These publications demonstrate the need to transform the existing market economy and outline ways to optimize it in order to ultimately develop and create a model of a fair social order:
2020-12-08 09:00
Saxo Bank 2021 Outrageous Predictions: The Future is
Now
Saxo Bank has today released its 10 Outrageous
Predictions for 2021. The predictions focus on a series of
unlikely but underappreciated events which, if they were to occur, could send
shockwaves across financial markets:
1.
Amazon “buys” Cyprus
2.
Germany bails out France
3.
Blockchain tech kills fake news
4.
China’s new digital currency inspires tectonic shift in capital flows
5.
Revolutionary fusion design catapults humanity into energy abundance
6.
Universal basic income decimates big cities
7.
Disruption dividend creates Citizens Technology Fund
8.
A successful Covid-19 vaccine kills companies
9.
Sun shines on silver, which sizzles on solar panel demand
10.
Next-generation tech supercharges frontier and emerging markets
While these predictions do
not constitute Saxo’s official market forecasts for 2021, they represent a
warning against the potential misallocation of risk among investors who might
typically assign just a one percent chance of these events materialising.
It’s an exercise in considering the full extent of what is possible, even if
not necessarily probable, and particularly relevant in the context of this
year’s unexpected Covid-19 crisis. Inevitably the outcomes that prove the most
disruptive (and therefore outrageous) are those that are a surprise to
consensus.
Commenting on this
year’s Outrageous Predictions, Chief Investment Officer at Saxo Bank, Steen
Jakobsen said:
“For the 2021
batch of Outrageous Predictions, the Covid-19 pandemic and the painful US
Election cycle have brought what might have seemed a distant future a quantum
leap closer, accelerating nearly every underlying social and technological
super-trend. Simply put, the traumas of 2020 mean that in 2021, the future is
now.
“We’ve seen the
fastest bear market and recovery in history, as well as central bank balance
sheets and fiscal deficits exploding at an unprecedented pace. So our
not-so-outrageous prediction is that 2021 will bring the beginning of a reality
check to the idea that “extend and pretend” can stretch to infinity and beyond,
even as markets have been pricing in that very expectation.
“Covid-19 has
accelerated all major super-trends. A structural shift in the labour market is
at the top of the list but at the same time, the total economic pie will be
even larger – even per capita. Universal Basic Income is coming, and this will
lead to a new way of living and new priorities. It will also require a new way
to redistribute the economic pie, without which we would see a self-limiting
vicious concentration of all resources into the hands of monopoly and rentier
incumbents. One key enabler of that future is a rise in energy available per
capita, with almost no negative impact on our natural resources, and with
sufficient extra output available to power the high-end technology systems like
advanced AI and quantum computing. This would bring us close to ending cancer,
preventing the fall-out from future pandemic risks, and dealing with fake news
through super-charged blockchain technology.”
The
Outrageous Predictions 2021 publication is available here with headline
summaries below:
1. Amazon “buys” Cyprus
2021 sees Amazon and other
online monopoly and infotech giants casting an increasingly wary eye on
governments looking to take them down a notch for having become too powerful,
and for paying very low tax rates.
These companies have long
employed an army of lobbyists, with some of them even taking up
quasi-governmental approaches to the situation. Take Microsoft, which has
launched a United Nations representation office in New York and hired a
diplomat to run European government affairs. At the same time, Facebook has
even established a “Supreme Court” to oversee user complaints and other issues.
In 2021, as the heat from
official quarters rises, Amazon makes its move, redomiciling its EU
headquarters to Cyprus. The country welcomes the giant corporation and the tax
revenue that will help it reduce its debt-to-GDP ratio of nearly 100%, having
chafed at the heavy-handed treatment by the EU during the 2010-12 EU sovereign
debt crisis.
Amazon consultants “help”
Cyprus to rewrite its tax code to mimic Ireland’s, but with even lower levels
of corporate and other taxes, with the country’s leaders and its population
happily in its thrall from the financial windfall and lower tax rates.
But EU regulators quickly
get wise to what is going on and move against Amazon, forcing the company to
change its practices, and forcing Cyprus and other EU countries to harmonise
tax rules. The US and other countries also move against monopolies in 2021, as
these companies are punished for their hubris.
Trade: Short monopoly tech
companies, especially AMZN.
2. Germany bails out France
France is one of the
European countries facing the highest wall of debt in the coming years. Before
the Covid-19 pandemic outbreak, public debt was flirting with the 100% of GDP
threshold and private debt was skyrocketing, reaching nearly 140% of GDP – far
more than that of Italy (106%) or Spain (119%). And the emergency pandemic
response has only accelerated the piling on of debt, with the level of public
debt expected to rise above 120% of GDP in 2021.
Despite a massive stimulus
package of €100bn and a loan scheme in which the state has guaranteed up to 90%
of the loans for companies, France is unable to avoid a wave of bankruptcies as
many companies in the services sector are unable to cope with the series of
“stop and go” lockdowns. Investors are getting increasingly gloomy about the
future return on equity, which triggers massive selling of French megabanks.
Net revenue drops and loan provisions are on the rise, sending French banks’
market capitalisation and price-to-tangible book ratio to unprecedentedly low
levels. Given the poor state of public finances and the already extraordinarily
high level of debt, France has no other choice but to come begging cap in hand
to Germany, in order to allow the ECB to print enough euros to enable a massive
bailout of its banking system, to prevent a systemic collapse.
Trade: probably
safer to buy the French banks after the bailout than selling them before, but
both might be possible.
3. Blockchain tech kills fake news
In 2021, the mounting threat
of disinformation and the erosion of trust in even well-established news
providers reaches a critical level, demanding an industry response. Major media
companies and social platforms are forced to impose new countermeasures against
fabricated and misleading news. The enabling technology is a massive shared
blockchain network for news content, which allows distribution of news in an
immutable way with a validity check of both the content and the source. With a
shared ledger structure, any content alterations would immediately be visible
to everyone, and every news item is always traceable to its original source,
suppressing misinformation that other sources can’t verify.
Companies like Twitter and
Facebook invest heavily in this blockchain tech, motivated first and foremost
by self-preservation as the threats of regulatory oversight we’ve seen in
recent years become white hot. Alternative news sites peddling conspiracy
theories like QAnon, disinformation about the coronavirus pandemic, falsified
evidence of election fraud and more will suddenly become
unavailable on major
platforms. Reality wins, and echo chambers lose.
Trade: Buy
Verizon, IBM, and social media companies.
4. China’s new digital currency
inspires tectonic shift in capital flows
The Digital Currency
Electronic Payment (DCEP) will be a blockchain-based digital version of the
Yuan (CNY) and in 2019, 80% of all payments in China were via WeChat Pay and
AliPay. The PBOC wants to take this one step further and in the process improve
the efficacy of monetary and fiscal policy through an increasingly cashless
society and with a goal of enhancing financial inclusiveness.
Allowing full access for
foreigners into Chinese capital markets will reduce the main barrier of concern
for foreign investors for using the CNY in trade and investment: its liquidity
and direct access to their investments inside China. Meanwhile, the stability
of the Chinese currency and the built-in traceability and oversight that
blockchain tech enables would virtually eliminate the risk of capital flight or
illegal transfers out of China.
This idea sits well inside
China’s Dual Circulation framework, improving transparency within China, while
growing the CNY’s use externally as a compelling alternative to the US dollar
in transactions. As a government-sponsored centralised currency, it will still
be viewed as “fiat currency” but from China’s perspective this is a feature of
the digital Yuan as it allows negative rates for “cash” and nominal GDP
targeting is far easier to achieve as well.
Opening up China’s capital
account and creating a currency that rivals the US dollar for reserve status
will help boost Chinese consumption, fund an entirely new Chinese pension
system and deepen the country’s capital markets.
Trade: Short the
US dollar and overweight Chinese government bonds and equities versus the rest
of the world.
5. Revolutionary fusion design
catapults humanity into energy abundance
he world will need much more
energy if our economy is to continue growing at anything approaching historical
rates. New alternative and green energy technologies are for the most part not
the answer. The world urgently needs a disruption in energy technology.
Enter 2021, in which an
advanced AI algorithm solves the super non-linear complexities of plasma physics,
clearing the way for commercial fusion energy. The SPARC fusion reactor design
from MIT, which has been validated in 2020 as a viable path to less costly
fusion energy, is massively improved by this new AI model. Engineers adjust the
SPARC design, with new models pointing to an energy gain factor of 20, creating
the biggest paradigm shift in energy technology since nuclear power. Even more
importantly, a massive investment from public and private sectors would allow
the implementation of the new fusion design within a few short years.
The mastery of fusion energy
opens up the prospect of a world no longer held back by water or food scarcity,
thanks to desalination and vertical farming. It’s a world with cheap
transportation, fully unleashed robotics and automation tech, making the
current young generation the last required to “work” by necessity. Best of all,
fusion energy allows nearly every country to become food- and
energy-independent and sees the most rapid and largest upgrade in living standards
ever witnessed.
Trade: The
political and investment winds favouring “traditional” green energy stop
blowing, and the wind energy ETF FAN falls by 50% in 2021.
6. Universal basic income decimates
big cities
The Covid-19 pandemic has
only accelerated the K-shaped recovery that was driving inequality and tearing
at the social fabric before the outbreak. Financialisaton of the economy has
meant that a single income is not nearly enough to support a family and
technology is another driver, with the growing, wage-deflationary forces of
software, AI and automation eroding a widening swath of jobs across industries.
The risk that societies are entirely torn apart results in the realisation that
the Covid-19 measures weren’t a mere panic response, but the start of a
permanent new universal basic income (UBI) reality.
n the new era of UBI,
tech-driven job redundancies, and frequent work from home jaunts made more
normal by Covid-19, city office real estate is suddenly faced with 100% or
worse overcapacity. Commercial office property values are crushed, together
with the commercial real estate containing restaurants and shops aimed at
servicing commuting worker drones.
The new UBI also drives
changes in the attitude toward work and life balance, allowing many young
people to stay in the communities where they grew up. Meanwhile, the
professionals and the marginal workers in big cities also begin to leave, as
job opportunities dry up and the quality of life in small, over-priced
apartments in higher crime neighbourhoods loses its appeal.
Trade: Short big
city REITs, for example SL Realty Trust (SLG), which exclusively invests in
Manhattan, NY office buildings, or Vornado Realty Trust (VNO), which invests in
Chicago, San Francisco and NYC.
7. Disruption
dividend creates Citizens Technology Fund
The march of technology,
combined with reliance on the legacy principles of the free market economy, is
already undermining the social contract and even tearing at the very social
fabric; Covid-19 has only accelerated these trends. In 2021 and beyond, our
society will have to find a new policy path if we are to avoid deepening
injustice, but also political upheavals, social unrest and systemic risk.
In 2021, policy comes in for
a major overhaul, with a whole new approach to reducing inequality that has
little to do with adjustments to the tax code.
A Citizens Technology Fund
is created that transfers a portion of asset ownership of capital assets to
everyone, with an extra portion going to displaced workers, allowing them and
everyone else to participate in the productivity gains of the digital era. The
policy is spun as a ‘Disruption Dividend’ and goes a long way to relieving the
economic and social anxieties for those who have been losing out on the share
of economic output in recent years. The Disruption Dividend frees up enormous
entrepreneurial energy at the individual and community scale as millions have
more time and energy on their hands away from repetitive and stressful
jobs.
Trade: Long
companies in education, art, crafts, and hobbies. But also in the digital
spectrum, virtual reality, gaming and E-sports.
8. A successful Covid-19 vaccine
kills companies
The Covid-19 pandemic
viciously accelerated the dangerous levering up of the global economy that
unfolded during the 2008-09 financial crisis. The policy of near infinite
liquidity provision and easing financial conditions at all costs has pushed
global sovereign and investment-grade corporate yields to historical lows and
forced investors to take positions in riskier assets.
The investors’ risky stance
is justified by the prospect of an effective vaccine bringing a new boom in
economic growth. In perfect hindsight it turns out the economy was vastly
over-stimulated during the pandemic, and the ripping post-vaccine recovery
rapidly overheats the economy. Inflation rises and unemployment falls so
rapidly that the Fed allows long treasury yields to spike higher, taking the
yield on riskier debt with it.
