ITEMS FOR YOUR CONSIDERATION
World Economic Outlook Update: Global Recovery Stalls, Downside Risks Intensify, International Monetary Fund, January 2012.
Trade and Development Report, 2011: Post-crisis Policy Challenges in the World Economy, United Nations Conference on Trade and Development (UNCTAD).
“Last year alone the daily volume of currencies traded was 220 per cent higher than that in 2001, and 65 per cent of the transactions were cross-border ― up from 54 per cent in 1998. Since 1990 foreign direct investment increased more than six fold.”
Moisés Naím, The Dangerous Cocktail of Global Money and Local Politics, Financial Times, November 18, 2011, (published on Carnegie Endowment for International Peace website).
“Assuming a cyclic dynamics of national economies and the interaction of different countries according to the import-export balances, we are able to investigate … the synchronization phenomenon of crises at the worldwide scale. … The results support the theory of a globalization process emerging in the decade 1970–1980, the synchronization phenomena after this period accelerates and the effect of a mesoscopic [intermediate in size] structure of communities of countries is almost dissolved in the global behavior.”
Pau Erola, Albert Diaz-Guilera, Sergio Gomez, Alex Arenas, Modeling international crisis synchronization in the World Trade Web, arXiv.org, January 10, 2012.
“In today’s financial architecture, as with other supply chains, interdependent networks tend to concentrate in powerful hubs. For example, just two financial centers, London and New York, dominate international finance, and only 22 players conduct 90% of all global foreign-exchange trading.”
Andrew Sheng, Global Finance’s Supply-Chain Revolution, Project Syndicate, January 5, 2012.
“So the degree of synchronisation has evolved fitfully. It is only in the most recent 1973-2006 period that we can speak meaningfully of anything resembling an international business cycle.”
Paul Ormerod, Random matrix theory and the evolution of business cycle synchronisation 1886-2006, arXiv, July 11, 2008.
“Globalization has made frontiers more porous. We see how one country’s policies, whether pertaining to work, the environment, public health, taxation, or myriad other issues, can have a direct impact on others. And we see such interdependence even more clearly in their economic performance: China’s annual GDP growth rate, for example, will slow by two percentage points this year, owing to sluggishness in the United States and the EU.”
Javier Solana, Whose Sovereignty?, Project Syndicate, March 12, 2012.
“At the news conference Monday, Mr. Zhou said China was especially worried about Europe and its chronic sovereign-debt crisis … The world economy is highly globalized with a very active flow of capital worldwide,” he said. “All of these factors will have an impact on our monetary policy.’”
Ian Johnson, China Talks of More Lending but Less Currency Growth, New York Times, March 12, 2012.
“Undoubtedly politicians should do a much better job of explaining to their constituents’ that what happens beyond the borders of their country-or city has implications for what happens inside their homes.”
Moisés Naím, The Dangerous Cocktail of Global Money and Local Politics, Financial Times, November 18, 2011 ( published on Carnegie Endowment for International Peace website).
It is becoming increasingly clear that merging the world’s 20th century national economies into our 21st century world economy has raced ahead of merging national economic policy making institutions into a global economic policy making system. The consequences of this lag in the development of global policy making institutions for the people of the U.S. and other nations are enormous.
National employment and income growth efforts are often ineffectual or only effective for a short time because of the ongoing policy push and shove of nations competing for advantage in the world economy. What one nation does to improve its position in the world economy and grow jobs and incomes, other nations work quickly to undo.
For the world economy as a whole, this push and shove of nation-centered economic policy making produces a high level of economic instability and a high level of policy incoherence.
One glaring and maddening consequence of this combination of reduced national policy effectiveness and global policy incoherence is that the recovery from the financial crisis of 2008-2009 has proceeded in fits and starts and seems too frequently to be on the verge of collapsing back into crisis. Global job and income growth is being held back and governments are being denied the tax revenues they need to protect economically vulnerable people from the ravages of poverty.
Most U.S. economists and policy makers continue to hold out hope for a much more robust economic recovery than we have had. But, one has to wonder whether a more robust recovery is possible while the world’s economic house is so geopolitically divided.
See my related comments in: The World Economy’s Demolition Derby of Competing and Overlapping Economic Policy Making Entities, January 22, 2012