Bulgaria to be only the second woman to lead the 189-member institution. (Photo by Eric BARADAT /AFP/Getty Images)

IMF board selects World Bank’s Georgieva as new chief
The International Monetary Fund announced today that Bulgarian national Kristalina Georgieva will become its new managing director, effective October 1.
She will be only the second woman to serve in the IMF’s top job and the first from an emerging economy.
Georgieva was previously the European commissioner in charge of the EU budget before she left at the end of 2016 to become CEO of the World Bank in January 2017, a job she has held since. She served for three months as the World Bank‘s interim president before David Malpass, a former top U.S. Treasury official, took over the global financial institution in April.
In her new role, Georgieva will chair the IMF’s executive board and oversee four deputies, as well as a staff of about 2,700 people.
She has a PhD in economic science from the University of National and World Economy in Bulgaria.

5 September
The specter of global disintegration
(Axios) It’s the end of the world as we know it. The world is disintegrating, and much of the highly visible noise and chaos is a symptom of a much deeper problem.
Hong Kong is a great test of whether Xi Jinping’s China is remotely compatible with Western liberalism. Argentina is a great test of whether a market-friendly government, working closely with the IMF, can turn an economy around. Britain is, in many ways, a great test of democracy itself.
So far, in all three cases, the outcomes have been profoundly disappointing and depressing, even as some hope remains.
Zoom out: In a bigger sense, the final outcomes don’t matter. In all 3 cases — and, most importantly of all, in Trump’s America — what we’re witnessing is the spectacle of global integration being thrown suddenly and jarringly into reverse.
The bottom line: The postwar economic order was built on ever-increasing integration, and there is no precedent in modern history for how — or even whether — the global economy can cope with its opposite.

1 August
The Economist: Oil & water don’t mix
There are three parts of the world in which we are particularly worried about the risk of military miscalculations causing escalating conflict and significant damage to the world economy: the Persian Gulf, the South China Sea and the Korean peninsula. Each is currently ranked in our top 10 global risks report, but we see the most immediate risk in the Gulf, owing to its impact on energy markets. Much of the world’s seaborne exported crude oil passes through the Strait of Hormuz. Escalating tensions between Iran and each of the US, the UK, Saudi Arabia and the UAE have already resulted in some disruption to and increased costs for shipping. In the face of this heightened risk, the oil-producing Gulf countries will regret not moving faster on alternative export options. Only around half the region’s current crude oil production could be transported out via pipeline if the Strait were closed, with the UAE and Saudi Arabia the best prepared, and Iraq and Kuwait the worst.

9 July
Dani Rodrik: What’s Driving Populism?
If authoritarian populism is rooted in economics, then the appropriate remedy is a populism of another kind – targeting economic injustice and inclusion, but pluralist in its politics and not necessarily damaging to democracy. If it is rooted in culture and values, however, there are fewer options.
(Project Syndicate) Is it culture or economics? That question frames much of the debate about contemporary populism. Are Donald Trump’s presidency, Brexit, and the rise of right-wing nativist political parties in continental Europe the consequence of a deepening rift in values between social conservatives and social liberals, with the former having thrown their support behind xenophobic, ethno-nationalist, authoritarian politicians? Or do they reflect many voters’ economic anxiety and insecurity, fueled by financial crises, austerity, and globalization?
Ultimately, the precise parsing of the causes behind the rise of authoritarian populism may be less important than the policy lessons to be drawn from it. There is little debate here. Economic remedies to inequality and insecurity are paramount.

Power and Interdependence in the Trump Era
Joseph Nye
(Project Syndicate) The US (and other countries) have legitimate complaints about Chinese economic behavior such as the theft of intellectual property and subsidies to state-owned companies that have tilted the playing field in trade. Moreover, there are important security reasons for the US to avoid becoming dependent on Chinese companies like Huawei for 5G wireless. And China has refused to allow Facebook or Google to operate within its Great Firewall for security reasons related to freedom of speech. But it is one thing to restrict certain technologies and companies for security reasons and quite another to cause massive disruption of commercial supply chains to develop political influence. It is not clear how long the influence will last or what the long-term costs will turn out to be.
Even if other countries are unable to extricate themselves from US networks of interdependence in the short term, incentives to do so will strengthen in the longer run. In the meantime, there will be costly damage to the international institutions that limit conflict and create global public goods. As Henry Kissinger has pointed out, world order depends not only on a stable balance of power, but also on a sense of legitimacy, to which institutions contribute. Trump was right to respond to Chinese economic behavior, but he was wrong to do it without regard for the costs imposed on US allies and international institutions. The same problem weakens his policies toward Iran and Europe.Alliances like NATO stabilize expectations, and the existence of institutions like the United Nations, the Nuclear Non-Proliferation Treaty, and the International Atomic Energy Agency enhances security. Open markets and economic globalization can be disruptive, but they also create wealth (albeit often unequally distributed). … And regardless of what a nativist populist backlash does to economic globalization, ecological globalization is unavoidable. Greenhouse gases and pandemics do not respect political borders. The laws of populist politics, which have dictated Trump’s denial of the science and his withdrawal of the US from the 2015 Paris climate agreement, are incompatible with the laws of physics.
States will increasingly need a framework to enhance cooperation on the use of the sea and space, and on combating climate change and pandemics. Referring to such a framework as a “liberal international order” confuses choices by conflating promotion of liberal democratic values with the creation of an institutional framework for promoting global public goods. China and the US disagree about liberal democracy, but we share an interest in developing an open, rules-based system to manage economic and ecological interdependence.(3 July 2019)

