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  • Brookings Global MetroMonitor: Metro Areas Continue to Drive Growth Worldwide, But Fastest Growth is in Emerging Economies

    The Brookings Institution 's Global MetroMonitor for 2011 paints a picture of shifting strength from cities in the developed nations to Asia and South America. Not that the metro areas of the US and Western Europe are not still vital drivers of the global economy, but the growth was elsewhere in between 2010 and 2011. Note where much of the blue is on this map: The map is a helpful supplement to the report (click here to access the interactive map). As it shows, most of the strongest performing metro areas--90%, in fact--are outside of the US and Western Europe, while almost all of the weakest are in Japan, the US, and Western Europe. Alan Berube , director of research for the Brookings Metropolitan Policy Program and one of the authors of the report, notes some of the key takeaways from the Global MetroMonitor in this video: Read the full report here .

  • Public Debt Data, 1880-2008

    IMF researchers S. M. Ali Abbas , Nazim Belhocine , Asmaa El-Ganainy , and Mark Horton are trying to make the task of studying debt cycles and debt sustainability easier. They have begun building a database of historical public debt. At VoxEU , they have posted a series of interesting graphs from the data they have compiled so far. Including this one, that they say provides an "historical perspective of debt developments in advanced, emerging, and low-income economies. Debt levels in advanced economies (now the G20) averaged 55% of GDP over 1880–2009, with a number of peaks and troughs that correspond with key historical events along the way.": Here is what the authors say about the value of this data moving forward: The composition of the 11 debt reductions observed during 1880–1914, the first era of financial globalisation, is quite similar to that witnessed in the post-1970 financially liberalised period. In both cases, the debt ratio reductions were mainly caused by large primary surpluses. In fact, the post-1970s debt reductions are accounted for almost entirely by primary surplus improvements. However, insofar as such improvements are boosted by the cycle and easier to implement in the context of strong growth, these results may somewhat understate the true role of growth in debt declines; strong growth was a consistent feature of most debt decline episodes.2 That conventional fiscal adjustment and growth have led the way in periods of global financial integration is intuitive as well as consistent with previous studies (such as IMF 2010). Looking ahead, highly indebted advanced economies are confronted by a challenging landscape. The pursuit of unconventional options – such as reverting to financial repression policies akin to those taken during the post-WWII years, reducing the burden of domestic debt through higher inflation, or restructuring – may be a temptingshortcut but it comes with high costs. A gradual but steady adjustment is the right way to go. History shows an orderly adjustment is much easier in the context of sustained medium-term growth. This suggests that there is a premium on both implementing structural measures that improve competitiveness and the business environment, and designing fiscal adjustment in a manner that minimises the drag on growth. Read Lessons from a century of large public debt reductions and build-ups here .

  • The Case for the Middleman

    Good news for those of us caught in the middle. Daniel Altman says today's economy rewards middlemen . In this Big Think interview, Altman explains why middlemen are so important, and what it takes to be a successful connector in the global economy: Watch the full interview with Altman here .

  • Paulson: Reforms Needed in China and US to Sustain Global Economic Growth

    Three years removed from his darkest hours as Treasury Secretary, Henry Paulson is ruminating on how to fix this country's jobs and growth problems. He discussed the need for new ideas with the Wall Street Journal 's David Wessel this week. At the top of his list: China and the US coming up with new ways to get their economies to work together. Paulson says "fundamental reform" in both countries is necessary or the whole global economy will suffer:

  • Bhagwati on the 'Growth-First Model' in Developing Economies

    Jagdish Bhagwati once again states his case for economic growth as the best path toward increased welfare of citizens across the income spectrum. At Project Syndicate , he argues that the best policy for countries with large populations living at or below poverty levels is growth with an explicit "inclusive development" strategy: Since the 1950’s, developmental economists have understood that growth in GNP is not synonymous with increased welfare. But, even prior to independence, India’s leaders saw growth as essential for reducing poverty and increasing social welfare. In economic terms, growth was an instrument, not a target – the means by which the true targets, like poverty reduction and the social advancement of the masses, would be achieved. A quarter-century ago, I pointed out the two distinct ways in which economic growth would have this effect. First, growth would pull the poor into gainful employment, thereby helping to lift them out of poverty. Higher incomes would enable them to increase their personal spending on education and health (as seems to have been happening in India during its recent period of accelerated growth). Second, growth increases state revenues, which means that the government can potentially spend more on health and education for the poor. Of course, a country does not necessarily spend more on such items simply because it has increased revenue, and, even if it does, the programs it chooses to fund may not be effective. Read Does Redistributing Income Reduce Poverty? here .

