We can tackle climate change, jobs, growth and global trade. Here’s what’s stopping us

We must leave behind established modes of thinking and seek creative workable solutions.

Another tumultuous year has confirmed that the global economy is at a turning point. We face four big challenges: the climate transition; the good-jobs problem; an economic-development crisis, and the search for a newer, healthier form of globalization.

To address each, we must leave behind established modes of thinking and seek creative workable solutions, while recognizing that these efforts will be necessarily uncoordinated and experimental.

Climate change is the most daunting challenge, and the one that has been overlooked the longest — at great cost. If we are to avoid condemning humanity to a dystopian future, we must act fast to decarbonize the global economy. We have long known that we must wean ourselves from fossil fuels, develop green alternatives and shore up our defenses against the lasting environmental damage that past inaction has already caused. However, it has become clear that little of this is likely to be achieved through global cooperation or economists’ favored policies.

Instead, individual countries will forge ahead with their own green agendas, implementing policies that best account for their specific political constraints, as the United States, China and the European Union have been doing. The result will be a hodge-podge of emission caps, tax incentives, research and development support, and green industrial policies with little global coherence and occasional costs for other countries. Messy though it may be, an uncoordinated push for climate action may be the best we can realistically hope for.

Inequality, the erosion of the middle class, and labor-market polarization have caused significant damage to our social environment.

But our physical environment is not the only threat we face. Inequality, the erosion of the middle class, and labor-market polarization have caused equally significant damage to our social environment. The consequences are now widely evident. Economic, regional, and cultural gaps within countries are widening, and liberal democracy (and the values that support it) appears to be in decline, reflecting rising support for xenophobic, authoritarian populists and the growing backlash against scientific and technical expertise.

Social transfers and the welfare state can help, but what is most needed is an increase in the supply of good jobs for the less-educated workers who have lost access to them. We need more productive, well-remunerated employment opportunities that can provide dignity and social recognition for those without a college degree. Expanding the supply of such jobs will require not only more investment in education and more robust defense of workers’ rights, but also a new brand of industrial policies for services, where the bulk of future employment will be created.

The disappearance of manufacturing jobs over time reflects both greater automation and stronger global competition. Developing countries have not been immune to either factor. Many have experienced “premature de-industrialization”: their absorption of workers into formal, productive manufacturing firms is now very limited, which means they are precluded from pursuing the kind of export-oriented development strategy that has been so effective in East Asia and a few other countries. Together with the climate challenge, this crisis of growth strategies in low-income countries calls for an entirely new development model.

Governments will have to experiment, combining investment in the green transition with productivity enhancements in labor-absorbing services.

As in the advanced economies, services will be low- and middle-income countries’ main source of employment creation. But most services in these economies are dominated by very small, informal enterprises — often sole proprietorships — and there are essentially no ready-made models of service-led development to emulate. Governments will have to experiment, combining investment in the green transition with productivity enhancements in labor-absorbing services.

Finally, globalization itself must be reinvented. The post-1990 hyper-globalization model has been overtaken by the rise of U.S.-China geopolitical competition, and by the higher priority placed on domestic social, economic, public-health, and environmental concerns. No longer fit for purpose, globalization as we know it will have to be replaced by a new understanding that rebalances national needs and the requirements of a healthy global economy that facilitates international trade and long-term foreign investment.

Most likely, the new globalization model will be less intrusive, acknowledging the needs of all countries (not just major powers) that want greater policy flexibility to address domestic challenges and national-security imperatives. One possibility is that the U.S. or China will take an overly expansive view of its security needs, seeking global primacy (in the U.S. case) or regional domination (China). The result would be a “weaponization” of economic interdependence and significant economic decoupling, with trade and investment treated as a zero-sum game.

The biggest gift major powers can give to the world economy is to manage their own domestic economies well.

But there could also be a more favorable scenario in which both powers keep their geopolitical ambitions in check, recognizing that their competing economic goals are better served through accommodation and cooperation. This scenario might serve the global economy well, even if — or perhaps because — it falls short of hyper-globalization. As the Bretton Woods era showed, a significant expansion of global trade and investment is compatible with a thin model of globalization, wherein countries retain considerable policy autonomy with which to foster social cohesion and economic growth at home. The biggest gift major powers can give to the world economy is to manage their own domestic economies well.