2 April
Harold James: The New-Old Globalization
(Project Syndicate) Once upon a time, everyone assumed that there was a single phenomenon called globalization, whereby cross-border flows of financial capital drove innovation, industrialization, development, and trade. But Chinese President Xi Jinping’s Belt and Road Initiative (BRI) advances an alternative vision of globalization, based on an integrated system of physical infrastructure. The material world of ships and trains will replace the immaterial world of financialization.
But while Xi conceived the BRI as a straightforward way to consign the old, unstable Western-led globalization to the dustbin of history, it is also meant to address a particular domestic challenge: namely, the concentration of economic development along China’s coast, where a wealthy, sophisticated seaboard elite has emerged. Social stability demands that the gains from China’s extraordinary growth be distributed more evenly throughout the country.
This is not just a Chinese issue, of course. Historically, globally significant cities have almost always been littoral, located either on coastlines or navigable rivers. Centuries ago, Amsterdam, Antwerp, Genoa, and Venice – even ancient Athens and Tyre – served as the world’s commercial hubs. Today, metropolises like London, New York, Tokyo, Hong Kong, Shanghai, Dubai, Sydney, and Rio de Janeiro perform a similar role.

12 March
Is modern monetary theory nutty or essential?
Some eminent economists think the former
“MODERN MONETARY THEORY” sounds like the subject of a lecture destined to put undergraduates to sleep. But among macroeconomists MMT is far from soporific. Stephanie Kelton, a leading MMT scholar at Stony Brook University, has advised Bernie Sanders, a senator and presidential candidate. Congresswoman Alexandria Ocasio-Cortez, a young flag-bearer of the American left, cites MMT when asked how she plans to pay for a Green New Deal.
As MMT’s political stock has risen, so has the temperature of debate about it. Paul Krugman, a Nobel prizewinner and newspaper columnist, recently complained that its devotees engage in “Calvinball” (a game in the comic strip “Calvin and Hobbes” in which players may change the rules on a whim). Larry Summers, a former treasury secretary now at Harvard University, recently called MMT the new “voodoo economics”, an insult formerly reserved for the notion that tax cuts pay for themselves. These arguments are loud, sprawling and difficult to weigh up. They also speak volumes about macroeconomics.

8 March
Why Economics Must Get Broader Before It Gets Better
By Mohamed A. El-Erian
(Project Syndicate) The profession owes its deteriorating reputation largely to excessive reliance on its own self-imposed orthodoxies. With more openness to interdisciplinary approaches and the broader use of existing analytical tools, particularly those offered by behavioral science and game theory, mainstream economics could start to overcome its shortcomings.
Three recent developments underscore the urgency of this challenge. In the 12 months between the World Economic Forum’s 2018 and 2019 annual gatherings in Davos, those in attendance went from celebrating a synchronized global growth pickup to worrying about a synchronized global slowdown. Notwithstanding the deterioration in European growth prospects, neither the extent nor the speed of the change in consensus seems warranted by economic and financial developments, which suggests that economists may have misdiagnosed the initial conditions.
A second area of concern is monetary policy.  …
A third area of concern is the Sino-American trade conflict, which is more controversial, owing to its political nature. So far, the vast majority of economists have trotted out the conventional argument that tariffs (real or threatened) are always bad for everyone. In doing so, they have ignored work from their own profession showing how the promised benefits of trade, while substantial, can be undermined by market and institutional imperfections. Those who wanted to make a productive contribution to the debate should have taken a more nuanced approach, applying tools from game theory to distinguish between the “what” and the “how” of trade warfare.