  • OECD: Signs of a Slowdown

    The OECD 's composite leading indicators (CLIs) are "designed to anticipate turning points in economic activity relative to trend." The CLIs for August, just released today, are now pointing toward a global slowdown: Anything below that 100 marker points to economic activity below the long term trend. The August numbers show most countries in the OECD already below the line. India, Brazil and China are all below the line as well, with India and Brazil well below. The US, Germany, and Russia are looking better, but are also trending toward slowdown. Japan, is an outlier. Its CLI "continues to indicate a potential turning-point in economic activity." See the specific CLIs for OECD countries here .

  • Niall Ferguson on Prosperity and the Great Divergence

    The West has dominated wealth creation since the Industrial Revolution. It sure feels like the dawn of the twenty-first century is revealing a shift of some sort. Could this be the end of the West's dominance of the global economy? If it is, in what ways is that a bad thing for the global economy? And what lessons might China, India, Brazil, and other rising economies take from the last 200 years? The often-provocative Niall Ferguson tries to tackle the question of how the "Great Divergence" came about. In this Ted Talk, Ferguson outlines what he calls "killer apps," that set the course for the West's unrivaled rise of prosperity:

  • The IMF Growth Tracker Showing Moderating Growth Across Global Economy

    The IMF's World Economic Outlook shows a worrying global economic slowdown, led by Europe and the US. Among the many causes cited for slowing economic activity is the lack of demand in the private sector. The IMF's researchers suggest that they expected a quicker "handover from public to private demand." The tsunami and earthquake damage in Japan also bears some of the blame, as do disruption in oil supplies in North Africa this year. A lasting, and troubling factor is the lack of confidence on the part of consumers and businesses in developed economies of the West. The ripple effects of the dip in confidence are being felt around the globe. Note the impact on growth, as shown in the IMF's Growth Tracker : From the report: Worryingly, various consumer and business confidence indicators in advanced economies have retreated sharply, rather than strengthened as might have been expected in the presence of mostly temporary shocks that are unwinding. Accordingly, the IMF’s Growth Tracker (Figure 1.4, top panel) points to low growth over the near term. WEO projections assume that policymakers keep their commitments and the financial turmoil does not run beyond their control, allowing confidence to return as conditions stabilize. The return to stronger activity in advanced economies will then be delayed rather than derailed by the turmoil. Read the World Economic Outlook, and watch video of the IMF staff discussing their findings, here .

  • Uncertainty in Europe over the Effects of Greek Default

    We are seeing more signs today of a pending Greek default . While some folks just want resolution , European policymakers in Germany and elsewhere may be delaying the inevitable in part because they are not yet certain of what the ripple effect of default will be. Dow Jones columnist Alen Mattich discusses the uncertainty throughout Europe:

  • Michael Spence on Growth Dynamics in Today's Global Economy

    A. Michael Spence , who won the 2001 Nobel Prize for Economic Sciences, has focused his work in recent years on the growth and development in the global economy. And his latest book, The Next Convergence The Future of Economic Growth in a Multispeed World , has quickly become a must read. Spence argues that the gap between developed and developing economies is narrowing for the first time since the dawn of the Industrial Revolution. Spence spoke about the book, and about growth dynamics in the global economy, at the Carnegie Council . Here is a clip from that speech, in which Spence discusses the choices that nations must make to fuel growth in today's global economy: Watch the full speech here .