The Fed ends up making a
policy mistake by allowing financial conditions to tighten too rapidly via
higher longer rates, having never implemented yield curve control as they were
too distracted by the sudden spectre of 4-5% annualised inflation and 6-8%
annualised wage gains by Q3. Corporate defaults rise to their highest in years,
with the first to go the most over-levered companies in the physical retail
space that were already struggling in the solid, pre-Covid economy.
Trade: Short HYG
and JNK High Yield corporate ETFs.
9. Sun shines on silver, which
sizzles on solar panel demand
2021 brings the usual
suspects that power silver higher on its hard asset/precious metal side as the
US dollar weakens, and as investors are faced with the harsh reality of no
relief in sight from negative real interest rates. This is exacerbated as
inflation suddenly jolts higher in 2021 and policymakers are slow to respond,
wanting to offer maximum support for their still-recovering economies. With a
Covid-19 vaccine in rapid rollout by the middle of the year, the excessive
liquidity and over-easy policy drives a powerful bid into any hard asset.
Turbocharging the rise in
the silver price in 2021, even relative to gold, is the rapidly rising demand
for silver in industrial
applications. In fact, a real silver supply crunch is on the cards in 2021, and
it frustrates the full throttle political support for solar energy investments
under a Biden presidency, the European Green Deal, and China’s 2060 carbon
neutral goal, among other initiatives.
Another challenge on the
supply side for silver is that more than half of mined silver supply is a
by-product of zinc, lead and copper mining, making it tough for miners to meet
the surging excess proportional demand for silver.
Trade: Long
silver as the price races to an all-time high of $50 per ounce in 2021.
10. Next-generation
tech supercharges frontier and emerging markets
In 2021, economists discover
that the growth rates in many frontiers and emerging markets have been woefully
underestimated in recent years. Closer analysis reveals that key technologies
may lie at the root of an acceleration in private sector productivity growth
far beyond anything seen in the developed markets in recent decades.
The first is the arrival of
satellite-based internet delivery systems, which are set to crush the price of
internet provisioning and importantly delivering an order of magnitude increase
in download speeds. SpaceX’s Starlink will be the first on the scene there,
with as many as 1,500 operational by the end of 2021. In emerging and frontier
markets, education and business productivity will reap the benefits. Second is
the ongoing revolution in fintech payment and banking systems which have
already given billions of people access to the digital economy via their mobile
devices.
Finally, drone technology is
set to revolutionise delivery systems and reduce the disadvantages and costs of
living away from the largest cities and towns. Drone technology combined with
automation also has applications in agriculture, where practices in many
under-developed rural areas across the world stand to gain the most from
productivity upgrades.
Trade: Long
emerging market currencies on superior growth outlook.
https://www.home.saxo/campaigns/pr/2020-h2/saxo-bank-2021-outrageous-predictions-the-future-is-now
TRADE AND DEVELOPMENT REPORT 2017: http://unctad.org/en/PublicationsLibrary/tdr2017_en.pdf
Trade and Development
Report, 2016
Contents
Page
Explanatory notes
....................................................................................................................................
xiii Abbreviations .............................................................................................................................................xv
OVERVIEW
..........................................................................................................................................
I–XV
Chapter
I
CURRENT TRENDS AND CHALLENGES IN THE WORLD ECONOMY ......................................1
A.
A
year of living dangerously
................................................................................................................1
B.
 |
Recent trends in the world economy ...................................................................................................4
1.
Growth performance
..........................................................................................................................4
2.
International trade
..............................................................................................................................8
3.
Recent developments in commodity markets
..................................................................................
11 4.
International capital flows to developing economies ......................................................................15
C.
The
slowdown of global trade
............................................................................................................17
1.
Preliminary observations on the causes of the trade
slowdown ......................................................18
2.
Global trade in the context of international production networks
...................................................20 3.
Summing up and implications for the global outlook .....................................................................24
Notes
...........................................................................................................................................................27
References
..................................................................................................................................................29
Chapter
II
GLOBALIZATION, CONVERGENCE AND STRUCTURAL TRANSFORMATION....................31
A.
Introduction
.........................................................................................................................................31
B.
Globalization
and convergence .........................................................................................................33
C.
Structural
transformation: The missing link(s)
...............................................................................43
D.
A
global enabling environment?
........................................................................................................47
E.
Conclusions
..........................................................................................................................................51
Notes
...........................................................................................................................................................52
References
..................................................................................................................................................53
Page
Chapter
III
THE CATCH-UP CHALLENGE: INDUSTRIALIZATION AND STRUCTURAL
CHANGE .......57
A.
Introduction
.........................................................................................................................................57
B.
The
case for developing manufacturing industries
..........................................................................58
1.
The virtues of manufacturing
..........................................................................................................58
2.
Knowledge linkages and productivity growth
.................................................................................60
C.
Trends
in structural change since 1970
.............................................................................................61
1.
Long-term trends
.............................................................................................................................61
2.
Impact of structural change and investment on aggregate productivity ..........................................67
D.
Successful
and stalled industrialization and premature deindustrialization ................................76
1.
Catch-up industrialization
................................................................................................................76
2. Stalled industrialization
...................................................................................................................78
3. Premature deindustrialization
..........................................................................................................82
E.
Making
the primary and tertiary sectors work for structural transformation ............................83
1.
The role of the primary sector in structural change
.........................................................................83 2.
Making commodity export revenues work for structural transformation ........................................84 3.
The role of services in structural transformation
.............................................................................86
F.
Conclusions
..........................................................................................................................................89
Notes
...........................................................................................................................................................90
References
..................................................................................................................................................92
Chapter
IV
REVISITING THE ROLE OF TRADE IN MANUFACTURES IN
INDUSTRIALIZATION .........97
A.
Introduction
.........................................................................................................................................97
B.
A
preliminary framework
..................................................................................................................98
C.
Trends
in international trade by region
..........................................................................................101
1.
General trends
................................................................................................................................101
2.
Trade in manufactures
...................................................................................................................106
D.
Structural
transformation, productivity growth and trade .......................................................... 110
1. Trade
in manufactures, value added and structural transformation ............................................... 110 2.
Growth in labour productivity and trade in manufactures ............................................................. 113
3.
Export sophistication and diversification
......................................................................................
115
E.
Global
value chains, industrial upgrading and structural transformation ................................. 118 Page
F.
Gender,
industrialization, trade and employment
.........................................................................122
1.
Export orientation and women’s employment
...............................................................................122
2.
Employment elasticity of export-oriented manufacturing .............................................................124
G.
The
past and future of pricing power
.............................................................................................128
H.
Conclusions
........................................................................................................................................131
Notes
.........................................................................................................................................................133
References
................................................................................................................................................134
Chapter
V
PROFITS, INVESTMENT AND STRUCTURAL CHANGE
............................................................139
A.
Introduction
.......................................................................................................................................139
B.
The profit-investment nexus revisited
.............................................................................................141
C.
Corporate strategies: Refocusing and financialization
.................................................................146
D.
The
corporate investment environment in developing countries
.................................................149
1.
Challenging macroeconomic conditions for private
investment
...................................................151 2.
Microeconomic trends: Incipient corporate financialization in developing
countries? .................155 3.
Structural transformation and finance for investment: Sectoral patterns of
(financialized) investment
..............................................................................................................160
E.
Reinvigorating
investment in developing countries
.......................................................................162
1.
Tackling global financial instability and corporate
financialization
..............................................162 2.
Establishing a functioning profit-investment nexus in the context of catch-up
development .......164
3. Combating tax avoidance, evasion and capital
flight
....................................................................166
F.
Conclusions
........................................................................................................................................168
Notes
.........................................................................................................................................................169
References
................................................................................................................................................171
Chapter
VI
INDUSTRIAL POLICY REDUX .........................................................................................................175
A.
Introduction
.......................................................................................................................................175
B.
Reassessing
the scope of industrial policy .....................................................................................176
1. The
long history of State-sponsored structural transformation .....................................................176
2.
Learning from successes and failures
............................................................................................177 Page
C.
The
varying geometry of State-business relations
.........................................................................179
1.
Institutions of the developmental State
........................................................................................179 2.
Government-business relations
.....................................................................................................181 3.
Support, performance and discipline
............................................................................................182
D.
Reassessing
the tools of industrial policy
........................................................................................185
1.
Targeting active and passive industrial policies
............................................................................185
2.
Managing rents
..............................................................................................................................188
3.
Strengthening learning capabilities
...............................................................................................188
E.
Integrating
trade, macroeconomic and structural policies ...........................................................191
1.
A strategic approach to the role of international trade
...................................................................191 2.
Macroeconomic matters
................................................................................................................193
3.
Reviving the profit-investment nexus
............................................................................................196
4.
Policies to better integrate the primary sector
...............................................................................197
F.
Conclusions
........................................................................................................................................198
Notes
.........................................................................................................................................................199
References
................................................................................................................................................201
Annex
to chapter VI
Growth
and Structural Change: An Updated Assessment of the Role of
the Real Exchange Rate
.........................................................................................................................205
List of tables
Table Page
1.1 World
output growth, 2008–2016
...................................................................................................5
1.2 Export
and import volumes of goods, selected regions and countries, 2012–2015
.......................9
1.3 World
primary commodity prices, 2010–2016
.............................................................................12
1.4 Commodity
consumption in China, selected commodities, 2002–2015
......................................14
1.5 Average
levels of tariffs between country groups in 2014 and changes between 2008 and
2014 ....19
2.1 Industrial
growth rates, selected countries and regions, 1870–2014
............................................32
2.2
Growth of real GDP per capita at
purchasing power parity, selected regions
and economies, 1951–2015
..........................................................................................................38
2.3 Probability
of catch-up with the United States, by income group, 1950–1980 and
1981–2010 ......42
3.1 Share of industry
in total value added and employment, selected groups
and economies, 1970–2014
..........................................................................................................63
3.2 Share of
manufacturing in total value added and employment, selected groups and
economies, 1970–2014
................................................................................................................65
3.3
Average annual growth rates of total
value added, value added in industry and
total employment, selected groups and
economies, 1970−2014 ..................................................68
3.4 Average
annual growth rates of investment, total labour productivity and labour productivity in industry, selected
groups and economies, 1970−2014 .............................69
3.5 Average
annual productivity growth in selected regions by driving factor, various years
...........72
3.6
Per capita investment and
investment-to-GDP ratio, selected groups and
economies, 1970–2014 .................................................................................................................74
3.7 Ratio of
manufacturing productivity to selected services productivity, selected
economies,
2000−2010
....................................................................................................................................88
4.1 Share of
exports of goods and services in GDP, by country group, 1970–2014
........................102
4.2 Exports
of manufactures as a share of GDP, by country group, 1980–2013
..............................107
4.3 Imports
of manufactures as a share of GDP, by country group, 1980–2013
..............................108
4.4
Shares of exports of high- and
medium-skill and technology-intensive manufactures
in total exports of manufactures, by
country group, 1980–2013 ................................................109
4.5 Responsiveness of
employment to exports of manufactures and industrial growth,
by gender, 1991–2014
...............................................................................................................126
4.6 Elasticity
of labour share in total income vis-à-vis the women-to-men employment
ratio
and the share of manufactures in GDP,
1991–2014 ...................................................................127
4.7 Annual
growth in the terms of trade, by country group, 1980–2014 ........................................130
5.1 Firms’
sources of investment finance and constraints on their access to external
finance, by size of firm, selected
country groups, 2008–2015
...............................................................145
5.2 Size of
the financial system, selected indicators and economies
................................................152
5.3 Non-financial
corporations: Investment and selected financial indicators, 1995–2014
.............156
5.4
Non-financial corporations: Debt
indicators and leverage ratios, 1995–2014 ...........................157
6.A.1 Regression of economic growth on
undervaluation measure, 1950–2014 .................................206
List of charts
Chart Page
1.1 Import
volume, selected country groups, January 2004–April 2016 .............................................9
1.2 Monthly
commodity price indices by commodity group, January 2002–June 2016
...................13
1.3 Net
capital flows for selected country groups, 2000–2016
..........................................................15
1.4 Average
global tariffs, 1995–2014
...............................................................................................18
1.5 Degree
of import dependency of exporting industries in selected countries, 2002–2014
............20
1.6
Manufacturing exports, wage earnings and
GDP of selected countries relative to those
of the world, 1985–2014
...............................................................................................................22
1.7 Global
wage share, 1985–2014
....................................................................................................23
1.8
Global trade growth, credit expansion and
fiscal deficits in the main current account deficit
countries, 1986–2015
...................................................................................................................24
1.9
Conditional projections of global trade
growth and related variables in the main
current account deficit countries,
2005–2020
...............................................................................26
2.1 Trade
and financial openness, selected country groups
................................................................34
2.2 Global
exports as a share of world output, 1960–2014
................................................................35
2.3 Global
current account surpluses and deficits as a share of world output, 1980–2014
................35
2.4 Stocks and flows of
inward foreign direct investment as a share of global output
by country group, 1970–2014
.......................................................................................................35
2.5 World
output growth rate, 1951–2015
.........................................................................................37
2.6 Ratio of GDP per capita of selected countries
and country groups to GDP per capita
of the United States, 1950–2015 ..................................................................................................39
2.7 GDP per capita gap between developing countries
and the United States, 1990 and 2014 .........39
2.8 Real GDP growth in selected country groups, 1971–2014
..........................................................43
2.9 Labour productivity
in the manufacturing sector and in the overall economy in selected
developing regions, 1960–2010
....................................................................................................44
2.10 Fixed
investment in selected rapidly growing countries, 1860–2015
..........................................45
2.11 Share
in global merchandise exports, selected economies, 1950–2015
.......................................46
2.12 Number
of systemic banking crises by country group, 1970–2012 ............................................48
2.13 International
capital flows and fixed investment as a proportion of world output, 1980–2014
.....49
3.1 Share of
economic sectors in total value added, by country group, 1970−2014
..........................62
3.2 Share of manufacturing in total value added, by
country group, 1970−2014 ..............................64
3.3 Employment, value
added and productivity by economic sector in selected country groups,
various years
.................................................................................................................................71
3.4
Average annual growth rates of employment
and productivity in manufacturing,
selected countries and regions, various
years
...............................................................................79
4.1
Developing and developed countries’ share
in world exports in manufactures and
selected commodities, 1995 and 2014
........................................................................................103
4.2 Composition
and direction of exports, selected regions/groups, 2000–2014
.............................104
4.3
Changes in the shares of exports of
manufactures and manufacturing value added in GDP
between 1991–1994 and 2011–2014, selected
countries by region ............................................111
Chart Page
4.4 Changes
in domestic value added in exports of manufactures and in the share of manufacturing in total value added,
selected economies, 1995–2011 ................................... 112
4.5 Labour
productivity growth and exports of manufactures as a share of
GDP............................ 114
4.6 Relationship
between export sophistication and per capita income growth,
selected developing economies
..................................................................................................