30 January
Dyson’s Singapore sling
British billionaire’s move has less to do with UK gloom than with Asia’s rise
(Nikkei Asian Review) Sir James Dyson’s decision to relocate his business headquarters from the U.K. to Singapore has been interpreted mostly in the lurid terms of Britain’s Brexit debate. Reaction to the move has focused on the apparent contradiction between the entrepreneur’s support for leaving the European Union and his decision to abandon Britain for the temptations of lower Singaporean tax rates.
But in truth Dyson’s shift is neither a complete disaster for Britain nor an unalloyed triumph for Singapore. It probably doesn’t even have much to do with tax. Rather, it illustrates a bigger story that is less about British decline, and more about the importance of getting close to rising Asia.
There is a further irony that ought not be lost on Brexiters and their naive vision of a future “global Britain.” Singapore is on the cusp of signing a free trade deal with the European Union. In the future, it is not impossible that Dyson could end up with better access to European markets having based himself in Asia rather than the U.K. Marooned outside the EU, more British-based businesses are now likely to be tempted by foreigners offering favorable terms, as Singapore doubtless did.
But Dyson’s migration also illustrates three more important lessons about the future of globalization, regarding manufacturing, consumption, and shifting growth patterns in Asia.
First, Dyson is a British brand, but it has not made products in the U.K. for the best part of two decades. Much of its factory production take place just over the border from Singapore, in southern Malaysia. … A future of rising trade tensions, and thus rising trade costs, will push many companies to reshape their global production systems, moving their focus to particular regions instead. This could see some manufacturing “re-shored” to the U.S. and Europe. But it is just as likely to mean that complex central headquarters functions will be relocated to Asia.

24 January
Paul Krugman: The Sum of Some Global Fears
Setting the table for a smorgasbord recession.
I’m not saying that a global recession is necessarily about to happen. But the risks are clearly rising: The conditions for such a slump are now in place, in a way they weren’t even a few months ago.

14 January
Ivanka Trump Will Help Pick New World Bank Leader, but It Won’t Be Her
Ivanka Trump, Nikki Haley In Race For World Bank President’s Post: Report (13 January)

7 January
World Bank President Jim Yong Kim resigns abruptly
(Reuters) Jim Yong Kim abruptly resigned as president of the World Bank more than three years ahead of schedule, potentially sparking an international tussle over who replaces him as the Trump administration questions the development lender’s purpose.
The U.S. is the largest shareholder in the development lender, which was conceived during the Second World War to finance the reconstruction of Europe. It has since focused on alleviating extreme poverty around the world.
An American has run the bank since it was established in 1945. Its sister institution, the International Monetary Fund, has always been led by a European, as part of an unwritten understanding between Western powers. Former French Finance Minister Christine Lagarde is the current head of the IMF.
But some nations have been pushing for a representative from emerging markets. The selection process is managed by the bank’s board of executive directors, which represents the lender’s 189 member countries.
President Donald Trump will now be expected to put forward a preferred American candidate to replace Kim, who was nominated by Barack Obama. The choice could prove controversial if the nominee shares Trump’s own disdain for international institutions such as the World Trade Organization and NATO. … Trump’s decision could affect how the bank deploys its capital at a time when emerging markets are facing growing stress from rising U.S. interest rates and trade tensions. The World Bank committed nearly US$64 billion in loans to developing countries in the fiscal year ended June 30 last year.

2018

26 November
The G20 summit is a reminder of how little the US is doing for American workers
President Donald Trump will meet with world leaders in Argentina later this month for the annual economic summit.
(Vox) When world leaders convene at the annual G20 summit in Argentina later this week, they will have to confront an uncomfortable truth: They’re not making much progress in confronting global poverty and income inequality and meeting other sustainable development goals.
The US, in particular, is trailing every other country in the group. The United States scored the lowest in a United Nations index that ranks how much action each government in the G20 has taken to meet development goals. And the US is failing nearly all of its goals related to creating more inclusive, sustainable job growth.
During the two-day meeting, world leaders will need to address how they’ve fallen short in delivering the promise their labor ministers made last year to “promote employment pathways for our societies and economies that foster strong, sustainable, balanced and inclusive economic growth benefiting all countries and people so that no one is left behind.”

8 November
Qian Liu: From Economic Crisis to World War III
The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.
(Project Syndicate) The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.
… monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.

