World economy: Crisis over?

“The outlook for growth today looks significantly better than it looked a few months back,” OECD Chief Economist Pier Carlo Padoan says. Growth in the G7 economies outside Japan appears to be stronger than previously projected, with accelerating private sector investment and trade boosting recovery, his analysis showed. Read on here

OECD countries need growth if they are to emerge from the crisis and create jobs. But where will that growth come from? Also, with challenges such as climate change and global development, how can cleaner, smarter economic activity be unleashed? Answering these questions may help us plot a path out of the crisis and build a safer future.

For more than two decades, the world’s economic growth and development was largely fuelled by globalisation–the opening up of financial and product markets, and the integration into the world economy of the emergence of economies such as China, India and Brazil. This process was hit by an earthquake with the global financial crisis of 2008, an event which some have dubbed the “first crisis of globalisation”.

A heated debate between Princeton University economist Paul Krugman and Harvard economic historian Niall Ferguson was a highlight of the 11th World Knowledge Forum*–held in Seoul, Korea from 12-14 October–and among the conference’s most attended sessions.

Public debt in the OECD area is fast approaching 100% of GDP, as the financial and economic crisis badly deteriorated government budgets. A concerted move towards more balanced budgets is needed, while preparing the ground for economic growth.

How can governments restore public finances and promote sound economic growth at the same time? With budget deficits stretched and public debt at historical highs, it will not be easy. But the OECD believes that with the right mix of policies much progress can be made.

© Sebastián Piñera

Chile and Latin America are at a historic crossroads. For Chile’s president, Sebastián Piñera, today’s new revolution in knowledge, technology and information will benefit only those countries that embrace it, but could be cruel to those who let it pass them by.

What is the state of world economy as we enter 2011? Have we made progress over the past 12 to 18 months in putting an end to the worst economic crisis in our lifetimes and laying the foundations for a stronger, cleaner and fairer world?

Governments and central banks managed to avoid a global economic catastrophe, but the crisis has left a legacy of nearly bankrupt governments. A quick return to solvency is required.

An update of the OECD’s Guidelines for Multinational Enterprises is due in 2011. The changes will include stronger guidance for businesses on preventing human rights abuses, both in their own operations and in those of suppliers.

Hey you, stop wurfing and read about the 26 billion buck haircut!

Pensions are a major component of public expenditure, and a target for governments looking to streamline budgets. What are countries doing to manage costs at a time when populations are ageing at an accelerated pace?

©Hannibal Hanschke/Reuters

Can a durable recovery come from greener growth? That largely depends on the policies. In 2011 the OECD will deliver its Green Growth Strategy. Here are some early pointers.

Anyone who doubts that policy can spur innovation should look at the Kyoto Protocol. After it was adopted in 1997, the number of patents for certain technologies used to mitigate climate change climbed worldwide. In fact, just six years later, the number of patents on wind technologies had grown more than five-fold, and those on solar photovoltaic and hydro/marine technologies had more than doubled. The number of new patents for other climate change mitigation technologies, such as carbon capture, biofuels and geothermal energy also rose, though at a rate that was not much faster than the increase for patents in general over the same period.

Innovation in organisation and management will be needed if sectors are to adjust to new, oil-challenged realities. Supply chains will evolve as a result, notably in transport.

If the transport sector is to make deep cuts in carbon emissions, the carbonintensity of travel must be reduced. For that, policy analysis has to be based on how world markets actually function, and that means understanding what consumers look for when deciding to buy a vehicle, and what drives manufacturers’ decisions too.

European businesses were disappointed with the climate change agreement hammered out in Copenhagen. Here’s one way forward.

©OECD

The current crisis is an opportunity to launch a new economic model, in which the environment, as a pillar of human welfare, must be central.

Angel Gurría, Secretary-General of the OECD

When leaders of government, international organisations and civil society from around the world gather for critical discussions at the OECD summit meetings in Paris this June, one question will dominate the agenda: Is enough being done to restore confidence and long-term growth, and break the grip of the worst global crisis of our times?

©Aladin Abdel Naby/Reuters

Environmentally-friendly investments form part of many recently launched recovery programmes. With the right policies, they could achieve growth and a cleaner planet as well.

©Charles Platiau/Reuters

2008 will be a decisive year in the battle against climate change. Hopefully, it will see us forge an international consensus so an agreement can be reached in Copenhagen in 2009 that will allow us to build on the Kyoto Protocol.

We hear again and again that we must choose between having a stable climate and having a strong global economy. This is a false choice.

©David Rooney

Harsh financial reality often rides roughshod over good intentions when it comes to corporate and national balance sheets. Climate change is no exception, for though it may rouse worldwide concern, it also makes people uneasy because of how much it might cost and who should pay.

With the world economy today experiencing turbulence on a number of diverse fronts, OECD countries are preoccupied with meeting these challenges.

The economy has been operating above its estimated production potential, but is expected to decelerate noticeably in the short term as lower external demand and the marked currency appreciation damp activity. Yet growth is likely to rebound quite rapidly once the effects of these international factors disappear. A slowing in commodityprice increases, the federal goods and services tax cut and the stronger Canadian dollar should contribute to a temporary decline in inflation.

Click to enlarge. By Stik, especially for the OECD Observer.

Click to enlarge. By StiK, especially for the OECD Observer.

The smooth introduction of euro banknotes and coins will not guarantee the new currency's economic success. That will depend on structural reforms and completing the European single market. 

Boston Tea Party: Americans throwing cargoes of the tea ships into the River, at Boston, 1773. ©W.D. Cooper

Newness in politics has a long and eventful history. Globalisation and the battle for and against are no exception, as the events of the late 18th century show.

Globalisation has highlighted the need to take a closer look at challenges, from reducing pollution to tightening disease control, whose consequences are shared across the world. But if we are to make best use of such global public goods, we need to understand how they work and how to measure them.

Economic data

GDP growth: +0.6% Q2 2018 year-on-year
Consumer price inflation: 2.9% Sept 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.2% Sept 2018
Last update: 13 Nov 2018

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