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Rich countries endangering global economic recovery
Wednesday, July 20, 2011
The global economic crisis which originated in the sub-prime debacle in the United States, and has been characterised by stagnation or anemic economic growth in Europe and Japan, remains in contrast to the economies of Asia and Latin America which continue to have steady and impressive growth.
China's spectacular growth of the last 20 years has continued unabated by the recession in the Western world, while most developing countries have experienced a slow-down in growth due to the adverse impact of the recession in the rich, developed countries but have not succumbed to an economic collapse.
For us in Jamaica, two important lessons can be drawn from those developments.
First, the centre of gravity of the global economy has shifted from the West to the East with the new global growth dynamic centred in China. The fact that the economic relations of Jamaica and the Caribbean remain concentrated on the US, Europe, Canada and Caricom is one of the causes of the economic recession in the region.
The implication is the urgent need to rebalance external economic relations to increase contact with Asia, in particular China and India, while not abandoning traditional economic partnerships.
Second, the deep and prolonged economic recession in the rich countries has been the principal cause of the global economic crisis. This is a direct result of poor short term regulation and prudential oversight of their financial markets compounding unattended long term structural and institutional deterioration. There was complacency in policy-making typified by an attitude of smugness in economic management.
The economic policy approach of the rich, developed countries is endangering global economic recovery and is retarding economic growth in the developing countries in several ways.
First, these countries have not done enough to return their economies to a path of sustained economic growth because of their abstemious fiscal and monetary policies instead of meaningful stimulus packages. They have refused to override the private banks, strengthen financial regulatory systems and manage their excessive debt burden, thus endangering the global financial and capital markets. They must put their house in order and keep the macroeconomic fundamentals right. The petulance of countries in the EU over adjustment and debt restructuring is irresponsible.
Second, they have ignored the plight of developing countries where the vast majority of mankind resides. The G-20 has done nothing substantive to promote the economic recovery of developing countries and has failed to reform the governance of the multilateral institutions, to give developing countries greater voice in decision-making. The rich countries have increased the resources of the International Monetary Fund and the World Bank but put such strictures on the use of those resources that it deprives developing countries of the ability to do stimulus packages.
The major risks for developing country economies in 2011 have come not from internal mismanagement but from the mismanagement of the rich countries. The governments in developed countries must quickly resolve the debt crisis in the EU and the US in a manner that does not lead to sovereign debt default.
Such an eventuality would do untold damage to the world economy and to the already hard hit developing countries.
Read more: http://www.jamaicaobserver.com/edito...#ixzz1SevvSjv0
Wednesday, July 20, 2011
The global economic crisis which originated in the sub-prime debacle in the United States, and has been characterised by stagnation or anemic economic growth in Europe and Japan, remains in contrast to the economies of Asia and Latin America which continue to have steady and impressive growth.
China's spectacular growth of the last 20 years has continued unabated by the recession in the Western world, while most developing countries have experienced a slow-down in growth due to the adverse impact of the recession in the rich, developed countries but have not succumbed to an economic collapse.
For us in Jamaica, two important lessons can be drawn from those developments.
First, the centre of gravity of the global economy has shifted from the West to the East with the new global growth dynamic centred in China. The fact that the economic relations of Jamaica and the Caribbean remain concentrated on the US, Europe, Canada and Caricom is one of the causes of the economic recession in the region.
The implication is the urgent need to rebalance external economic relations to increase contact with Asia, in particular China and India, while not abandoning traditional economic partnerships.
Second, the deep and prolonged economic recession in the rich countries has been the principal cause of the global economic crisis. This is a direct result of poor short term regulation and prudential oversight of their financial markets compounding unattended long term structural and institutional deterioration. There was complacency in policy-making typified by an attitude of smugness in economic management.
The economic policy approach of the rich, developed countries is endangering global economic recovery and is retarding economic growth in the developing countries in several ways.
First, these countries have not done enough to return their economies to a path of sustained economic growth because of their abstemious fiscal and monetary policies instead of meaningful stimulus packages. They have refused to override the private banks, strengthen financial regulatory systems and manage their excessive debt burden, thus endangering the global financial and capital markets. They must put their house in order and keep the macroeconomic fundamentals right. The petulance of countries in the EU over adjustment and debt restructuring is irresponsible.
Second, they have ignored the plight of developing countries where the vast majority of mankind resides. The G-20 has done nothing substantive to promote the economic recovery of developing countries and has failed to reform the governance of the multilateral institutions, to give developing countries greater voice in decision-making. The rich countries have increased the resources of the International Monetary Fund and the World Bank but put such strictures on the use of those resources that it deprives developing countries of the ability to do stimulus packages.
The major risks for developing country economies in 2011 have come not from internal mismanagement but from the mismanagement of the rich countries. The governments in developed countries must quickly resolve the debt crisis in the EU and the US in a manner that does not lead to sovereign debt default.
Such an eventuality would do untold damage to the world economy and to the already hard hit developing countries.
Read more: http://www.jamaicaobserver.com/edito...#ixzz1SevvSjv0
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