19 October
The Prophets of Cryptocurrency Survey the Boom and Bust
Inside the ongoing argument over whether Bitcoin, Ethereum, and the blockchain are transforming the world.
By Nick Paumgarten
(New Yorker magazine Oct 22) The dizzying run-up in crypto prices in 2017 was followed, this year, by a long, lurching retreat that, as the summer gave way to fall, began to seem perilous. As with notorious stock-market and real-estate bubbles, innocents had been taken in and cleaned out. But both boom and bust reflected an ongoing argument over what cryptocurrencies and their technological underpinnings might be worth—which is to say, whether they are, as some like to ask, real, …
Jamie Dimon, the chief executive of J. P. Morgan, labelled crypto “a fraud”; Warren Buffett used the phrase “rat poison squared.” Legions of skeptics and technophobes, out of envy, ignorance, or wisdom, savored such pronouncements, while the true believers and the vertiginously invested mostly brushed it aside. They had faith that a new order was nigh. They pumped but did not dump.
The larger world has tended to see crypto as an asset class and, therefore, in terms defined by arrows pointing up or down, as numbers displayed either in red or in green. The fact that prices have sunk so far, from the great hype cycle of 2017, leads some to conclude that its relevance is past, its demise nigh. As a method of payment, it remains flawed, owing to sparse adoption and price volatility—it’s hard to open your crypto wallet when what you spend today on a six-pack might be enough next year to buy the brewery. Conversely, as a store of value, it has proved more fickle than the price of gold or real estate in Peru. As for its utility as a vehicle for systemic and societal renewal, it depends on whether society takes it up.

15 October
The Big Blockchain Lie
By Nouriel Roubini
(Project Syndicate) Now that cryptocurrencies such as Bitcoin have plummeted from last year’s absurdly high valuations, the techno-utopian mystique of so-called distributed-ledger technologies should be next. The promise to cure the world’s ills through “decentralization” was just a ruse to separate retail investors from their hard-earned real money.
No serious institution would ever allow its transactions to be verified by an anonymous cartel operating from the shadows of the world’s authoritarian kleptocracies. So it is no surprise that whenever “blockchain” has been piloted in a traditional setting, it has either been thrown in the trash bin or turned into a private permissioned database that is nothing more than an Excel spreadsheet or a database with a misleading name.

10 October
IMF strives to get its multilateral mojo back
The IMF needs to take steps to bolster its reputation as the guardian of multilateralism, ahead of a possible meltdown in emerging markets that could put the Fund centre stage of any rescue effort.
(globalcapital.com) “The world needs a new multilateralism.” The warning was stark and momentous given that it came from the head of the fiscal department at the International Monetary Fund, its deputy chief economist and general counsel just a few weeks before the Fund’s annual meetings.
The three senior executives were encapsulating a growing sense of pessimism among member states, financial organisations and commentators that the IMF was being sidelined by a rising tide of protectionism especially in the United States.
… the reason for the weakening of the IMF’s position has not come so much from leaders such as Donald Trump and Hungary’s Viktor Orban thumbing their noses at the multilateral organisations, but from the groundswell of public opposition that has propelled them into power. Voters are themselves questioning the benefits of international co-operation, and often for good reason. Economic inequality within nations is widening, especially in advanced economies.

9 October
World Economic Outlook, October 2018
(IMF) Global growth for 2018–19 is projected to remain steady at its 2017 level, but its pace is less vigorous than projected in April and it has become less balanced. Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded. Global growth is projected at 3.7 percent for 2018–19—0.2 percentage point lower for both years than forecast in April. The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills.

27 September
Hidden Costs of Climate Change Running Hundreds of Billions a Year
A new report warns of a high price tag on the impacts of global warming, from storm damage to health costs. But solutions can provide better value, the authors say.
A global tipping point: Half the world is now middle class or wealthier
(Brookings) Why does it matter that a middle-class tipping point has been reached and that the middle class is the most rapidly growing segment of the global income distribution? Because the middle class drive demand in the global economy and because the middle class are far more demanding of their governments. …
The middle class also puts pressure on governments to perform better. They look to their governments to provide affordable housing, education, and universal health care. They rely on public safety nets to help them in sickness, unemployment or old age. But they resist efforts of governments to impose taxes to pay the bills. This complicates the politics of middle-class societies, so they range from autocratic to liberal democracies. Many advanced and middle-income countries today are struggling to find a set of politics that can satisfy a broad middle-class majority.
The tipping point in the world today offers opportunities for business but complications for policymakers.

13 September
The US-Canada fight over dairy exposes an inconvenient truth about free markets
(Quartz) The world order built on pushing free trade NAFTA, the WTO, and other transnational institutions pushed globalization too far. A backlash is underway, evident in populist upsurges like Trump’s victory and Brexit.
Nation-states are filling the void as they claw back authority from global organizations. The question is what form the restoring of national sovereignty will take. Can countries wrest back control of their economic policies while preserving the mutually beneficial elements of open markets? Or will this impulse give way to corrosive nationalism that wields trade threats like a cudgel?
The answers will determine global prosperity for generations. And so far, what can be divined from the great North American milk fight offers some ominous clues to that outcome.

