Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

New, bold visions of growth needed to kick-start the global economy

New, bold visions of growth needed to kick-start the global economy

Governments must cast aside the tired old tools of monetary easing and consumption-driven demand, and reach for what the UN calls transformative growth. Climate change, public health and digital infrastructure are areas of potential growth, requiring massive investment.

It is hard to imagine that the global economy, with the exception of China and a few others, will enjoy anything beyond a dead cat bounce next year. This does not appear to have sunk in yet with many people – stock market investors especially – who are hoping for a fairly robust recovery in 2021 and beyond.
But this is not going to happen. What is needed is what the United Nations referred to in a recent report as “transformative change”.

We face a new economic reality, with growth restored only by renewed emphasis on capital investment rather than consumer spending, and it needs to be spending on human as well as physical capital, according to the UN Economist Network’s analysis.

According to the OECD, the global economy is set to plunge by 4.5 per cent this year, then recover by 5 per cent in 2021 – leaving it roughly back where it was at the end of last year. The US economy will mark time while some European economies will contract for a time.

China’s economy, in contrast, will be almost 10 per cent larger by the end of 2021 than at the end of last year, which appears to say something about the resilience of planned economies. China, likewise, outgrew others during the global financial crisis in 2008/09.

One strength of planned economies is an ability to implement long-term capital investment, and what matters more now than the quantum of growth is its quality. This is where the outlook in most advanced economies is not encouraging, predicated more upon consumption than investment.

How is increased consumption supposed to materialise? Neither a pickup in employment (and consequently, income) nor a rundown in household savings is likely at this juncture.

Any consumption-led recovery will depend more on further monetary handouts than on earned income, and that means even bigger fiscal deficits. This implies further central bank underwriting of mountainous government debt.

What is needed instead is bold thinking on how to generate growth without relying on a monetary boost to consumption or on boosting asset prices to produce a wealth effect and generate confidence. Confidence is not going to be in strong supply given the fractured world economy.

It is obvious where efforts to stimulate growth should be directed in both advanced and emerging economies. As the Organisation for Economic Cooperation and Development said in its latest economic outlook report, “corporate investment and international trade remain weak”, holding back any pickup in manufacturing.

What policymakers desperately need to focus on is not the latest purchasing managers’ index as they search for signs of recovery, tech stocks
moving again or central banks easing policy further. They need to take the lead in creating new economic growth.

Climate change is accelerating, the Covid-19 pandemic has created a massive need for new health spending, and physical and digital infrastructure investment is lagging. All require spending of trillions of dollars over the coming decade plus Herculean feats of (government-led) organisation.

This is where sustainable growth can come from – not just monetary stimulus and consumption-driven demand. The challenge is massive and it requires an equally muscular response. Climate change is by no means least among the areas where attention needs urgently to be directed.

As the UN says, global greenhouse gas emissions have grown every year since the last global financial crisis, with no sign of reaching peak emissions in the next few years. “This is serious as the changing climate will impact all communities, especially those in Africa and Asia.”

It cannot be left to trendy solutions such as so-called ESG (environmental, social and governance) investments, which, as veteran financial analyst Jesper Koll in Tokyo has described, are chiefly “a means of generating commissions” for brokers and fund managers.

What is needed, the UN says, are new financing mechanisms such as innovation and technology funds, new types of bonds and crowdfunding, venture capital, angel financing and impact investment as well as more international development funding.

It is time for governments to set national targets for real growth, such as China’s pledge to become carbon neutral within 40 years, because, as with John F. Kennedy’s pledge in 1961 that America would reach the moon within a decade, such targets produce confidence and call forth investment.

Market economies have become passive in their approach to growth. They lack vision, such as that embodied in China’s Belt and Road Initiative. They have turned inward (as with Britain and Brexit). They cannot keep up with China so they turn to attacking it. But unlike the dead cat, it will not lie down and die.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
×