ASIA
30 April 2014
Give growth a chance -- OECD Week 2013
"Give growth a chance" was the refrain from the economic outlook session at OECD Forum 2013.
"Give growth a chance" was the refrain from the economic outlook session at OECD Forum 2013. Portugal's economy minister, Álvaro Santos Pereira, coined this expression, with inspiration from John Lennon.
As trade union leader Sharan Burrow argued, "austerity has failed". Austerity has proved to be economic and social poison!
We now have a three-speed world economy, according to the OECD Economic Outlook. Emerging economies are still growing strongly. The US is now gathering momentum, while Japan's economy has picked up thanks to the Abenomics stimulus. Only Europe's growth prospects have been marked down by the OECD.
The overall lesson is that government matters. Emerging economies, especially China, have maintained momentum thanks to government stimulus. Following the 2008 Lehman shock, the US responded quickly with stimulus and repairing the banking sector. Although America has since been in a state of fiscal paralysis because of Congress's political games, quantitative easing by the Federal Reserve has helped.
The recent "sequester" in the US is having a negative effects on the US economy, according to Alan Krueger, chief economist of the White House. The sequester is lopping about 0.6% off growth in 2013, and another 0.2% in 2014. This is also having longer term effects as expenditure on R&D, and infrastructure are being hit.
What's more, the sequester is also affecting the most vulnerable through its impact on social entitlements. The sequester is a reflection of a disfunctional US Congress. A more rational approach by the US Congress would "give growth a chance". Now is just at the right time, as the economy seems to be blossoming again. They shouldn't nip it in the bud.
The new Japanese government has decided to "give growth a chance" by stimulating the economy through Abenomics and its three arrows. While the fiscal and monetary arrows have left the bow, it is time for serious structural reforms, especially in light of Japan's dramatic population ageing and massive government debt. The decision to join the Trans Pacific Partnership trade talks is a welcome move. Elsewhere in Asia, Korea is making impressive strides by targeting aggregate employment, and promoting the creative economy, explained Korea's deputy prime minister, Oh-Seok Hyun.
Europe is the problem, where the ideology of austerity is inflicting unnecessary suffering on the continent's people, particularly youth and older workers, argued Guillermo de la Dehesa, Chairman of the Centre for Economic Policy Research.
The crisis won't be solved until the unemployment problem is solved. But the long-term scars of the crisis will result in permanent damage. The long-term unemployed often don't make it back to the world of work. It's a question of skills -- if you don't use them, you lose them.
But it's worse than that. Workers' incomes are falling. Precarious and part-time employment is on the rise. Many people have been left without health insurance. Countries are seeing large emigration, a brain drain, especially of their best and brightest, and their youth. Social damage is growing through suicides, and other psychological problems.
New Zealand industry leader Phil O'Reilly argued for a sound business climate in which companies would hire workers. But as Alan Krueger retorted government also has an important role to play in financing things like R&D, and infrastructure, as well as stimulating the economy in cyclical downturns.
At the London G20 meeting, Gordon Brown said that never again would the financial sector be left in charge of the economy, remarked Sharan Burrow. But we are back to an unfortunate business-as-usal, she continued.
Burrow argued for an income-led recovery. As Henry Ford once realized, the best way to stimulate demand is to put money in workers' pockets -- especially since the gap between rich and poor is at record levels, and corporate profits are at record highs. The economy should also be stimulated through a big boost to infrastructure spending.
Workers and enterprises need to return to the bargaining table. More jobs, higher incomes, better social protection, and less inequality, should be the agenda, Burrow argued. Very much in the spirit of the new deal that OECD Secretary-General Gurria called for in the Forum's opening session.
As could be expected, the day started with wonderful speeches by Norway's Prime Minister, Jens Stoltenberg, and OECD Secretary-General, Angel Gurria.
But once again, the gap between their beautiful words, and the policy and social realities on the ground was striking.
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
As trade union leader Sharan Burrow argued, "austerity has failed". Austerity has proved to be economic and social poison!
We now have a three-speed world economy, according to the OECD Economic Outlook. Emerging economies are still growing strongly. The US is now gathering momentum, while Japan's economy has picked up thanks to the Abenomics stimulus. Only Europe's growth prospects have been marked down by the OECD.
The overall lesson is that government matters. Emerging economies, especially China, have maintained momentum thanks to government stimulus. Following the 2008 Lehman shock, the US responded quickly with stimulus and repairing the banking sector. Although America has since been in a state of fiscal paralysis because of Congress's political games, quantitative easing by the Federal Reserve has helped.
The recent "sequester" in the US is having a negative effects on the US economy, according to Alan Krueger, chief economist of the White House. The sequester is lopping about 0.6% off growth in 2013, and another 0.2% in 2014. This is also having longer term effects as expenditure on R&D, and infrastructure are being hit.
What's more, the sequester is also affecting the most vulnerable through its impact on social entitlements. The sequester is a reflection of a disfunctional US Congress. A more rational approach by the US Congress would "give growth a chance". Now is just at the right time, as the economy seems to be blossoming again. They shouldn't nip it in the bud.
The new Japanese government has decided to "give growth a chance" by stimulating the economy through Abenomics and its three arrows. While the fiscal and monetary arrows have left the bow, it is time for serious structural reforms, especially in light of Japan's dramatic population ageing and massive government debt. The decision to join the Trans Pacific Partnership trade talks is a welcome move. Elsewhere in Asia, Korea is making impressive strides by targeting aggregate employment, and promoting the creative economy, explained Korea's deputy prime minister, Oh-Seok Hyun.
Europe is the problem, where the ideology of austerity is inflicting unnecessary suffering on the continent's people, particularly youth and older workers, argued Guillermo de la Dehesa, Chairman of the Centre for Economic Policy Research.
The crisis won't be solved until the unemployment problem is solved. But the long-term scars of the crisis will result in permanent damage. The long-term unemployed often don't make it back to the world of work. It's a question of skills -- if you don't use them, you lose them.
But it's worse than that. Workers' incomes are falling. Precarious and part-time employment is on the rise. Many people have been left without health insurance. Countries are seeing large emigration, a brain drain, especially of their best and brightest, and their youth. Social damage is growing through suicides, and other psychological problems.
New Zealand industry leader Phil O'Reilly argued for a sound business climate in which companies would hire workers. But as Alan Krueger retorted government also has an important role to play in financing things like R&D, and infrastructure, as well as stimulating the economy in cyclical downturns.
At the London G20 meeting, Gordon Brown said that never again would the financial sector be left in charge of the economy, remarked Sharan Burrow. But we are back to an unfortunate business-as-usal, she continued.
Burrow argued for an income-led recovery. As Henry Ford once realized, the best way to stimulate demand is to put money in workers' pockets -- especially since the gap between rich and poor is at record levels, and corporate profits are at record highs. The economy should also be stimulated through a big boost to infrastructure spending.
Workers and enterprises need to return to the bargaining table. More jobs, higher incomes, better social protection, and less inequality, should be the agenda, Burrow argued. Very much in the spirit of the new deal that OECD Secretary-General Gurria called for in the Forum's opening session.
As could be expected, the day started with wonderful speeches by Norway's Prime Minister, Jens Stoltenberg, and OECD Secretary-General, Angel Gurria.
But once again, the gap between their beautiful words, and the policy and social realities on the ground was striking.
Author
John WestExecutive Director
Asian Century Institute
www.asiancenturyinstitute.com