13 September
How the 2008 financial crisis crashed the economy and changed the world
(PBS Newshour) Ten years ago this week, the collapse of Lehman Brothers became the signal event of the 2008 financial crisis. Its effects and the recession that followed, on income, wealth, disparity and politics are still with us. Economics correspondent Paul Solman walks through those events and consequences with historian Adam Tooze, author of “Crashed: How a Decade of Financial Crises Changed the World.”

12 September
The Next Financial Calamity Is Coming. Here’s What to Watch.
The global financial crisis is fading into history. But the roots of the next one might already be taking hold.
Financial crises strike rich countries every 28 years on average. Often, the break between busts is much shorter.
Fast-growing pockets of debt, as in the last time around, look like potential sources of problems. They’re nowhere near as big as the mortgage bubble, and no blow-ups appear imminent. [BUT] The amount of American student debt — roughly $1.5 trillion — has more than doubled since the financial crisis. It is now the second-largest category of consumer debt outstanding, after mortgages.
Public colleges and universities, hurt by state budget cuts, increased tuition. The drop in house values also made it harder for families to tap into their home equity to pay for tuition. As a result, the financial burden shifted to students, who took on heavier debt loads to pay for school. … The bigger issue is whether growing amounts of student debt may be a drag on consumers. Some think it could be playing a role in the decline of homeownership over the last decade, an important driver of spending in the consumption-led American economy.

9 August
The example is Australian, but the topic is universal:
How Globalization Has Broken the Chain of Responsibility
(Sapiens) In today’s accelerating and overheating world, the gap between the people affected by change in local environments and the people in charge is growing ever wider
In the mid-1800s, when Karl Marx and Friedrich Engels wrote The Communist Manifesto, capitalists were easily identifiable. They were typically men, and the property owner was the proverbial man in the top hat, with his waistcoat, paunch, cigar, and gold watch. Today, the situation is far more complicated since ownership structures are transnational, corporate, and complex. Even in democratic countries, where political leaders are elected, there is a widespread feeling that the “powers that be” are further away and less approachable than before, and that there is nowhere to go with your complaints. In other words, both the economy and politics are less manageable, more difficult to understand, and harder to effectively react to.
There are alternatives to the current situation of powerlessness. One way to counter globalized power is to globalize the response by forging alliances between local community groups and transnational organizations that are capable of putting pressure on governments, public opinion, and corporations.

18 July
Nouriel Roubini: Trump May Kill the Global Recovery
In a sharp departure from this time last year, the global economy is now being buffeted by growing concerns over US President Donald Trump’s trade war, fragile emerging markets, a slowdown in Europe, and other risks. It is safe to say that the period of low volatility and synchronized global growth is behind us.
(Project Syndicate) Though the world economy is still experiencing a lukewarm expansion, growth is no longer synchronized. Economic growth in the eurozone, the United Kingdom, Japan, and a number of fragile emerging markets is slowing. And while the US and Chinese economies are still expanding, the former is being driven by unsustainable fiscal stimulus.
Worse still, the significant share of global growth driven by “Chimerica” (China and America) is now being threatened by an escalating trade war. The Trump administration has imposed import tariffs on steel, aluminum, and a wide range of Chinese goods (with many more to come), and it is considering additional levies on automobiles from Europe and the rest of the world. And currently the renegotiation of NAFTA is stalled. Thus, the risk of a full-scale trade war is rising.
Meanwhile, with the US economy near full employment, fiscal-stimulus policies, together with rising oil and commodity prices, are stoking domestic inflation. As a result, the US Federal Reserve must raise interest rates faster than expected, while also unwinding its balance sheet. And, unlike in 2017, the US dollar is now strengthening, which will lead to an even larger US trade deficit and more protectionist policies as Trump, assuming he remains true to form, blames other countries.