116
4.7
Changes in the shares of foreign value
added in manufacturing exports and
of manufacturing value added in GDP,
1995–2011 ....................................................................120
5.1 Profits, investments
and dividend distribution of non-financial corporations,
selected countries, 1960–2015
....................................................................................................142
5.2 Corporate
profits and investment (excl. construction), 1980–2015
...........................................143
5.3 Investment
in selected economies and country groups, 1970–2014
..........................................150
5.4 Gross
operating surplus, by region/subregion, 1980–2015 ........................................................151
5.5 Debt
service-to-income ratio of the private non-financial sector of developing and
developed countries, 2007–2015
................................................................................................154
5.6
Investment as a proportion of total
capital stock of non-financial and
manufacturing firms in Brazil and South
Africa, 2000–2014 .....................................................160
5.7 Sectoral
contribution to the increase in the nominal value of total debt and capital stock between 2010 and 2014
.........................................................................................161
List of
boxes
Box Page
2.1 Middle-income
troubles
................................................................................................................40
4.1 Gendered
patterns in industrial employment
..............................................................................124
5.1 Chinese
non-financial corporate debt on the rise
.......................................................................158
5.2
Creating a development-oriented financial
system: The role of the central bank
of the Republic of Korea
............................................................................................................165
6.1 Industrial
policy and the role of “intermediary institutions”: The Ethiopian experience ..........182
6.2 Government
procurement and industrial policy
.........................................................................186
6.3 Industrial
councils in Uruguay
...................................................................................................190
6.4 Services
and diversification: A role for industrial policy?
..........................................................194
Turp.: sk. http://unctad.org/en/PublicationsLibrary/tdr2016_en.pdf
World
Economic Outlook Reports
Перспективы
развития мировой экономики (ПРМЭ)
Human Development Report 2016 :
http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf
Global Economic Prospects
The Turning of the Tide?
After reaching 3.1 percent
in both 2017 and 2018, global growth is expected to decelerate over the next
two years as global slack dissipates, major central banks remove policy
accommodation, and the recovery in commodity exporters matures. Amid moderating
international trade and tightening global financing conditions, growth in
emerging and developing economies (EMDEs) is projected to plateau, reaching 4.7
percent in 2019 and 2020, up from 4.5 percent in 2018.
Global growth is expected to
edge down over the next two years, as global slack dissipates, trade and
investment moderate, and financing conditions tighten. In EMDEs, growth in
commodity importers is expected to remain robust, while the rebound in
commodity exporters is projected to mature. Risks to the outlook are tilted to
the downside, including the possibility of disorderly financial market
movements, escalating trade protectionism, heightened policy uncertainty, and
rising geopolitical tensions. EMDE policymakers need to rebuild monetary and
fiscal policy buffers and boost potential growth by promoting competitiveness,
adaptability to technological change, and trade openness.
Regional Outlooks
Growth in EMDEs is projected
to reach 4.5 percent in 2018, before stabilizing at 4.7 percent in 2019-20. The
ongoing cyclical recovery in most EMDE regions with a substantial number of
commodity exporters is expected to continue in the near term, but mature
thereafter as commodity prices level off. Robust growth in EMDE regions with
large numbers of commodity importers is projected to continue. A close look at
the economic outlook for each region follows.
Long-term Growth Prospects: Downgraded No
More?
A prolonged period of weaker
growth expectations, characterized by the systematic downgrading of long-term
forecasts, seems to have come to an end. For the first time since 2010, the
10-year-ahead consensus forecast for global growth appears to have stabilized,
as long-term growth expectations improved from 2017 in more than half of
countries. Although this development could be another encouraging sign the
global economy is finally enjoying a healthy expansion, long-term forecasts are
often overly optimistic. While well below levels expected a ...See
More
The Role of Major Emerging Markets in
Global Commodity Demand
Rapid growth among the major
emerging markets over the past 20 years has boosted global demand for
commodities. The seven largest emerging markets (EM7) accounted for almost all
the increase in global consumption of metals, and two-thirds of the increase in
energy consumption over this period. As these economies mature and shift
towards less commodity-intensive activities, their demand for most commodities
may plateau. While global energy consumption growth may remain broadly steady,
growth in global demand for metals and food could slow by one... See
More
Three Topical Issues
Corporate Debt: Financial Stability and
Investment Implications
Average corporate debt in
emerging market and developing economies (EMDEs) has risen over the past
decade. This trend raises concerns for their financial stability and growth
prospects. Debt service costs of EMDE firms are expected to rise as advanced
economies normalize monetary policy, and debt is increasingly held by firms
with riskier balance sheets. Firm-level empirical analysis also suggests that
debt overhang may be associated with weak investment, especially in large or
highly leveraged firms. Countercyclical and macroprudential policie... See
More
Long-term Growth Prospects: Downgraded No
More?
A prolonged period of weaker
growth expectations, characterized by the systematic downgrading of long-term
forecasts, seems to have come to an end. For the first time since 2010, the
10-year-ahead consensus forecast for global growth appears to have stabilized,
as long-term growth expectations improved from 2017 in more than half of
countries. Although this development could be another encouraging sign the
global economy is finally enjoying a healthy expansion, long-term forecasts are
often overly optimistic. While well below levels expected a ...See
More
The Role of Major Emerging Markets in
Global Commodity Demand
Rapid growth among the major
emerging markets over the past 20 years has boosted global demand for
commodities. The seven largest emerging markets (EM7) accounted for almost all
the increase in global consumption of metals, and two-thirds of the increase in
energy consumption over this period. As these economies mature and shift
towards less commodity-intensive activities, their demand for most commodities
may plateau. While global energy consumption growth may remain broadly steady,
growth in global demand for metals and food could slow by one... See
More
Data
Global growth is projected
to hold steady at 3.1 percent in 2018 and ease slightly in 2019-20. Click on
button to download the data into Excel. Download the report's statistical
appendix in PDF format. Charts
can be generated by visiting the World Bank's DataBank website.
http://www.worldbank.org/en/publication/global-economic-prospects
В четвёртой
колонке (2011 — 2020) показаны цифры, которые мои коллеги
и я спрогнозировали ещё в 2001 году, когда
мы придумали аббревиатуру БРИК. Можно увидеть разницу между тем, что мы прогнозировали,
и тем, что реально происходило в нынешнем десятилетии (2011 —
2017*). На эти десять лет мы прогнозировали общемировой рост
экономики на уровне чуть более 4% в год, учитывая подъём Китая и других
крупных стран группы БРИК. Именно этим фактором объясняется то, что
в 2001-2010 годах темпы экономического роста оказались выше, чем
в предыдущие десятилетия, когда постоянство темпов роста на уровне
3,3% в год привело некоторых экономистов к выводу, что мировая экономика
достигла своего полного потенциала.
https://inosmi.ru/economic/20190417/244954718.html
Communiqué of the Thirty-Seven Meeting of the International Monetary and Financial Committee
April 21, 2018
Chaired by Mr. Lesetja Kganyago, Governor of the South African Reserve Bank
The Committee expresses its deep gratitude to its former Chair, Mr. Agustín Carstens, for his invaluable contribution to the work of the Committee during 2015-17, and extends its best wishes to him as the General Manager of the Bank for International Settlements. The Committee welcomes Governor Lesetja Kganyago as its new Chairman.
Global outlook and policy priorities
Global growth has further strengthened and is increasingly broad-based, driven by a strong rebound in investment and trade. Risks are broadly balanced in the near term, but remain skewed to the downside beyond the next several quarters. Rising financial vulnerabilities, increasing trade and geopolitical tensions, and historically high global debt threaten global growth prospects. Demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward.
The window of opportunity remains open and should be used expeditiously to advance policies and reforms that sustain the current upswing, enhance resilience, and raise medium-term growth for the benefit of all. We will continue to use all policy tools to achieve strong, sustainable, balanced, inclusive, and job-rich growth. In line with central bank mandates and mindful of financial stability risks, monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets. Fiscal policy should be flexible and growth-friendly, rebuild buffers where needed, avoid procyclicality, create space to invest in infrastructure and workforce skills, and ensure that public debt as a share of GDP is on a sustainable path.
Structural reforms should aim to lift productivity, potential growth, and employment, while effectively assisting those bearing the cost of adjustment. We stress the importance of timely, full, and consistent implementation and finalization of the financial sector reform agenda as soon as possible to further strengthen financial sector resilience. We will continue to monitor and, if necessary, address emerging risks and vulnerabilities in the financial system. Policies should also enhance inclusion to widely share the gains from technology and economic integration and manage associated risks. We will work together to reduce excessive global imbalances in a way that supports global growth by pursuing appropriate and sustainable policies.
Strong fundamentals, sound policies, and a resilient international monetary system (IMS) are essential to the stability of exchange rates, contributing to strong and sustainable growth and investment. Flexible exchange rates, where feasible, can serve as a shock absorber. We recognize that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes.
We will cooperate to tackle shared challenges. We reaffirm the importance of implementing the conclusions of the G-20 Hamburg Summit on trade and recognize the need for further dialogue and actions. We are working to strengthen the contribution of trade to our economies. We will continue to work for a globally fair and modern international tax system, address tax and competition challenges, including from digitalization, as appropriate; and tackle the sources and channels of money laundering and terrorism financing, proliferation financing, corruption, and other illicit finance.
