The Times They Are a-Changin’

Half a year ago I started a presentation at a retreat with the song The Times They Are a-Changin’. Luckily for the audience it was not my voice, but Bob Dylan’s own voice, embedded in the powerpoint.

The Nobel Prize for Literature that Dylan has recently been awarded is a nice occasion to come back to the lyrics of this song.  
Dylan has not yet responded to the Swedish Academy that awarded him the Nobel Prize. Presumably he prefers his lyrics to speak for themselves. And they have a lot to say, not just about the world half a century ago, when they were written. They still sound very fresh and topical. You recognize the growing mistrust in political institutions, and the call for adjustments? In addition to the senators and congressmen who need to heed Dylan’s call, policymakers around the region need to recognize the changing world around them and make policy decisions that can adequately adapt to the ‘new economic normal’ that has set in following the onset of the global financial crisis.
  The old road of high commodity prices and booming investment that fueled rapid growth is aging around the region, forcing governments to adapt to this new normal. Although the prospects for commodity prices are notoriously uncertain, it is unlikely that prices will move back to levels seen in the decade between 2004-14 any time soon, and policymakers face the challenges of permitting an adequate devaluation, resolving problems in the banking sector, putting fiscal policies on a sustainable path, guaranteeing fair and transparent burden sharing, and facilitating the creation of new, internationally competitive production and employment. Many countries in the European Union also have to find new sources of growth as the pre-crisis rapid growth fueled by capital inflows and a real-estate boom is far behind us. 
   
It is this recognition that adjustments are required in the face of a changing world that makes these lyrics so relevant for today’s economy. In the absence of change, more people may face worse economic outcomes, fall into poverty, or become increasingly disaffected and cynical of the benefits of an interconnected world.

In our forthcoming Economic Update for the Europe and Central Asia region we list some of these changes: old sources of growth (high commodity prices, capital inflows) have dried up; new technologies are dramatically changing job security as we knew it; divergence across European countries seems to be replacing the convergence of the past; new forms of inequality might be arising. Failure to adjust to these changes might well be a reason for the increased polarization and rising populism in the region.
  The economic report on ECA, titled Polarization and Populism, merely makes a start in framing the policy questions linked to all these changes. In the coming year more analysis will be done. Today, the wheel is still in spin – meaning there is still time to implement policies that can ultimately bring about possible change that ensures more inclusive growth for the future. For the moment, though, the answers are still Blowin’ in the Wind.

^{*Songwriters: Bob Dylan}