19 June
Canaries in the coal mine
As the global trading system fractures, multinational firms are cutting cross-border investment
(The Economist) To look only at the headline numbers, populism and protectionism seem to be weirdly good for global business. Look more closely, however, and it becomes clear that the decay of globalisation is accompanied by a steady demoralisation of multinationals. Cross-border investment by firms is falling and bosses are being more cautious, an impulse further amplified by trade tensions. This is unlikely to change while Donald Trump remains in office.
Since 2015 … the profits of the world’s biggest 3,000 listed firms have risen by 44% in dollar terms. Share prices have soared. As for tariffs, for now they are little more than an irritant for most bosses. Plenty of Western firms are still keen on exotic thrills far beyond their borders—in May, Walmart bid $16bn for Flipkart, an Indian e-commerce company. Starbucks is opening a new shop in China every 15 hours.
Look more closely, however, and you will see that the decay of globalisation is accompanied by a steady demoralisation of multinationals. Between the fall of the Berlin Wall in 1989 and the subprime crisis some 20 years later, a few thousand corporate cosmopolitans became ever more powerful, acting as the brains of the global economy, controlling intellectual property as well as international supply chains. During the past decade, however, they got stuck in a rut.

15 June
From our friend Nick Rost van Tonningen (Nick’s Gleanings II 274)
Shanghai Cooperation Organization – The Western media gave massive, continuous & breathless coverage to President Trump’s latest ‘bull in the china shop’, “Make America Great Again” histrionics at the June 8-9 G-7 meeting in Canada to dismantle his predecessors’ laboriously constructed post-WW II global economic-political-financial institutional infrastructure. But it gave scant coverage to the June 9-10 meeting in Quingdao, China of the Council of Heads of State of the Shanghai Cooperation Organization that, apart from the Presidents of its eight member countries2, was also attended by those of Afghanistan, Belarus, Iran & Mongolia, Nigeria’s Amina Mohammed, one of the five UN Deputy Secretary-Generals, Victoria Kwakwa, the Ghanaian World Bank Vice President for East Asia, & Changyong Rhee, the Korean Director of the IMF Asia & Pacific Department, and by several heads of non-Western international agencies – in long-term global macro economic & political terms, the Qingdao gathering may outweigh any short-term gains Trump may have made in Singapore.
Shanghai Cooperation Organisation Endorses Trade Facilitation Plan
(ICTSD) As the host of this year’s meeting, Chinese President Xi Jinping highlighted regional cooperation’s achievements so far, as well as its future potential, while also acknowledging the wider global context on trade and the economy.
“While unilateralism, trade protectionism and backlash against globalisation are taking new forms, in this global village of ours where countries’ interests and future are so interconnected, the pursuit of cooperation for mutual benefit represents a surging trend,” he said, according to a transcript of his remarks published in Xinhua.
Influential SCO seeks to supplant G7
(Arab News) … the group has developed into the largest regional bloc in the world in terms of geographical coverage and population. Covering three-fifths of the Eurasian continent and representing nearly half of the world’s population, the organization is quickly becoming one of the world’s most powerful and influential groups.
Most recently, as US President Donald Trump threw the G7 summit into disarray, the leaders of the SCO meeting stressed unity and free trade. There is no doubt that the organization is becoming more influential but, with the US seeming to have unilaterally resolved Asia’s most urgent security concern in North Korea, perhaps American leadership cannot be said to have waned.

2 May
(The Economist) The genesis of the next crisis is probably lurking in corporate debt. Investors are getting less reward for the same amount of risk. Combine this with the declining liquidity of the bond market (because banks have withdrawn from the market-making business) and you have the recipe for the next crisis. It may not happen this year, or even next. But there are already ominous signs, writes our financial-markets columnist

23 March
Globalization’s Backlash Is Here, at Just the Wrong Time
By Neil Irwin
(NYT) The world economy became more interconnected in the 1990s and 2000s, delivering immediate pain to rich countries, along with benefits that only now are starting to be more apparent. … the anti-globalization drive that is spreading across the Western world may be coming at exactly the wrong time — too late to do much to save the working-class jobs that were lost, but early enough to risk damaging the ability of rich nations to sell advanced goods and services to the rapidly expanding global middle class.
“Global manufacturing has already reconfigured itself. That change happened, and the horse is out of the barn. We don’t think globalization is over, but it has taken a new form.” … it’s not a form of globalization that endangers factory jobs, but one that could have big consequences in other areas — leading to more competition for technologically advanced white-collar jobs, while also creating enormous new opportunities for American and Western European firms. That, in turn, helps explain why much of the trans-Pacific Partnership, the trade deal that the Trump administration withdrew from, focused on intellectual property rights, data security and privacy.

1 March
The Bitcoin Landscape
In a decade, bitcoin has grown from an obscure proposal for a virtual currency to an entire ecosystem of companies and services. How does it all work?
(Politico March/April 2018) How does it all work? In the imaginary town shown here, the trains represent the “blockchain,” the encrypted record of transactions at the heart of this new economy. The huge “B” represents the miners, whose high-speed computers verify transactions and keep the shared system running. And around that, a host of services have sprung up—some virtual and some physical, some legitimate and some shady—like an Old West boomtown putting down roots.