We support efforts toward reaching the 2030 Sustainable Development Goals (SDGs). We will work toward enhancing debt transparency and sustainable financing practices by both debtors and creditors and addressing debt vulnerabilities in low-income countries (LICs). We will support countries dealing with the macroeconomic consequences of pandemics, cyber risks, climate change and natural disasters, energy scarcity, conflicts, migration, and refugee and other humanitarian crises.
IMF operations
We welcome the Managing Director’s Global Policy Agenda Update. In line with its mandate, the IMF will continue to support its members and collaborate with others to:
- Promote a stable international monetary and financial system. We welcome efforts to conduct a rigorous, evenhanded, candid, and transparent assessment of excessive global imbalances and exchange rates in the 2018 External Sector Report. We look forward to the stock-take on capital flow management measures based on the Institutional View.
- Help members tackle shared challenges. We support the IMF’s collaboration with relevant stakeholders on financial technology, crypto assets, and cyber security. We support the IMF’s continued role in international tax issues and domestic resource mobilization, including through the Platform for Collaboration on Tax. We call on the IMF to set out a clear process for supporting country authorities in developing their medium-term revenue strategies. We support further efforts to address the withdrawal of correspondent banking relationships and its adverse consequences, including on remittances, trade flows, and financial inclusion. We reaffirm our support for the IMF’s work to help countries achieve the 2030 SDGs. We support the IMF’s continued efforts to assist countries in dealing with the macroeconomic consequences of large refugee inflows.
- Safeguard debt sustainability. Debt vulnerabilities are rising in many countries, particularly in LICs. We call on the IMF and the World Bank Group to work together on a multi-pronged work program to enhance debt transparency and sustainability and address LIC debt vulnerabilities. We urge the IMF to work closely with members to strengthen fiscal frameworks and improve debt management capacity, and to work with debtors and creditors on promoting sustainable lending practices and tackling data gaps.
- Enhance resilience and raise medium-term prospects. We welcome the IMF’s enhanced engagement on governance issues, including corruption, as well as efforts to establish a framework to guide its involvement in social protection issues. We agree that the IMF will need to consider the effects of technology and digitalization in its macroeconomic analysis, including on inequality, productivity, labor and financial markets, fiscal policy, monetary policy, and measurement of the digital economy. We also welcome work on youth unemployment and the impact of gender inclusion and labor force participation on growth. We look forward to the IMF’s management implementation plan in response to the IEO Evaluation—The IMF and Fragile States.
- Upgrade policy tools to develop tailored policy solutions to members. We welcome the findings of the Interim Surveillance Review and look forward to further improvements in surveillance practices to ensure evenhandedness, enhance traction and effectiveness for crisis prevention, improve the coverage of spillovers, and adapt to evolving macro-critical challenges. We support work on the reviews of the AML/CFT program, the Financial Sector Assessment Program, the capacity development strategy, and the debt sustainability framework for countries with market access.
- Strengthen the IMS. We continue to support work toward further strengthening the global financial safety net (GFSN) and collaboration with regional financing arrangements. We support the IMF’s contributions to the G-20 Data Gaps Initiative. We look forward to the reviews of LIC facilities, including with regard to small and fragile states, and of conditionality and design of IMF-supported programs. We appreciate continued efforts to strengthen the effectiveness and accountability of capacity development and assist countries in implementing the updated LIC debt sustainability framework.
IMF resources and governance
We reaffirm our commitment to a strong, quota-based, and adequately resourced IMF to preserve its role at the center of the GFSN. We are committed to concluding the 15th General Review of Quotas and agreeing on a new quota formula as a basis for a realignment of quota shares to result in increased shares for dynamic economies in line with their relative positions in the world economy and hence likely in the share of emerging market and developing countries as a whole, while protecting the voice and representation of the poorest members. We call on the Executive Board to work expeditiously toward the completion of the 15th General Review of Quotas in line with the above goals by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019. We note the progress report to the Board of Governors and look forward to further progress by the time of our next meeting. We welcome the progress made in securing commitments under the 2016 Bilateral Borrowing Agreements. We call for full implementation of the 2010 governance reforms.
We reiterate the importance of maintaining the IMF’s high-quality staff and strengthening efforts to meet the 2020 diversity targets. We support promoting gender diversity in the Executive Board.
Our next meeting will be held in Bali, Indonesia, on October 13, 2018.
Attendance can be found at:
http://www.imf.org/en/News/Articles/2018/04/20/april-2018-imfc-attendance-list
Global Economic Prospects
The Turning of the Tide?
Overview
After reaching 3.1 percent
in both 2017 and 2018, global growth is expected to decelerate over the next
two years as global slack dissipates, major central banks remove policy
accommodation, and the recovery in commodity exporters matures. Amid moderating
international trade and tightening global financing conditions, growth in
emerging market and developing economies (EMDEs) is projected to plateau,
reaching 4.7 percent in 2019 and 2020, up from 4.5 percent in 2018.
https://www.bloomberg.com/news/articles/2018-07-03/bank-of-america-sees-replay-of-1998-script-in-summer-pain-trades
Future Politics
Living Together
in a World Transformed by Tech
Jamie Susskind
Description
Future Politics confronts one of
the most important questions of our time: how will digital technology transform
politics and society? The great political debate of the last century was about
how much of our collective life should be determined by the state and what
should be left to the market and civil society. In the future, the question
will be how far our lives should be directed and controlled by powerful digital
systems - and on what terms?
Introduction
Part I. THE DIGITAL LIFEWORLD
1: Increasingly Capable Systems
2: Increasingly Integrated Technology
3: Increasingly Quantified Society
4: Thinking Like a Theorist
Part II. FUTURE POWER
5: Code is Power
6: Force
7: Scrutiny
8: Perception-Control
9: Public and Private Power
Part III. FUTURE LIBERTY
10: Freedom and the Supercharged State
11: Freedom and the Tech Firm
Part IV. FUTURE DEMOCRACY
12: The Dream of Democracy
13: Democracy in the Future
Part V. FUTURE JUSTICE
14: Algorithms of Distribution
15: Algorithms of Recognition
16: Algorithmic Injustice
17: Technological Unemployment
18: The Wealth Cyclone
Part VI. FUTURE POLITICS
19: Transparency and the New Separation of Powers
20: Post-Politics
Part I. THE DIGITAL LIFEWORLD
1: Increasingly Capable Systems
2: Increasingly Integrated Technology
3: Increasingly Quantified Society
4: Thinking Like a Theorist
Part II. FUTURE POWER
5: Code is Power
6: Force
7: Scrutiny
8: Perception-Control
9: Public and Private Power
Part III. FUTURE LIBERTY
10: Freedom and the Supercharged State
11: Freedom and the Tech Firm
Part IV. FUTURE DEMOCRACY
12: The Dream of Democracy
13: Democracy in the Future
Part V. FUTURE JUSTICE
14: Algorithms of Distribution
15: Algorithms of Recognition
16: Algorithmic Injustice
17: Technological Unemployment
18: The Wealth Cyclone
Part VI. FUTURE POLITICS
19: Transparency and the New Separation of Powers
20: Post-Politics
https://www.goodreads.com/book/show/38819346-future-politics
Global Wealth Report 2018
The
ninth edition of the Global Wealth Report published by the Credit Suisse
Research Institute provides the most comprehensive and up-to-date source of
information available on global household wealth. During the twelve months to
mid-2018, aggregate global wealth rose by $14.0 trillion (4.6%) to a combined
total of $317 trillion, outpacing population growth. Wealth per adult grew by
3.2%, raising global mean wealth to a record high of $63,100 per adult. The US
contributed most to global wealth adding $6.3 trillion and taking its total to
$98 trillion. This continues its unbroken run of growth in both total wealth
and wealth per adult every year since 2008. Unsurprisingly, China is now
clearly established in second place of the world wealth hierarchy. The country
overtook Japan with respect to the number of ultra-high net worth (UHNW)
individuals in 2009, total wealth in 2011 and the number of millionaires in
2014.
This
year's report also provides new insights on female wealth holdings. Women now
account for an estimated 40% of global wealth overall and their share of wealth
has grown considerably throughout the 20th century. The report explores global
variations in female wealth accumulation, along with differences in portfolio
composition, risk aversion and the impact on female Millennials.
Interesting
Facts & Figures
317
trillion
USD global wealth in 2018
42
million
millionaires worldwide
63100
USD
average 2018 wealth per adult
399
trillion
USD global wealth by 2023
2019 Annual Forecast
https://worldview.stratfor.com/article/2019-annual-forecast-geopolitics-intelligence-global-risk
Top 10: robo-advisor products in the
fin-tech landscape
Popular smart
software to manage your investment portfolio.
January 20, 2019
Mid-way between hiring a
financial advisor and do-it-yourself investing are robo-advisors. These
user-friendly, automatic investing services are trendy, efficient, and
easy-to-use. They provide digital financial advice for investing. A
robo-advisor monitors + automatically re-balances your investments to help keep
your portfolio on track. You can track your progress on the web or with a
smart-phone app.
Here’s a list of some
best-known robo-advisors in the fin-tech landscape to fit your needs. Although
robo-advisors were basically non-existent 5 years ago, today they’re gaining
fast in popularity — and expected to keep growing.
So robo-advisors are
automated investment portfolios that use computer software algorithms to
consider your unique goals + requirements in the context of outside factors —
and then automatically adjust your portfolio to help you earn.
year: 2016 — $ 126.5 billion
year: 2018 — $ 401.9 billion
year: 2021 — $ 1,152 billion • predicted
year: 2018 — $ 401.9 billion
year: 2021 — $ 1,152 billion • predicted
The
Future of Jobs Report 2018
Centre for the New Economy and Society World
Economic Forum
Contents
Preface
vii Key Findings
1
PART 1:
PREPARING
THE FUTURE WORKFORCE 3
Introduction 6
Strategic
Drivers of New Business Models 7
Workforce
Trends and Strategies for the Fourth Industrial Revolution 15
The Future of Jobs across Industries 17
The
Future of Jobs across Regions 19
A
Look to the Recent Past (in Collaboration with LinkedIn) 22
Conclusions 25
References
and Further Reading 27
Appendix
A: Report Methodology 31
Appendix
B: Industry and Regional Classifications 33
PART
2:
INDUSTRY
AND COUNTRY/REGION PROFILES 35
User’s Guide: How to Read the Industr y and Country/Region Profiles 41
Industry Profiles 67
Country/Region Profiles 127
Contributors 129
System Initiative Partners 131
Survey
Partners 133
Acknowledgements C
2018 FORD TRENDS REPORT UNDERSCORES HOW
CONSUMERS AND BRANDS ARE PUSHING THROUGH IN UNCERTAIN, INTERESTING TIMES
- 2018 Looking Further with Ford Trends Report
highlights how global societal changes are impacting new consumer
behaviors and attitudes; shifts toward activism, compassion and
self-expression will shape the new year
- Sixth annual report shows that while two-thirds
of adults globally say they are overwhelmed by changes taking place around
them, three-quarters believe they can influence positive change; nearly
half say they expect brands to take a stand on social issues
- Consumers are focused on world suffering, the widening
gap between rich and poor, and emotional well-being, and while many
express skepticism about artificial intelligence, more are hopeful about
the future of autonomous vehicles
NEW YORK, Dec. 6, 2017 – People feel increasingly polarized by unrest, upheaval
and other changes taking place in the world, and more than 60 percent of adults
globally say they feel overwhelmed by things happening around them. Ford’s 2018
Looking Further with Ford Trends Report examines not only the issues dividing
the world, but also the coping mechanisms that are emerging as a result.
“We’re clearly living in
interesting times,” said Sheryl Connelly, Ford global consumer trends and
futuring manager. “Shifting global priorities, rampant political upheaval, and
a spotlight on social inequity have upended the status quo and left many
disoriented. But out of the chaos and conflict, a new energy and creativity is
motivating people like never before. From compassion and guilt to heightened
activism, most adults believe their actions have the power to influence
positive change.”
As societies cope with the
rising demands of urbanization, serious threats to the environment and economic
instability, Ford continues its work as a trusted mobility company developing
smart transportation solutions for all. Amid concern for world suffering, a
widening gap between rich and poor, and worries that artificial
intelligence will do more harm than good, Ford remains committed to the belief
that freedom of movement drives human progress—and is designing sustainable,
meaningful technologies to help make people’s lives better.
