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Posts Tagged ‘World Economy’

Inequality and the world economy: True Progressivism

Posted by Ram Kumar Shrestha on October 15, 2012

A new form of radical centrist politics is needed to tackle inequality without hurting economic growth

BY THE end of the 19th century, the first age of globalisation and a spate of new inventions had transformed the world economy. But the “Gilded Age” was also a famously unequal one, with America’s robber barons and Europe’s “Downton Abbey” classes amassing huge wealth: the concept of “conspicuous consumption” dates back to 1899. The rising gap between rich and poor (and the fear of socialist revolution) spawned a wave of reforms, from Theodore Roosevelt’s trust-busting to Lloyd George’s People’s Budget. Governments promoted competition, introduced progressive taxation and wove the first threads of a social safety net. The aim of this new “Progressive era”, as it was known in America, was to make society fairer without reducing its entrepreneurial vim.

Modern politics needs to undergo a similar reinvention—to come up with ways of mitigating inequality without hurting economic growth. That dilemma is already at the centre of political debate, but it mostly produces heat, not light. Thus, on America’s campaign trail, the left attacks Mitt Romney as a robber baron and the right derides Barack Obama as a class warrior. In some European countries politicians have simply given in to the mob: witness François Hollande’s proposed 75% income-tax rate. In much of the emerging world leaders would rather sweep the issue of inequality under the carpet: witness China’s nervous embarrassment about the excesses of Ferrari-driving princelings, or India’s refusal to tackle corruption. Read the rest of this entry »

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The world economy: Powering down

Posted by Ram Kumar Shrestha on July 7, 2012

More months of uncertainty about the euro area will weigh on the global economy

EUROPEAN leaders delivered rather more progress in tackling their interminable debt crisis than had been expected when they met in Brussels on June 28th and 29th. They decided, among other things, to allow the new permanent bail-out fund to recapitalise banks in ailing economies directly rather than via their governments. They also enabled rescue funds to buy the government bonds of struggling countries without imposing such strict conditions as before.

The euro promptly rose; stockmarkets regained some vim; the oil price spiked (see article). Government-bond yields fell in Spain and Italy; they also tumbled in Ireland on expectations that it will gain some retrospective relief from the heavy costs of its banking clear-up. In response, the Irish government decided to raise money by issuing short-term bills on July 5th, its first such auction since 2010.

But the June summit also delivered rather less than the market rally suggested. In theory, the agreement promises to break the self-reinforcing link between weak governments and weak banks. In practice, that will not happen until the European Central Bank (ECB) is put in charge of euro-area banking supervision, which may take a lot longer than the planned six months. Before then a deal stitched together in the bleary hours could well snag on legal difficulties about redefining the permanent fund’s remit without changing the treaty that set it up, or on political objections in smaller northern economies—Finland, for example, doesn’t like the idea of using the rescue funds to buy government bonds in secondary markets. Meanwhile, Greece has lost none of its capacity to cause trouble, as a new, weak government tries to extract concessions from creditor nations. Read the rest of this entry »

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Global Economy Slowing Down: World Bank

Posted by Ram Kumar Shrestha on January 18, 2012

The global economy is heading for a slowdown, the World Bank said on Wednesday, as the eurozone’s sovereign debt crisis and weak growth in other major economies weigh on growth.

The bank now predicts that global growth will slow to 2.5% in 2012, down from an estimate of 3.6% from June, with a marked difference between developing and high-income countries, which are forecast to grow at 5.4% and 1.4%, respectively. The eurozone is likely to contract by 0.3%.

Commodity prices have begun to fall back and the growth in global trade is slowing – from 12.4% in 2010 to 6.6% in 2011, with a forecast of 4.7% in 2012, according to the World Bank’s Global Economic Prospects report.

Should the debt crisis in Europe get any worse, no country will be safe from the results, the bank said. At the beginning of the financial downturn it was thought that so-called “decoupling” – a lack of economic links between the global South and the industrialised world – might protect developing countries. Read the rest of this entry »

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