27 January
Every One of the World’s Big Economies Is Now Growing
(NYT) A decade after the world descended into a devastating economic crisis, a key marker of revival has finally been achieved. Every major economy on earth is expanding at once, a synchronous wave of growth that is creating jobs, lifting fortunes and tempering fears of popular discontent.
No tidy, all-encompassing narrative explains how the world has finally escaped the global downturn. The United States has been propelled by government spending unleashed during the previous administration, plus a recent $1.5 trillion shot of tax cuts. Europe has finally felt the effects of cheap money pumped out by its central bank.
In general terms, improvement owes less to some newfound wellspring of wealth than the simple fact that many of the destructive forces that felled growth have finally exhausted their potency.
The long convalescence has yielded a global recovery that is far from blistering in pace, and geopolitical risks threaten its demise. Many economists are skeptical that the benefits of growth will reach beyond the educated, affluent, politically connected class that has captured most of the spoils in many countries and left behind working people whose wages have stagnated even as jobless rates have plunged.
And still the fact that every major swath of the globe is expanding is a source of optimism. There is no guarantee that this expansion will prove more equitable.

26 January
Blockchain’s Broken Promises
By Nouriel Roubini
Boosters of blockchain technology compare its early days to the early days of the Internet. But whereas the Internet quickly gave rise to email, the World Wide Web, and millions of commercial ventures, blockchain’s only application – cryptocurrencies such as Bitcoin – does not even fulfill its stated purpose.
(Project Syndicate) Clearly, Bitcoin and other cryptocurrencies represent the mother of all bubbles, which explains why every human being I met between Thanksgiving and Christmas of 2017 asked me if they should buy them. Scammers, swindlers, charlatans, and carnival barkers (all conflicted insiders) have tapped into clueless retail investors’ FOMO (“fear of missing out”), and taken them for a ride.
As for the underlying blockchain technology, there are still massive obstacles standing in its way, even if it has more potential than cryptocurrencies. Chief among them is that it lacks the kind of basic common and universal protocols that made the Internet universally accessible (TCP-IP, HTML, and so forth). More fundamentally, its promise of decentralized transactions with no intermediary authority amounts to an untested, Utopian pipedream. No wonder blockchain is ranked close to the peak of the hype cycle of technologies with inflated expectations.

January 2018
The Global Risks Report 2018
(WEF) The Global Risks Report 2018 is published at a time of encouraging headline global growth. Any breathing space this offers to leaders should not be squandered: the urgency of facing up to systemic challenges has intensified over the past year amid proliferating signs of uncertainty, instability and fragility.
This year’s report covers more risks than ever, but focuses in particular on four key areas: environmental degradation, cybersecurity breaches, economic strains and geopolitical tensions. And in a new series called “Future Shocks” the report cautions against complacency and highlights the need to prepare for sudden and dramatic disruptions.
The 2018 report also presents the results of our latest Global Risks Perception Survey, in which nearly 1,000 experts and decision-makers assess the likelihood and impact of 30 global risks over a 10-year horizon. Over this medium-term period, environmental and cyber risks predominate. However, the survey also highlights elevated levels of concern about risk trajectories in 2018, particularly in relation to geopolitical tensions. Link to Report

World Economic Outlook Update, January 2018
Brighter Prospects, Optimistic Markets, Challenges Ahead
(IMF) The current cyclical upswing provides an ideal opportunity for reforms. Shared priorities across all economies include implementing structural reforms to boost potential output and making growth more inclusive. In an environment of financial market optimism, ensuring financial resilience is imperative.
Risks to the global growth forecast appear broadly balanced in the near term, but remain skewed to the downside over the medium term. On the upside, the cyclical rebound could prove stronger in the near term as the pickup in activity and easier financial conditions reinforce each other. On the downside, rich asset valuations and very compressed term premiums raise the possibility of a financial market correction, which could dampen growth and confidence. A possible trigger is a faster-than-expected increase in advanced economy core inflation and interest rates as demand accelerates. If global sentiment remains strong and inflation muted, then financial conditions could remain loose into the medium term, leading to a buildup of financial vulnerabilities in advanced and emerging market economies alike. Inward-looking policies, geopolitical tensions, and political uncertainty in some countries also pose downside risks.
Policies
Two common policy objectives tie advanced, emerging, and developing economies together. First, the need to raise potential output growth—through structural reforms to lift productivity and, especially in advanced economies with aging populations, enhance labor force participation rates—while making sure that the gains from growth are shared widely. Second, the imperative to increase resilience, including through proactive financial regulation and, where needed, balance sheet repair and strengthening fiscal buffers. Action is particularly important in a low-interest-rate, low-volatility environment with potential for disruptive portfolio adjustments and capital flow reversals. The current cyclical upswing provides a unique opportunity for structural and governance reforms. Full Text (PDF)