Each year, the company
focuses on global trends to understand how consumers are changing, and how
companies must respond.
Key insights from Ford’s
sixth annual report include:
- 39 percent of adults say they do not mind
sharing their personal information with companies, but 60 percent say they
are frustrated by how much of their information has become public
- 76 percent of adults around the world say they
find it creepy when companies know too much about them
- 52 percent of adults say they believe
artificial intelligence will do more harm than good, but 61 percent say
they are hopeful about a future of autonomous vehicles
- 68 percent of adults say they are overwhelmed
by suffering in the world today, and 51 percent say they feel guilty for
not doing more to make the world better
- 81 percent of adults say they are concerned
about the widening gap between the rich and the poor
- 73 percent of adults say they should take
better care of their emotional well-being
- 54 percent of adults globally say they feel
more stressed out than they did a year ago, and among 18- to 29-year-olds,
that number is even higher, at 65 percent
What all this means for 2018 and beyond
This report serves as a blueprint for understanding how key trends are expected to influence consumers and brands in 2018 and beyond. Ford has identified and explored these 10 trends:
This report serves as a blueprint for understanding how key trends are expected to influence consumers and brands in 2018 and beyond. Ford has identified and explored these 10 trends:
1. The
Edge of Reason: Global upheaval is evident in everything from politics
to pop culture, and people are responding to these changes in polarized
fashion. As divisiveness grows, a sense of being overwhelmed intensifies.
Consumers are hungry for inventive ways to cope and adapt.
2. The
Activist Awakening: This culture of polarization means consumers are
being jolted out of complacency. Conventional wisdom and expectations are being
toppled as individuals debate the change we need.
3. Minding
the Gap: Worldwide, the spotlight is on inequality. Activists and
entrepreneurs are experimenting with new ways to improve access to quality
education, increase productive employment, close wage gaps, and provide
everyone with affordable access to basic living standards and
infrastructure.
4. The
Compassionate Conscience: With an omnipresent news cycle, we are more
aware than ever of the challenges consumers face around the world. People are
becoming more reflective of their roles in society and more focused on how they
can be more engaged.
5. Mending
the Mind: Consumers and institutions are realizing that you cannot
have a healthy body unless you have a healthy mind. As such, mental health and
well-being are moving to the forefront for individuals, governments and
companies to address.
6. Retail
Therapy: Many consumers are on an endless hunt for something new and
different – seeking material goods or experiences that bring happiness. As
services aiming to provide efficiency experiences proliferate, consumers now
find they can buy the one thing that was never for sale – time.
7. Helplessly
Exposed: Big Data claims to be able to interpret our behaviors, which
in theory should help consumers. But with Big Data can come Big Bias, and once
personal information is relinquished, all consumers can do is hope companies
use it responsibly.
8. Technology’s
Tipping Point: Virtual reality, artificial intelligence and autonomous
technology – long far-fetched notions – are now being incorporated into our
daily lives. Worldwide, humans are wondering what the onslaught of intelligent
technology will mean for society.
9. Singled
Out: Are marriage and parenthood still the desired norms for happy
living? Couples today – with more choices and longer life spans to consider –
are rethinking commitment and fulfillment.
10. Big Plans
for Big Cities: By 2050, nearly 75 percent of the world’s population
is expected to live in urban areas. To capitalize on the full potential of
cities – ensuring they are happy and healthy places in which to thrive – we
must smartly plan for transportation, employment, housing, wellness initiatives
and an infrastructure that can accommodate booming populations.
Building a smarter future
With an astounding 87
percent of consumers agreeing cities need better transportation options, Ford
is uniquely positioned to provide meaningful solutions for consumers
everywhere. As connected, sustainable and autonomous technologies rapidly
transform transportation, Ford is committed driving progress that consumers can
trust.
“In today’s fast-moving
world, consumers have less patience for the frivolous, and they demand greater
emphasis on what’s meaningful and impactful,” said Connelly. “This ethos is
reflected in the work we do at Ford, and our relentless focus on providing
trustworthy solutions that make consumers’ lives better.”
For the full Looking Further
with Ford 2018 Trends Report, please visit www.fordtrends.com.: https://media.ford.com/content/dam/fordmedia/Europe/en/2016/12/Ford_Trends-Report-2017.pdf
GDP Is Not a
Measure of Human Well-Being
OCTOBER 04, 2019
Economic growth has raised living standards around
the world. However, modern economies have lost sight of the fact that the
standard metric of economic growth, gross domestic product (GDP), merely
measures the size of a nation’s economy and doesn’t reflect a nation’s welfare.
Yet policymakers and economists often treat GDP, or GDP per capita in some
cases, as an all-encompassing unit to signify a nation’s development, combining
its economic prosperity and societal well-being. As a result, policies that
result in economic growth are seen to be beneficial for society.
We know now that the story is not so simple – that
focusing exclusively on GDP and economic gain to measure development ignores
the negative effects of economic growth on society, such as climate change and
income inequality. It’s time to acknowledge the limitations of GDP and expand
our measure development so that it takes into account a society’s quality of life.
A number of countries are starting to do this.
India, for instance, where we both work advising the government, is developing
an Ease of Living Index, which measures quality of life, economic ability and
sustainability.
When our measures of development go beyond an
inimical fixation towards higher production, our policy interventions will
become more aligned with the aspects of life that citizens truly value, and
society will be better served. But before we attempt to improve upon the
concept of GDP, it is instructive to understand its roots.
The
origins of GDP
Like many of the ubiquitous inventions that
surround us, the modern conception of GDP was a product of war. While Simon
Kuznets is often credited with the invention of GDP (since he attempted to estimate
the national income of the United States in 1932 to understand the full extent
of the Great Depression), the modern definition of GDP was developed by John
Maynard Keynes during the second world war.
In 1940, one year into the war with Germany, Keynes,
who was working in the UK Treasury, published an essay complaining
about the inadequacy of economic statistics to calculate what the British
economy could produce with the available resources. He argued that such data
paucity made it difficult to estimate Britain’s capacity for mobilization and
conflict.
According to him, the estimate of national income
should be the sum of private consumption, investment and government spending.
He rejected Kuznets’ version, which included government income, but not
spending, in his calculation. Keynes realized that if the government’s wartime
procurement was not considered as demand in calculating national income, GDP
would fall despite actual economic growth taking place. His method of
calculating GDP, including government spending into a country’s income, which
was driven by wartime necessities, soon found acceptance around the world even
after the war was over. It continues to this day.
How
GDP falls short
But a measure created to assess wartime production
capabilities of a nation has obvious drawbacks in peacetime. For one, GDP by
definition is an aggregate measure that includes the value of goods and
services produced in an economy over a certain period of time. There is no
scope for the positive or negative effects created in the process of production
and development.
For example, GDP takes a positive count of the cars
we produce but does not account for the emissions they generate; it adds the
value of the sugar-laced beverages we sell but fails to subtract the health
problems they cause; it includes the value of building new cities but does not
discount for the vital forests they replace. As Robert Kennedy put it in his
famous election speech in 1968, “it [GDP] measures everything in short, except
that which makes life worthwhile.”
Environmental degradation is a significant
externality that the measure of GDP has failed to reflect. The production of
more goods adds to an economy’s GDP irrespective of the environmental damage
suffered because of it. So, according to GDP, a country like India is
considered to be on the growth path, even though Delhi’s winters are
increasingly filled with smog and Bengaluru’s lakes are more prone to fires. Modern
economies need a better measure of welfare that takes these externalities into
account to obtain a truer reflection of development. Broadening the scope of
assessment to include externalities would help in creating a policy focus on
addressing them.
GDP also fails to capture the distribution of
income across society – something that is becoming more pertinent in today’s
world with rising inequality levels in the developed and developing world
alike. It cannot differentiate between an unequal and an egalitarian society if
they have similar economic sizes. As rising inequality is resulting in a rise
in societal
discontentment and increased polarization, policymakers will need to
account for these issues when assessing development.
Another aspect of modern economies that makes GDP
anachronistic is its disproportionate focus on what is produced. Today’s
societies are increasingly driven by the growing service economy – from the
grocery shopping on Amazon to the cabs booked on Uber. As the quality of
experience is superseding relentless production, the notion of GDP is quickly
falling out of place. We live in a world where social media delivers troves of
information and entertainment at no price at all, the value for which cannot be
encapsulated by simplistic figures. Our measure of economic growth and
development also needs to adapt to these changes in order to give a more
accurate picture of the modern economy.
How
we’re redefining development in India
We need alternative metrics to complement GDP in
order to get a more comprehensive view of development and ensure informed
policy making that doesn’t exclusively prioritize economic growth. We’re seeing
some efforts already, such as Bhutan’s attempt to measure Gross National
Happiness, which considers factors like equitable socio-economic development
and good governance, and UNDP’s Human Development Index (HDI), which
encapsulates health and knowledge apart from economic prosperity.
As a step in this direction, India is also
beginning to focus on the ease of living of its citizens. Ease of living is the
next step in the development strategy for India, following the push towards
ease of doing business that the country has achieved over the last few years.
The Ministry of Housing and Urban Affairs has developed the Ease of Living
Index to measuring quality of life of its citizens across Indian cities, as
well as economic ability and sustainability. It is as well expected to evolve
into a measurement tool to be adopted across districts. We believe that this
more holistic measure will provide more accurate insights into the state of
development of the Indian economy.
The end goal is to have a more just and equitable
society that is economically thriving and offering citizens a meaningful
quality of life. With a change in what we measure and perceive as a barometer
of development, how we frame our policies will also catch up. In an economy
with well-being at its heart, economic growth will simply be another tool to
guide it in the direction that the society chooses. In such an economy, the
percentage points of GDP, which are rarely connected with the lives of average
citizens, will cease to take the center stage. The focus would instead shift
towards more desirable and actual determinants of welfare.
https://hbr.org/2019/10/gdp-is-not-a-measure-of-human-well-being?utm
GDP Is the Wrong Tool for Measuring What
Matters
It’s time to
replace gross domestic product with real metrics of well-being and
sustainability
August
1, 2020
AUTHOR Joseph E.
Stiglitz
IN BRIEF
- Gross domestic product (GDP) is almost
universally used to gauge how well a society is doing. In fact, it is a
measure of market activity—no more.
- The Great Recession of 2008–2009 highlighted the need for
better ways to measure the well-being of an economy and society, as well
as its sustainability—whether or not good times can last.
- Over the past decade leading scholars have
devised a broad set of measures to help steer societies toward the
futures their citizens desire. Several countries are embedding these
“dashboard” indicators into their decision-making processes.
Since
World War II, most countries around the world have come to use gross domestic
product, or GDP, as the core metric for prosperity. The GDP measures market
output: the monetary value of all the goods and services produced in an economy
during a given period, usually a year. Governments can fail if this number
falls—and so, not surprisingly, governments strive to make it climb. But
striving to grow GDP is not the same as ensuring the well-being of a society.
In
truth, “GDP measures everything,” as Senator Robert Kennedy famously said,
“except that which makes life worthwhile.” The number does not measure health,
education, equality of opportunity, the state of the environment or many other
indicators of the quality of life. It does not even measure crucial aspects of
the economy such as its sustainability: whether or not it is headed for a
crash. What we measure matters, though, because it guides what we do. Americans
got an inkling of this causal connection during the Vietnam War, with the
military's emphasis on “body counts”: the weekly tabulation of the number of
enemy soldiers killed. Reliance on this morbid metric led U.S. forces to
undertake operations that had no purpose except to raise the body count. Like a
drunk looking for his keys under the lamppost (because that is where the light
is), the emphasis on body counts kept us from understanding the bigger picture:
the slaughter was inducing more Vietnamese people to join the Viet Cong than
U.S. forces were killing.
Now
a different body count—that from COVID-19—is proving to be a horribly good
measure of societal performance. It has little correlation with GDP. The U.S.
is the richest country in the world, with a GDP of more than $20 trillion in
2019, a figure that suggested we had a highly efficient economic engine, a
racing car that could outperform any other. But the U.S. recorded upward of
100,000 deaths by June, whereas Vietnam, with a GDP of $262 billion (and a mere
4 percent of U.S. GDP per capita) had zero. In the race to save lives, this
less prosperous country has beaten us handily.
