A lot is being written these days on the global economic crisis. In fact, the volume of research and blogs on various aspects of the crisis particularly in the developed countries is truly overwhelming. There are too many camps and too many ideas being brandied about the causes, consequences and responses to the global crisis.
Macroeconomics and Economic Growth
‘What is diaspora?’ – a senior official of the biotechnology department of India’s Ministry of Science and Technology asked me as she was describing how the department engages with India’s technical and managerial talent abroad. Relevant expertise is drawn upon for peer review of proposals and mentoring of their subsequent implementation.
There has been an ongoing debate on the future need for foreign aid—a debate made ever more crucial by the current budget constraints in many countries as a result of the financial crisis. Some contend that aid budgets should be ramped up to counter the continued existence of severe poverty in the world; others argue that aid has been ineffective in the past, and in some cases, stymied growth in developing countries.
Last week’s State of the Union underscored the debate surrounding public spending as a measure to stimulate economic growth. President Barrack Obama argued that to “win the future” the US needs to make significant public expenditures to update the country’s infrastructure, health, and educational systems. The opposite view is that economic growth can only occur through decreased public spending and private sector growth.
Such varied opinions on public expenditures do not exist in the US alone—the debate is global. From the US to the UK, from Europe to Africa, from Latin America to Southeast Asia, to spend or not to spend is a question faced everywhere.
Beyond the epicenter of the economic crisis—the US and Western Europe—public spending has had an indeterminate effect on
The 2008–09 crisis opened the door to a different kind of thinking in international macroeconomics—and closed it on some of the previous orthodoxy. Let’s take a look at some of the most obvious cases.
First, some now see a bit of inflation (perhaps as high as 5 percent per year) as desirable for countries that pursue inflation targets, because it would allow more space to reduce nominal interest rates when an economy falls in recession. In fact, what to target (e.g., consumer, producer, asset, housing, or other prices) is the question.
Second, regulatory parameters and practices in the financial sector have proved to be
Why is it that some countries are more developed than others? A country is “less developed” not only because it lack inputs (labor and capital) but because it uses them less efficiently. In fact, inputs are estimated to account for less than half of the differences in per capita income across nations. The rest is due to the inability to acquire, adopt and adapt better technologies to raise productivity. As an engine of growth, the potential of technological learning is huge—and largely untapped. Four global trends have begun to unlock that potential, and are bound to continue.
First, the vertical decomposition of production across frontiers allows less-advanced countries to insert themselves in supply chains by initially specializing in
This is the third in a series of blogs where we take a look at the issues and the countries that will be at the forefront of the development agenda, not now, not next year, but over the next 2 to 5 years—thus, “after tomorrow”1.
There is now a budding consensus on what reduces poverty: it is
The traditional micro-prudential regulations of bank-by-bank audit and supervision proved inadequate during the recent global financial crisis.
Global GDP growth and as well as GDP growth in each of the regions were lower in 2009 compared to 2007. More specifically, specifically, negative growth rates were observed during 2009 in developed countries & European Union, Central and SE Europe & CIS countries and to a lesser extent in LAC, while the growth rates for East Asia, South Asia, Middle East, North Africa and Sub-Saharan Africa were positive in 2009 but lower than in 2007.
Reflecting this, all regions experienced higher unemployment rates, with the highest being in the developed economies & EU, Central and SE Europe & CIS and LAC economies, which again all had negative GDP growth rates in 2009. The ILO estimates that the global crisis has led to 34 million more unemployed and the World Bank estimates that about 60 million people may have been pushed into poverty.