Global Economic Prospects
Broad-Based Upturn, but for How Long?
Global Outlook Highlights
(World Bank) Global growth is expected to be sustained over the next couple of years—and even accelerate somewhat in emerging market and developing economies (EMDEs) thanks to a rebound in commodity exporters. Although near-term growth could surprise on the upside, the global outlook is still subject to substantial downside risks, including the possibility of financial stress, increased protectionism, and rising geopolitical tensions. With output gaps closing or closed in many countries, supporting aggregate demand with the use of cyclical policies is becoming less of a priority. Focus should now turn to the structural policies needed to boost longer-term productivity and living standards

26 January
IMF chief warns Trump’s tax cuts could destabilise global economy
Reforms may threaten recovery and lead to bigger US budget deficit, says Christine Lagarde
(The Guardian) Christine Lagarde singled out Trump’s tax reforms as one of three risks that could destabilise the current economic recovery, especially given the boom in stock markets in the past year.
“While the US tax reforms certainly will have positive effects in the short term, for the US and other countries around, it might also lead to serious risks,” Lagarde told the World Economic Forum in Davos.
“That has an impact on financial vulnerability, particularly given the high asset prices that we see around the world, and the easy financing that it still available,” she added.
Lagarde cautioned against people becoming too complacent about the pick-up in global growth reported by the IMF at the start of the WEF’s annual meeting. The IMF raised its forecasts for global expansion to 3.9% this year and in 2019, reporting that all major economies – the US, the eurozone and Japan – are doing better.

The World Bank’s new plan: Work with Wall Street
What can you do when your efforts are dwarfed by the funds pouring into developing countries through financial markets? For Jim Yong Kim, the president of the World Bank, the solution was to partner with investors.
But not everyone at the bank is comfortable with the approach. More from Landon Thomas Jr. of the NYT:
“This would be a cultural and organizational shift for the bank, which has not engaged with the private sector in a substantial way,” said Joel Hellman, a former top economist at the bank who is now dean of Georgetown’s School of Foreign Service. “World Bank staffers are used to talking to governments, and now they have to leverage the private sector? It is a different skill set, and flexibility is not the hallmark of development institutions.”
In other World Bank News: Its chief economist, Paul Romer, resigned, weeks after apologizing to Chile for the way it was treated in a report on countries’ competitiveness.

23 January
Globalization losing its lustre, Indian PM tells economic forum
New U.S. tariffs could backfire, German business leader warns at World Economic Forum meetings in Davos
Protectionism is gaining ground and globalization is losing its attractiveness, Indian Prime Minister Narendra Modi told the World Economic Forum on Tuesday.
Modi is leading a big government and business delegation at the summit in Davos, Switzerland, the first Indian prime minister do so in 21 years, aiming to showcase India as a fast-growing economic power and a potential driver of global growth.
India’s economy is expected to more than double and touch $5 trillion by 2025, Modi said. The last time an Indian prime minister attended the Davos talks, India’s GDP was “little more than $400 billion and now two decades later it’s about six times that amount.”
Commentary: For Trump, the great Davos face-off
(Reuters) Since its foundation in 1971, the World Economic Forum in Davos has been a byword for the growing consensus around an increasingly globalized world. Now, President Donald Trump is on his way to tell those who consider themselves the global elite that they have been wrong on just about everything.
For his audience back home, the U.S. president and those around him face a difficult balancing act. Trump knows his political base would like nothing more than to see him criticize the chief executives, celebrities and more liberal politicians gathered in the Alps.
At the same time, the administration has no shortage of things it would like to achieve. The summit offers unparalleled opportunities for backroom dealing and short and surreptitious meetings.
In an interview with the Wall Street Journal, Trump said his aim in going to Davos was to be a “cheerleader for the country.” Treasury Secretary Steven Mnuchin said the president would be heavily promoting his “America first” economic doctrine, a protectionist message that he also pushed heavily on his November trip to Asia.

22 January
Trump tax cuts will bring short-term global growth surge, says IMF
Davos report says changes will encourage investment, but that shot in the arm will only be short-lived
Davos attendees should beware the slowing of potential growth
(Brookings) The global economy is finally delivering solid growth and outpacing expectations after several years of disappointing performance, something
World Economic Forum attendees in Davos will surely celebrate. At the same time, they will be doubling down on their efforts to find solutions for making globalization more equitable