In
fact, the American economy is more like an ordinary car whose owner saved on
gas by removing the spare tire, which was fine until he got a flat. And what I
call “GDP thinking”—seeking to boost GDP in the misplaced expectation that that
alone would enhance well-being—led us to this predicament. An economy that uses
its resources more efficiently in the short term has higher GDP in that quarter
or year. Seeking to maximize that macroeconomic measure translates, at a
microeconomic level, to each business cutting costs to achieve the highest
possible short-term profits. But such a myopic focus necessarily compromises
the performance of the economy and society in the long term.
The
U.S. health care sector, for example, took pride in using hospital beds
efficiently: no bed was left unused. In consequence, when SARS-CoV-2 reached
America there were only 2.8 hospital beds per 1,000 people—far fewer than in
other advanced countries—and the system could not absorb the sudden surge in
patients. Doing without paid sick leave in meat-packing plants increased
profits in the short run, which also increased GDP. But workers could not
afford to stay home when sick; instead they came to work and spread the
infection. Similarly, China made protective masks cheaper than the U.S. could,
so importing them increased economic efficiency and GDP. That meant, however,
that when the pandemic hit and China needed far more masks than usual, hospital
staff in the U.S. could not get enough. In sum, the relentless drive to
maximize short-term GDP worsened health care, caused financial and physical
insecurity, and reduced economic sustainability and resilience, leaving
Americans more vulnerable to shocks than the citizens of other countries.
The
shallowness of GDP thinking had already become evident in the 2000s. In
preceding decades, European economists, seeing the success of the U.S. in
increasing GDP, had encouraged their leaders to follow American-style economic
policies. But as signs of distress in the U.S. banking system mounted in 2007,
France's President Nicolas Sarkozy realized that any politician who
single-mindedly sought to push up GDP to the neglect of other indicators of the
quality of life risked losing the confidence of the public. In January 2008 he
asked me to chair an international commission on the Measurement of Economic
Performance and Social Progress. A panel of experts was to answer the question:
How can nations improve their metrics? Measuring that which makes life
worthwhile, Sarkozy reasoned, was an essential first step toward enhancing it.
Coincidentally,
our initial report in 2009, provocatively entitled Mismeasuring Our
Lives: Why GDP Doesn't Add Up, was published right after the global
financial crisis had demonstrated the necessity of revisiting the core tenets
of economic orthodoxy. It met with such positive resonance that the
Organization for Economic Co-operation and Development (OECD)—a think tank that
serves 37 advanced countries—decided to follow up with an expert group. After
six years of consultation and deliberation, we reinforced and amplified our
earlier conclusion: GDP should be dethroned. In its place, each nation should
select a “dashboard”—a limited set of metrics that would help steer it toward
the future its citizens desired. In addition to GDP itself, as a measure for
market activity (and no more) the dashboard would include metrics for health,
sustainability and any other values that the people of a nation aspired to, as
well as for inequality, insecurity and other harms that they sought to
diminish.
These
documents have helped crystallize a global movement toward improved measures of
social and economic health. The OECD has adopted the approach in its Better
Life Initiative, which recommends 11 indicators—and provides citizens with a
way to weigh these for their own country, relative to others, to generate an
index that measures their performance on the things they care about. The World
Bank and the International Monetary Fund (IMF), traditionally strong advocates
of GDP thinking, are now also paying attention to environment, inequality and
sustainability of the economy.
A
few countries have even incorporated this approach into their policy-making
frameworks. New Zealand, for instance, embedded “well-being” indicators in the
country's budgetary process in 2019. As the country's finance minister, Grant
Robertson, put it: “Success is about making New Zealand both a great place to
make a living and a great place to make a life.” This emphasis on well-being
may partly explain the nation's triumph over COVID-19, which appears to have
been eliminated after roughly 1,500 confirmed cases and 20 deaths in a total
population of nearly five million.
APPLES AND
ARMAMENTS
Necessity
is the mother of invention. Just as the dashboard emerged from a dire need—the
inadequacy of the GDP as an indicator of well-being, as revealed by the Great Recession
of 2008—so did the GDP. During the Great Depression, U.S. officials could
barely quantify the problem. The government did not collect statistics on
either inflation or unemployment, which would have helped them steer the
economy. So the Department of Commerce charged economist Simon Kuznets of the
National Bureau of Economic Research with creating a set of national statistics
on income. Kuznets went on to construct the GDP in the 1940s as a simple metric
that could be calculated from the exceedingly limited market data then
available. An aggregate of (the dollar value of) the goods and services
produced in the country, it was equivalent to the sum of everyone's
income—wages, profits, rents and taxes. For this and other work, he received
the Nobel Memorial Prize in Economic Sciences in 1971. (Economist Richard
Stone, who created similar statistical systems for the U.K., received the prize
in 1984.)
Kuznets
repeatedly warned, however, that the GDP only measured market activity and
should not be mistaken for a metric of social or even economic well-being. The
figure included many goods and services that were harmful (including, he
believed, armaments) or useless (financial speculation) and excluded many
essential ones that were free (such as caregiving by homemakers). A core
difficulty with constructing such an aggregate is that there is no natural unit
for adding the value of even apples and oranges, let alone of such disparate
things as armaments, financial speculation and caregiving. Thus, economists use
their prices as a proxy for value—in the belief that, in a competitive market,
prices reflect how much people value apples, oranges, armaments, speculation or
caregiving relative to one another.
This
profoundly problematic assumption—that price measures relative value—made the
GDP quite easy to calculate. As the U.S. recovered from the Depression by
ramping up the production and consumption of material goods (in particular,
armaments during World War II), GDP grew rapidly. The World Bank and the IMF began
to fund development programs in former colonies around the world, gauging their
success almost exclusively in terms of GDP growth.
Over
time, as economists focused on the intricacies of comparing GDP in different
eras and across diverse countries and constructing complex economic models that
predicted and explained changes in GDP, they lost sight of the metric's shaky
foundations. Students seldom studied the assumptions that went into
constructing the measure—and what these assumptions meant for the reliability
of any inferences they made. Instead the objective of economic analysis became
to explain the movements of this artificial entity. GDP became hegemonic across
the globe: good economic policy was taken to be whatever increased GDP the
most.
In
1980, following a period of seemingly poor economic performance—stagflation,
marked by slow growth and rising prices—President Ronald Reagan assumed office
on the promise of ramping up the economy. He deregulated the financial sector
and cut taxes for the better-off, arguing that the benefits would “trickle
down” to those less fortunate. Although GDP grew somewhat (albeit at a rate
markedly lower than in the decades after World War II), inequality rose
precipitously. Well aware that metrics matter, some members of the
administration reportedly argued for stopping the collection of statistics on
inequality. If Americans did not know how bad inequality was, presumably we
would not worry about it.
The
Reagan administration also unleashed unprecedented assaults on the environment,
issuing leases for fossil-fuel extraction on millions of acres of public lands,
for example. In 1995 I joined the Council of Economic Advisers for President
Bill Clinton. Worrying that our metrics paid too little attention to resource
depletion and environmental degradation, we worked with the Department of
Commerce to develop a measure of “green” GDP, which would take such losses into
account. When the congressional representatives from the coal states got wind
of this, however, they threatened to cut off our funding unless we stopped our
work, which we were obliged to.
The
politicians knew that if Americans understood how bad coal was for our
economy correctly measured, then they would seek the elimination of
the hidden subsidies that the coal industry receives. And they might even seek
to move more quickly to renewables. Although our efforts to broaden our metrics
were stymied, the fact that these representatives were willing to spend so much
political capital on stopping us convinced me that we were on to something
really important. (And it also meant that when, a decade later, Sarkozy
approached me about heading an international panel to examine better ways of
measuring “economic performance and social progress,” I leaped at the chance.)
I
left the Council of Economic Advisers in 1997, and in the ensuing years the
deregulatory fervor of the Reagan era came to grip the Clinton administration.
The financial sector of the U.S. economy was ballooning, driving up GDP. As it
turned out, many of the profits that gave that sector such heft were, in a
sense, phony. Bankers' lending practices had generated a real-estate bubble that
had artificially enhanced profits—and, with their pay being linked to profits,
had increased their bonuses. In the ideal free-market economy, an increase in
profits is supposed to reflect an increase in societal well-being, but the
bankers' takings put the lie to that notion. Much of their profits resulted
from making others worse off, such as when they engaged in
abusive credit-card practices or manipulated LIBOR (for London Interbank
Offered Rate of interest for international banks lending to one another) to
enhance their earnings.
But
GDP figures took these inflated figures at face value, convincing policy makers
that the best way to grow the economy was to remove any remaining regulations
that constrained the finance sector. Long-standing prohibitions on
usury—charging outrageous interest rates to take advantage of the unwary—were
stripped away. In 2000 the so-called Commodity Modernization Act was passed. It
was designed to ensure that derivatives (risky financial products that played a
big role in bringing down the financial system just eight years later) would
never be regulated. In 2005 a bankruptcy law made it more difficult for those
having trouble paying their bills to discharge their debts—making it almost
impossible for those with student loans to do so.
By
the early 2000s two fifths of corporate profits came from the financial sector.
That fraction should have signaled that something was wrong: an efficient
financial sector should entail low costs for engaging in financial transactions
and therefore should be small. Ours was huge. Untethering the market had
inflated profits, driving up GDP—and, as it turned out, instability.
OPIOIDS,
HURRICANES
The
bubble burst in 2008. Banks had been issuing mortgages indiscriminately, on the
assumption that real-estate prices would continue to rise. When the housing
bubble broke, so did the economy, falling more than it had since the immediate
aftermath of World War II. After the U.S. government rescued the banks (just
one firm, AIG, received a government bailout of $130 billion), GDP improved,
persuading President Barack Obama and the Federal Reserve to announce that we
were well on the way to recovery. But with 91 percent of the gains in income in
2009 to 2012 going to the top 1 percent, the majority of Americans experienced
none.
As
the country slowly emerged from the financial crisis, others commanded
attention: the inequality crisis, the climate crisis and an opioid crisis. Even
as GDP continued to rise, life expectancy and other broader measures of health
worsened. Food companies were developing and marketing, with great ingenuity,
addictive sugar-rich foods, augmenting GDP but precipitating an epidemic of
childhood diabetes. Addictive opioids led to an epidemic of drug deaths, but
the profits of Purdue Pharma and the other villains in that drama added to GDP.
Indeed, the medical expenditures resulting from these health crises also
boosted GDP. Americans were spending twice as much per person on health care
than the French but had lower life expectancy. So, too, coal mining seemingly
boosted the economy, and although it helped to drive climate change, worsening
the impact of hurricanes such as Harvey, the efforts to rebuild again added to
GDP. The GDP number provided an optimistic gloss to the worst of events.
These
examples illustrate the disjuncture between GDP and societal well-being and the
many ways that GDP fails to be a good measure of economic performance. The
growth in GDP before 2008 was not sustainable, and it was not sustained. The
increase in bank profits that seemed to fuel GDP in the years before the crisis
were not only at the expense of the well-being of the many people whom the
financial sector exploited but also at the expense of GDP in later years. The
increase in inequality was by any measure hurting our society, but GDP was
celebrating the banks' successes. If there ever was an event that drove home
the need for new ways of measuring economic performance and societal progress,
the 2008 crisis was it.
THE DASHBOARD
The
commission, led by three economists (Amartya Sen of Harvard University,
Jean-Paul Fitoussi of the Paris Institute of Political Studies and me),
published its first report in 2009, just after the U.S. financial system
imploded. We pointed out that measuring something as simple as the fraction of
Americans who might have difficulty refinancing their mortgages would have
illuminated the smoke and mirrors underpinning the heady economic growth
preceding the crisis and possibly enabled policy makers to fend it off. More
important, building and paying attention to a broad set of metrics for
present-day well-being and its sustainability—whether good times are
durable—would help buffer societies against future shocks.