All these challenges call for new ideas and frameworks. We do not need to throw conventional economics out the window. But to remain relevant, economists must learn to apply the tools of their trade to the objectives and constraints of the day. They will have to be open to experimentation, and sympathetic if governments engage in actions that do not conform to the playbooks of the past.

Dani Rodrik, professor of international political economy at Harvard Kennedy School, is president of the International Economic Association and the author of Straight Talk on Trade: Ideas for a Sane World Economy (Princeton University Press, 2017).

This commentary was published with the permission of Project Syndicate — Confronting Our Four Biggest Economic Challenges

More: Biden administration’s antitrust victories are much-needed wins for consumers

Also read: ‘Dr. Doom’ Nouriel Roubini: ‘Worst-case scenarios appear to be the least likely.’ For now.

Source link

#tackle #climate #change #jobs #growth #global #trade #Heres #whats #stopping

World Needs To ‘Move On’ From Ukraine War Because ‘Global South Is Suffering’: India’s G20 Negotiator

The West cannot ignore the suffering of the Global South and bring global developmental issues to a standstill due to the Ukraine war, India’s G20 summit negotiator Amitabh Kant said.

Kant’s scorching comments Wednesday came as the G20 meet on education under India’s G20 presidency is underway in Amristar.

“Europe cannot bring growth, poverty, global debt, all developmental issues to a standstill across the world,” Kant told reporters Wednesday, as reported by Reuters. “Especially when the south is suffering, especially when 75 countries are suffering from global debt, especially when one-third of the world is in recession, especially when 200 million people have gone below poverty line. Can that one war bring the entire world to a standstill?” he asked.

Kant, who is designated as India’s G20 sherpa, said people have become “wasted” as the world is fixated on the ongoing war.

His call also echoes the comments made by Bangladesh’s foreign minister A.K.Abdul Momen earlier this month on the sidelines of the G20 foreign ministers’ meeting in New Delhi. The minister had demanded that companies profiting from the conflict should be asked to compensate poor nations impacted by it. He had also said that developing nations should be consulted before any sanctions and counter-sanctions are imposted by the warring parties.

“Nutrition has been impacted, health outcomes have been impacted, learning outcomes have been impacted, people have become stunted and wasted and we are just concerned with one Russia and Ukraine war,” Kant said in New Delhi. “The world needs to move on and Europe needs to find a solution to its challenges.”

With the war having disrupted global trade, poor and developing nations have argued they have more pressing problems — like food security, energy crisis, mounting debt, climate change related problems — to deal with instead of getting tangled in the Russia-West geopolitical rivalry.

“India’s emphasis on global poverty as a larger global issue than Ukraine makes sense if one keeps in view India’s national interest, as such an emphasis does not require India to get entangled in power politics as in Ukraine,” Debidatta Aurobinda Mahapatra, professor of political science at Florida State College at Jacksonville, told International Business Times.

“War in Ukraine and global poverty are global issues affecting the globe in different ways, but depending on a nation’s, and in this case India’s, priorities and national interest, one issue can be put forward as more important than the other,” he added. “It also demonstrates India’s exasperation at the protracted nature of the conflict, possible widening of its nature and scope with the active involvement of more powers, and the risk of jeopardizing its relations with either of the major powers.”

When Russia launched its full-scale invasion of Ukraine, which Moscow calls a special military operation, G7 countries and several other democracies condemned it, while India, South Africa, China and many from the Global South refused to be drawn into taking sides.

Kant’s comments show that there “is a growing frustration with a war status quo in Europe, which is economically debilitating from the Global South’s perspective — there is a frustration in Europe too but the concerns are different from those of the Global South,” Vivek Mishra, a fellow with Indian think tank ORF’s Strategic Studies Programme, told IBT.

“If you take the Ukraine-Russia war, for instance, it may well be existential for both Europe and Global South — but in two very different contexts,” Mishra explained. “Unlike the threats which the world faced due to the pandemic, the war in Europe is accompanied with the possibility to stop it through negotiations. Perhaps the compulsions of the ongoing war are still far outweighing other concerns like global food security and therefore the juggernaut continues.”

India, as the current G20 host, has tried to represent the voice of the Global South in the grouping.

India’s response to the war was largely out of self-interest, said Mahapatra. “National policies are guided by the concern to promote national interest. This concern is at display in the context of Ukraine,” he said.