We
need to know whether, when GDP is going up, indebtedness is increasing or
natural resources are being depleted; these may indicate that the economic
growth is not sustainable. If pollution is rising along with GDP, growth is not
environmentally sustainable. A good indicator of the true health of an economy
is the health of its citizens, and if, as in the U.S., life expectancy has been
going down—as it was even before the pandemic—that should be worrying, no
matter what is happening to GDP. If median income (that of the families in the
middle) is stagnating even as GDP rises, that means the fruits of economic
growth are not being shared.
It
would have been nice, of course, if we could have come up with a single measure
that would summarize how well a society or even an economy is doing—a GDP plus
number, say. But as with the GDP itself, too much valuable information is lost
when we form an aggregate. Say, you are driving your car. You want to know how
fast you are going and glance at the speedometer. It reads 70 miles an hour.
And you want to know how far you can go without refilling your tank, which
turns out to be 200 miles. Both those numbers are valuable, conveying
information that could affect your behavior. But now assume you form a simple
aggregate by adding up the two numbers, with or without “weights.” What would a
number like 270 tell you? Absolutely nothing. It would not tell you whether you
are driving recklessly or how worried you should be about running out of fuel.
That
was why we concluded that each nation needs a dashboard—a set of numbers that
would convey essential diagnostics of its society and economy and help steer
them. Policy makers and civil-society groups should pay attention not only to
material wealth but also to health, education, leisure, environment, equality,
governance, political voice, social connectedness, physical and economic
security, and other indicators of the quality of life. Just as important,
societies must ensure that these “goods” are not bought at the expense of the
future. To that end, they should focus on maintaining and augmenting, to the
extent possible, their stocks of natural, human, social and physical capital.
We also laid out a research agenda for exploring links between the different
components of well-being and sustainability and developing good ways to measure
them.
Concern
about climate change and rising inequality had already been fueling a global
demand for better measures, and our report crystallized that trend. In 2015 a
contentious political process culminated in the United Nations establishing a
set of 17 Sustainable Development Goals. Progress toward them is to be measured
by 232 indicators, reflecting the manifold concerns of governments and civil
societies from around the world. So many numbers are unhelpful, in our view:
one can lose sight of the forest for the trees. Instead another group of
experts, chaired by Fitoussi, Martine Durand (chief statistician of the OECD)
and me, recommended that each country institute a robust democratic dialogue to
discover what issues its citizens most care about.
Such
a conversation would almost certainly show that most of us who live in highly
developed economies care about our material well-being, our health, the
environment around us and our relations with others. We want to do well today
but also in the future. We care about how the fruits of our economy are shared:
we do not want a society in which a few at the top grab everything for
themselves and the rest live in poverty.
A
good indicator of the true health of an economy is the health of its citizens.
A decline in life expectancy, even for a part of the population, should be
worrying, whatever is happening to GDP. And it is important to know if, even as
GDP is going up, so, too, is pollution—whether it is emissions of greenhouse
gases or particulates in the air. That means growth is not environmentally
sustainable.
The
choice of indicators may vary across time and among countries. Countries with
high unemployment will want to track what is happening to that variable; those
with high inequality will want to monitor that. Still, because people generally
want to know how they are doing in comparison with others, we recommended that
the advanced countries, at least, share some five to 10 common indicators.
GDP
would be among them. So would a measure of inequality or some pointer toward
how the typical individual or household is doing. Over the years economists
have formulated a rash of indicators of inequality, each reflecting a different
dimension of the phenomenon. It may well be that societies where inequality has
become particularly problematic may need to have metrics reflecting the depth
of the poverty at the bottom and the excesses of riches at the top. To me,
knowing what is happening to median income is of particular importance; in the
U.S., median income has barely changed for decades, even as GDP has grown.
Employment
is often used as an indicator of macroeconomic performance—an economy with a
high unemployment rate clearly is not using all of its resources well. But in
societies where paid work is associated with dignity, employment is a value in
its own right. Other elements of the dashboard would include indicators for
environmental degradation (say, air or water quality), economic sustainability
(indebtedness), health (life expectancy) and insecurity.
Insecurity
has both subjective and objective dimensions. We can survey how insecure people
feel: how worried they are about adverse effects or how prepared they feel to
cope with a shock. But we can also predict the likelihood that someone falls
below the poverty line in any given year. And some elements of the dashboard
are “intermediate” variables—things that we may (or may not) value in
themselves but that provide an inkling of how a society will function in the
future. One of these is trust. Societies in which citizens trust their
governments and one another to “do the right thing” tend to perform better. In
fact, societies in which people have higher levels of trust, such as Vietnam
and New Zealand, have dealt far more effectively with the pandemic than the
U.S., for instance, where trust levels have declined since the Reagan era.
Policy
makers need to use such indicators much as physicians use their diagnostic
tools. When some indicator is flashing yellow or red, it is time to look
deeper. If inequality is high or increasing, it is important to know more: What
aspects of inequality are getting worse?
STEERING
THROUGH STORMS
Since
we began our work on well-being indicators some dozen years ago, I have been
amazed at the resonance that it has achieved. A focus on many of the elements
of the dashboard has permeated policy making everywhere. Every three years the
OECD hosts an international conference of nongovernmental organizations,
national statisticians, government officials and academics furthering the “well-being”
agenda, the most recent being in Korea in November 2018, with thousands of
participants.
Whenever
the conference next convenes, the global crisis in human societies that a
microscopic virus has precipitated will surely be on the agenda. The full dimensions
of it could take years or decades to become clear. Recovering from this
calamity and steering complex societies through the even more devastating
crises that loom—catastrophic climate change and biodiversity collapse—will
require, at the very least, an excellent navigational system. To paraphrase the
OECD: We have been developing the tools to help us drive better. It is time to
use them.
The Doomsday Clock is now two minutes
before midnight
Scientists move
clock ahead 30 seconds, closest to midnight since 1953
January 25, 2018
Citing growing nuclear risks
and unchecked climate dangers, the Doomsday Clock — the
symbolic point of annihilation — is now two minutes to midnight, the closest
the Clock has been since 1953 at the height of the Cold War, according to a statement
today (Jan. 25) by the Bulletin of the Atomic
Scientists.
“In 2017, world leaders
failed to respond effectively to the looming threats of nuclear war and climate
change, making the world security situation more dangerous than it was a year
ago — and as dangerous as it has been since World War II,” according to the
Atomic Scientists’ Science and Security Board in consultation with the Board of
Sponsors, which includes 15 Nobel Laureates.
“This is a dangerous time,
but the danger is of our own making. Humankind has invented the implements of
apocalypse; so can it invent the methods of controlling and eventually
eliminating them. This year, leaders and citizens of the world can move the
Doomsday Clock and the world away from the metaphorical midnight of global
catastrophe by taking common-sense action.” — Lawrence Krauss, director of the
Origins Project at Arizona State University, Foundation Professor at School of
Earth and Space Exploration and Physics Department, Arizona State University,
and chair, Bulletin of the Atomic Scientists’ Board of Sponsors.
The increased risks driving
the decision to move the clock include:
Nuclear. Hyperbolic rhetoric and provocative actions from North Korea and the
U.S. have increased the possibility of nuclear war by accident or
miscalculation. These include U.S.-Russian military entanglements, South China
Sea tensions, escalating rhetoric between Pakistan and India, uncertainty
about continued U.S. support for the Iran nuclear deal.
Decline of U.S. leadership and a related
demise of diplomacy under the Trump Administration. “In 2017, the United States backed away from
its longstanding leadership role in the world, reducing its commitment to seek
common ground and undermining the overall effort toward solving pressing global
governance challenges. Neither allies nor adversaries have been able to
reliably predict U.S. actions or understand when U.S. pronouncements are real
and when they are mere rhetoric. International diplomacy has been reduced to
name-calling, giving it a surrealistic sense of unreality that makes the world
security situation ever more threatening.”
Climate change. “The nations of the world will have to
significantly decrease their greenhouse gas emissions to keep climate risks
manageable, and so far, the global response has fallen far short of meeting
this challenge.”
How to #RewindtheDoomsdayClock
According to Bulletin of the
Atomic Scientists:
* U.S. President Donald
Trump should refrain from provocative rhetoric regarding North Korea,
recognizing the impossibility of predicting North Korean reactions. The U.S.
and North Korean governments should open multiple channels of communication.
* The world community should
pursue, as a short-term goal, the cessation of North Korea’s nuclear weapon and
ballistic missile tests. North Korea is the only country to violate the norm
against nuclear testing in 20 years.
* The Trump administration
should abide by the terms of the Joint Comprehensive Plan of Action for Iran’s
nuclear program unless credible evidence emerges that Iran is not complying
with the agreement or Iran agrees to an alternative approach that meets U.S.
national security needs.
* The United States and
Russia should discuss and adopt measures to prevent peacetime military
incidents along the borders of NATO.
* U.S. and Russian leaders
should return to the negotiating table to resolve differences over the INF
treaty, to seek further reductions in nuclear arms, to discuss a lowering of
the alert status of the nuclear arsenals of both countries, to limit nuclear modernization
programs that threaten to create a new nuclear arms race, and to ensure that
new tactical or low-yield nuclear weapons are not built, and existing tactical
weapons are never used on the battlefield.
* U.S. citizens should
demand, in all legal ways, climate action from their government. Climate change
is a real and serious threat to humanity.
* Governments around the
world should redouble their efforts to reduce greenhouse gas emissions so they
go well beyond the initial, inadequate pledges under the Paris Agreement.
* The international
community should establish new protocols to discourage and penalize the misuse
of information technology to undermine public trust in political institutions,
in the media, in science, and in the existence of objective reality itself.
Worldwide deployments of nuclear weapons,
2017
“As of mid-2017, there are
nearly 15,000 nuclear weapons in the world, located at some 107 sites in 14
countries. Roughly, 9400 of these weapons are in military arsenals; the
remaining weapons are retired and awaiting dismantlement. Nearly 4000 are
operationally available, and some 1800 are on high alert and ready for use on
short notice.
“By far, the largest
concentrations of nuclear weapons reside in Russia and the United States, which
possess 93 percent of the total global inventory. In addition to the seven
other countries with nuclear weapon stockpiles (Britain, France, China, Israel,
India, Pakistan, and North Korea), five nonnuclear NATO allies (Belgium,
Germany, Italy, the Netherlands, and Turkey) host about 150 US nuclear bombs at
six air bases.”
Misbehaving:
The Making of Behavioral Economics by Richard H. Thaler
Economics
-- Psychological aspects; Consumer Behavior.
Traditional
economics assumes rational actors. Early in his research, Thaler realized these
Spock-like automatons were nothing like real people. Whether buying a clock
radio, selling basketball tickets, or applying for a mortgage, we all succumb
to biases and make decisions that deviate from the standards of rationality
assumed by economists. In other words, we misbehave.
The Value of Everything: Making and Taking
in the Global Economy
Modern
economies reward activities that extract value rather than create it. This must
change to insure a capitalism that works for us all.
In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it.
The book uses case studies - from Silicon Valley to the financial sector to big pharma - to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP.
The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster long-term economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society.
In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it.
The book uses case studies - from Silicon Valley to the financial sector to big pharma - to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP.
The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster long-term economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society.
- 06-11-20
THE SHAPE
OF TOMORROW
We have an unprecedented opportunity to rein in
capitalism’s excesses and reshape our democracy. Here’s how experts from MIT,
Harvard, and more would tackle the biggest problems.
For Fast
Company’s Shape of Tomorrow series, we’re asking business
leaders to share their inside perspective on how the COVID-19 era is
transforming their industries. Here’s what’s been lost—and what could be
gained—in the new world order.
Sarah Miller is
the executive director of the American Economic Liberties Project, which
advocates for antitrust regulation and corporate accountability. She’s the
former deputy director of the Open Markets Institute, another prominent
anti-monopoly group, and was a policy adviser at the U.S. Treasury during the
Obama administration.
One of the biggest challenges—which we have seen
exacerbated by the pandemic—is the question of Amazon: just the sheer amount of
economic and political power that it has generated for Jeff Bezos. We also do a
lot of work on Facebook and Google. These three [companies] are some of the
most dangerous monopolies from a societal and democratic perspective. Our
regulators—our government—have allowed them to monopolize advertising markets.
You’ve seen the sheer power of Amazon as an
intermediary in the economy between businesses and consumers. You’ve seen them
make decisions on who can sell and who can’t sell, on what’s essential and
what’s not essential. You’ve seen them leverage their political power to abuse
workers and prevent them from working safely. Most recently, you saw Amazon tell
the House Judiciary Committee [which requested testimony from Bezos on Amazon’s
anticompetitive business practices], essentially, to go to hell. That just
shows the culture of disrespect for democracy that monopolists tend to carry
along with them. And then you top it off with stories that Bezos might become a
trillionaire in seven years. Is that really the kind of economic and political
power that we want our economy to generate for a single person?
WHETHER WE LIKE IT OR NOT, THE ECONOMY IS GETTING RESTRUCTURED,
AND OUR DEMOCRATIC INSTITUTIONS HAVE A ROLE TO PLAY.”
SARAH MILLER, AMERICAN ECONOMIC LIBERTIES PROJECT
At the same time, there’s more awareness across the
board that [concentrating power in the private sector] is a problem, that this
crisis is going to make it worse, and that government has a role to play.
[There’s awareness] that we’re going to probably come out on the other side of
this with a decimated small-business sector and more power in the largest
corporations.
Whether we like it or not, the economy is getting
restructured, and our democratic institutions have a role to play. There’s not
any single-bullet solution to it: There’s no Dodd-Frank Act to deal with
concentrated private power. It really is about a reorientation of priorities and
relearning how to use and create new tools in government to address it. And
that’s going to take a lot of research, a lot of investigations, and a
confrontational approach to monopolies. This broadly shared ideology of “Uh, we
shouldn’t punish success”—that huge, powerful companies bestow great benefits,
or that we can keep them under control through various checks on their
power—just isn’t a sustainable or safe path.
The first thing and most easy thing to do is pause
mergers during the crisis. We saw legislation that would do that: Amy Klobuchar
and Elizabeth Warren and David Cicilline sent a letter to the Fed asking for
that to be a condition on access to any bailout money. [We also need to look]
at trade agreements and see how they benefit the largest corporations and how
that entrenches their power. We need to look into a lot of specific corporate
actors, and revitalize the FTC and have commissioners in place who will use
that authority. Same with the Department of Justice. Same with the Department
of Defense.
We’d like Democrats to see this as both a humanitarian
crisis and a moment when we are making decisions about who is going to have
power in the economy and who is going to lose power.
Demond Drummer is
the executive director and cofounder of New Consensus, an organization that
promotes a vision of a robust public sector that actively shapes the economy
and markets. The group is particularly focused on how the government and public
institutions should make investments to create and support a sustainable
economy in the form of a Green New Deal.
We had outlined a set of national projects [tied to
the Green New Deal] to update this country’s energy system and the way it
consumes energy and the way we grow food. But back in February, it was hard to
make the case that we needed a jobs program in this country, because people
said, “Unemployment is so low.” Well, people had shit jobs—and several jobs, in
some cases. And they were gig workers. It was a terrible situation for most
people.
Now we don’t have to make the case that we need robust
public investments to create and stimulate great jobs, because it’s clear: 40
million people are unemployed, and increasing numbers of people who were
employed are now underemployed. Now we can have that jobs conversation.
WE BUILT THE WHITE MIDDLE CLASS—WE CAN BUILD THE
MIDDLE CLASS THAT INCLUDES BLACK PEOPLE AND BROWN PEOPLE.”
DEMOND DRUMMER, NEW CONSENSUS
What else happens? You lose your job, you lose your
healthcare. Now there’s a stronger case for some form of universal healthcare.
And the federal government picks up the tab, because that can unleash industry
to do what it needs to do to advance.
Everything that I would call the Green New Deal
package is very much on the table right now, and much more urgent, not only
from an economic stimulus standpoint, but from a sustainability standpoint.
This is a beautiful moment to onshore [manufacturing]
in a sustainable manner. I think that this a build-it-here, make-it-here,
grow-it-here [moment]—and not in some weird, nationalist kind of frame, but in
the sense that we need to be able to build the things we need, in case these
types of things happen again. And they will. We’ve got to have a more resilient
way of getting [manufacturing] done. And if that creates jobs, all the better.
We will be laying out a package of proposals from
energy all the way to manufacturing and food that can advance this country to
an era of strength and vitality. The tools are there. We built the white middle
class—we can build the middle class that includes Black people and brown
people.
I’m not optimistic that we’re going to see some
natural kind of shift in political thinking and vision, because look what got
us into this crisis. I do think we have urgency and a set of immediate data and
lived experience that can be exploited to explain to folks and communicate what
needs to be done and how we can do it. People may be open to alternative
solutions.
David Autor, Ford
Professor of Economics at MIT, is a leading labor economist who focuses on
inequality and the opportunities facing people without high levels of
education, especially in an economy that’s being rapidly altered by technology
and automation.
There are two aspects of [the COVID-19 crisis]. One is
in the short term: Who’s bearing the burden, and how can it possibly be reduced
to some degree? The second is in the long run: What does this mean for the
structure of earnings and employment and opportunity for those same groups of
workers? Unfortunately, the longer-term prospects are also adverse.
In the long run, my concern is it’s going to change
patterns of consumption. One [example] is in business travel, which drives a
lot of the money in the hospitality industry because business travelers pay
full freight on the airplane. They pay full fare at hotels on weeknights. They
may expense-account meals. It’s hard to believe that there won’t be a big
reduction in business travel over the long term because people have realized
that it’s just not as necessary as they’d thought.
Similarly, people will be going less to offices, which
means less cleaning services, less people going out for lunch, less location
services, less Uber. That will also affect the demand for services. And,
finally, I think that employers are learning, very rapidly, which workers they
can do without. And there’s no reason to think that employers would unlearn
that as soon as this is over.
[This crisis] will speed up the process of automation.
In the long run, that has some benefits: We can raise productivity;
technologies that we were only beginning to use before, now we will realize how
well we can make them work. But it also means that even though the labor market
is slack—with millions of people ready to go back to their jobs—many firms may
say, “Actually, we’ve figured out how to do that one without people.” There’s
also going to be a shift in the distribution of business activity from small-
and medium-sized firms to larger firms, and those larger firms are less
labor-intensive. That’s also going to exacerbate exactly the same phenomenon.
The government is the only actor that really has the
capacity to act on the scale that’s needed. We just spent 10% of GDP on a
bailout; why don’t we spend another 10% on investment? Let’s create a Marshall
Plan for the U.S.: Rebuild American infrastructure, invest in schools, and
remake ourselves. The U.S. has essentially unlimited borrowing capacity and
interest rates are essentially zero. This is the moment to use that.
We have done something quite radical with the social
safety net in the last couple months: We decided a bunch of people who weren’t
part of the unemployment insurance system should get unemployment insurance
benefits. We could do that more broadly: Make the unemployment insurance system
more comprehensive. Let’s now formalize that. And then [use the crisis as] an
opportunity for skills investment. There are many things that we’ve been doing
extensively in the form of in-person education that can potentially be done
less expensively and still efficiently. [Let’s] capitalize on that.
Rebecca Henderson, an
economics professor at Harvard Business School, is the author of Reimagining Capitalism in a World on Fire,
which explores how a democratically accountable government and a strong civil
society can rein in capitalism’s excesses.
Before the pandemic, a lot of businesspeople would
say, “I care about inequality and it’s important, but I have a business to
run.” It was not so clear that [inequality is] an immediate business problem.
Now, it’s much clearer. Businesses can’t just say, “Someone else will deal with
this.”
Look at the states bidding against each other for
vital medical equipment. Where is the federal task force [putting] the might of
America to work? The political system is broken, and the idea that government
should take a central role has been delegitimized. We can disagree about how
big government should be, and what exactly the edges should be. But the idea
that government is a good thing and is fundamental to the health of the
society—that, we should not be disagreeing about.
What can businesses do to help? Businesses can stop
demonizing the government. Business [leaders have] a role to play in moving our
society: First, by doing what you can in your own business to address social
and environmental problems, then by cooperating with other firms to address
problems like environmental damage and inequality in your industry. But of
course we’re not going to solve [an issue like] climate change without
appropriate regulation and support for the transition. We’re not going to solve
inequality without new labor market policies, without investments in education
and health. Government is the answer—government in partnership with business.
I think the pandemic may hopefully have a silver
lining. [Historically] major shifts in political systems tend to come at times
of crisis. This crisis might be that kind of crisis. But it might be like 2008,
where we papered over, and somehow chugged on.
Tom Steyer, a
former 2020 Democratic presidential candidate, is the founder of NextGen
America, an organization that’s dedicated to mobilizing voters under the age of
35, and co-chair of California’s economic recovery task force.
What does rebooting California look like? We don’t
want to go back to January 2020. We want something better, more just, more
equitable, more sustainable. And we want to make sure that we have the
underresourced communities, the black and brown communities who’ve borne the
brunt of the COVID pandemic and the economic freefall, in the front of our
minds as we take action in the short run and make policy in the long run.
There’s going to be a big building program. Exactly
how that takes place is unclear, but we know doing it in a sustainable fashion
is the better way to invest. It creates more jobs in the short run and creates
an infrastructure that will sustain us in the long run, in terms of preserving
the natural world, but also in terms of having costs be much lower for
Americans.
One of the things that’s true in the very near term,
but also going forward, is that not having equal access to high-speed internet
is a profound source of inequality. If you can’t receive [your education both]
online and offline, you’re at a severe disadvantage. As telemedicine becomes
more relevant, if you’re unable to access high-speed internet, you’re going to
be at a disadvantage. With high unemployment, [we] want to retrain and rescale
workers. [But] if you can’t participate online, that’s going to be a severe
disadvantage.
Stephanie Kelton,
professor of economics and public policy at Stony Brook University, is a
leading proponent of Modern Monetary Theory, which posits that the U.S.
government can and should spend and invest without having to balance a budget
like a private business. She was the chief economist for the Democratic
Minority Staff of the U.S. Senate Budget Committee, and was an economic adviser
for Bernie Sanders during his 2016 presidential campaign.
People say, We just want to return to normal; we just
want to get back to the way things were. Hang on: The way things were is why
we’re where we are today.
Look at the inequality. Why are black and brown people
bearing a disproportionate amount of pain, both physical and economic, in the
coronavirus crisis? Why is it that 30 million people just lost their
employer-sponsored health insurance, and [around 40] million lost jobs? Well,
we tied healthcare to employment. And now you’ve got people who can’t afford
housing and student debt.
THE ONLY WAY WE’RE GOING TO GET SUSTAINED COMMITMENT
[TO FISCAL POLICY] IS IF EVERYBODY CAN BREATHE THROUGH IT, LIKE A LAMAZE CLASS
FOR DEFICIT SPENDING.”
STEPHANIE KELTON, ECONOMIST
These are more than imperfections—they’re deeply
rooted flaws in the design. The way that we have constructed our economy over
the last almost 40 years has left us vulnerable in many respects. Recent events
bring such things into sharper focus for people, but hopefully also, there’s
that backdrop that says the way out of this is not through the Federal Reserve.
[It’s] going to have to be through sustained commitment to fiscal policy.
And the only way we’re going to get sustained
commitment [to fiscal policy] is if everybody can breathe through it, like a
Lamaze class for deficit spending. So that we can take a deep breath, exhale,
breathe through it, and let the deficit get as big as it needs to get to heal
and repair and allow us to rebuild the type of economy that will, to the extent
we can, deal with and eliminate those vulnerabilities.
Many of us thought that after the [2008] financial
crisis [there was] an opportunity, but this one is bigger. So much is driven by
the virus: We could possibly have three or four years with no vaccine. And so,
as this thing possibly pops back up periodically and we’re dealing with
hotspots and closures, we’ll have a situation where a lot of industries are
going to be shadows of their former selves, and some won’t survive at all. Many
of the jobs that have been lost will never come back. The economy is going to
change, the way we work, how the consumer wants to spend—a lot of things are
going to change.
The last thing I want to do is watch everything come
apart, and then pick up the pieces and try to reassemble them exactly the way
they were assembled before. You want to put it together differently: You want
to build better, build smarter, build safer, build stronger, build more
resilient.