“India, which has remained a traditional partner of Russia, plays a delicate balance by openly calling for peaceful resolution of the conflict and gearing its channels in that direction while at the same time not supporting the U.S. and allies’ position, which is to condemn Russia as the aggressor and support Ukraine by providing weapons while exploring solutions to the conflict,” he added.

But he said that, in the grand scheme of things, India is expected to continue strengthening its relationship with the U.S. and Quad countries. The Quad is a grouping of the United States, Australia, India, and Japan.

Though the grouping is sometimes dubbed the “Assian NATO,” it is not a formal military alliance. Quad members cooperate across various fields including Covid-19 and natural disasters, climate change and sustainability.

“India as a major power in the post-Cold War globalized world is interested in developing close ties with the U.S., and leverage its democratic culture and demographic connections to promote its national interest,” Mahapatra said. “As the Quad relationship suggests, India is interested to strengthen relationships with these countries to address China’s moves in Asia while at the same time continuing relations with Russia, a major weapons’ supplier and a supporter of its position on issues like Kashmir and terrorism.”

India will still try to mark its presence on the global stage without possibly ever having to pick a side in the divide caused by the Ukraine war.

“This is an important year for India’s leadership at the global stage,” Mishra said. “This year could have seen incredibly high momentum in India’s engagements with Europe and the west on G20 collaborations if the west remained unshackled from any combat commitments.”

“India still has a very expansive G20 agenda despite the war but the repercussions of the war on the global economy and a resultant fractured world order have all led to a moderated achievement,” he continued. “As a champion of the Global South’s concerns and one of the largest economies, it is incumbent upon India to talk about other pressing concerns, which may not always coincide with that of the West.”

Related Articles

Source link

#World #Move #Ukraine #War #Global #South #Suffering #Indias #G20 #Negotiator

Hong Kong Eyes Becoming A Global Digital Asset Hub By Legalizing Crypto Trading: Report

Just a few days after Hong Kong reassured businesses that its stand on cryptocurrencies is separate from that of mainland China, a new report this week revealed that the vertical city is planning to legalize retail crypto trading to regain its status as a global digital asset hub.

The Hong Kong government is reportedly planning a mandatory licensing program for crypto platforms that will enable retail cryptocurrency trading, Bloomberg reported Thursday, citing unnamed sources familiar with the matter. The plan to re-establish the vertical city as a global crypto hub is expected to be revealed Monday at the Hong Kong FinTech Week, with the plans said to be enforced in March 2023.

Elizabeth Wong, the director of licensing and head of the fintech unit of Hong Kong’s Securities and Futures Commission (SFC), confirmed last week that they are considering allowing retail investors to “directly invest into virtual assets.”

“We’ve had four years of experience in regulating this industry … We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement,” she was quoted as saying by South China Morning Post, noting that the industry has also become more compliant.

The SFC director’s comment comes as the Hong Kong government boosts efforts to bring back entire fintech businesses that have left the city. A few years ago, the city used to be a leading global center for cryptocurrency companies like FTX, Binance, Amber Group and Q9 Capital.

However, in 2021, Hong Kong launched a licensing regime that shut down cryptocurrency exchange platforms to everyone except professional investors with portfolios of at least $1.03 million. If the said plan of legalizing retail trading pushes through, it would underline a major shift in the stand of the SFC about crypto.

However, some think that Hong Kong’s plan could be just China’s way to use it as a proxy to transact crypto. Former BitMEX CEO Arthur Hayes in his latest blog said that China just wanted to recycle its surplus dollars and reduce its USD balance without disrupting its financial system, so it has to use Hong Kong.

“If there is a governmental belief that crypto and the technological revolution it heralds have value, then having a vibrant crypto ecosystem in an adjacent territory is a sound policy. Beijing never has to allow the aspects of crypto that might be socially destabilizing to its political model across the border. Hong Kong can be used as a safe space for Beijing to experiment with the crypto capital markets,” Hayes said.

“China has not left crypto — it has just been dormant. The current global geopolitical situation will force China to do something with its dollars. I believe that the reorientation of Hong Kong as a pro-crypto location is a prong in Beijing’s strategy to reduce its position in a way that won’t destabilize its internal financial system,” he added.

Related Articles

Source link