  • Considering the Decline of the Dollar as the Dominant Global Currency

    The dollar remains a global currency--or even THE global currency--and not just the US's currency. But the rise of China's economy combined with the global economic crisis brought about more discussions over whether the dollar's dominance will, or even should, end. Big Think's Global Roundtable series recently tackled the issue. Parag Khanna, Dambisa Moyo, Daniel Altman and Anand Giridharadas discussed the future of a global economy in which the Euro, the Renmibi, and the Yen become more significant players:

  • Feldstein: If China's Savings Rate Goes Up, Interest Rates Will Follow

    China's latest 5-year-plan--the country's 12th--seeks to "improve people's livelihoods, social infrastructure and safety nets, and to tackle rising inequality," according to the BBC 's Sarah Wang . And that likely means pushing for an increase in consumer spending. Martin Feldstein believes that any significant shift away from maximizing GDP growth as China's overarching economic objective will bring have far reaching consequences on the global economy. Namely, interest rates will likely go up as China's savings rate goes down. At Project Syndicate , Feldstein writes: A country that saves more than it invests in equipment and structures (as China does) has the extra output to send abroad as a current-account surplus, while a country that invests more than it saves (as the United States does) must fill the gap by importing more from the rest of the world than it exports. And a country with a current-account surplus has the funds to lend and invest in the rest of the world, while a country with a current-account deficit must finance its external gap by borrowing from the rest of the world. More precisely, a country’s current-account balance is exactly equal to the difference between its national saving and its investment. The future reduction in China’s saving will therefore mean a reduction in China’s current-account surplus – and thus in its ability to lend to the US and other countries. If the new emphasis on increased consumption shrank China’s saving rate by 5% of its GDP, it would still have the world’s highest saving rate. But a five-percentage-point fall would completely eliminate China’s current-account surplus. That may not happen, but it certainly could happen by the end of the five-year plan. If it does, the impact on the global capital market would be enormous. With no current-account surplus, China would no longer be a net purchaser of US government bonds and other foreign securities. Moreover, if the Chinese government and Chinese firms want to continue investing in overseas oil resources and in foreign businesses, China will have to sell dollar bonds or other sovereign debt from its portfolio. The net result would be higher interest rates on US and other bonds around the world. Read China’s Five-Year Plan and Global Interest Rates here .

  • Making Sense of, and Coming to Terms With, China's Rise

    Economist Martin Jacques , columnist for The Guardian and author of When China Rules the World predicts that China will become both the most powerful economy in the world, and the most dominant country in the world within the next ten years. And, he argues, many people in the West are struggling to recognize just what that means for global politics because we in the West simply don't understand China. In this Ted Talk , Jacques does his best to help us make sense of China as it is now, and what China is about to become:

  • Bagwati Compares China's Economic Prospects to India's

    If Jagdish Bagwati --professor of Economics and Law at Columbia--were a betting man, he would bed on India's economy to overtake China's. As well as Bagwati's native country has weathered the global economic crisis and continued its economic expansion, his bet would still seem to go against conventional wisdom. But in an op-ed at Project Syndicate , Bagwati argues that, while China's Communist government was able to institute economic reforms more quickly thirty years ago, its authoritarian approach is likely to run into some headwinds as the country becomes more advanced economically. But that's not the only reason Bagwati sees long term advantages for India's democratic approach: Economic factors also militate against Chinese prospects. China was clearly able for many years to exploit a "reserve army of the unemployed" à la Karl Marx - to grow rapidly without facing a labor-supply constraint, so that capital accumulation would not run into diminishing returns. But now, given China's one-child policy and lack of adequate infrastructure (including housing) in rapidly growing areas, labor is getting scarce and wages are rising. In economic jargon, the supply curve of labor was flat but is now sloping upward, so that rapidly increasing demand for labor resulting from rapid growth is driving up wages. That means that China is beginning to "rejoin the human race" as capital accumulation meets scarcer labor and growth slows. By contrast, India has a far more abundant supply of labor, as well as a more favorable demographic profile, so that, as India's investment rate increases, labor will not be a constraint. India will thus become the new China of the past two decades. Besides, in contrast to China, where economic reforms were quicker and more complete, India still has a way to go: privatization, labor-market reforms, and opening up the retail sector to larger, more efficient operators are all pending - and will give a further boost to India's growth rate once they are implemented. Read India or China? here .

  • The Story of China's Rise Looks Familiar to Clyde Prestowitz

    Clyde Prestowitz , president of the Economic Strategy Institute and adviser in the Commerce Department during the Reagan administration, looks at the rise of China and sees a lot of similarities with the rise of the US in the Nineteenth Century. And he credits Alexander Hamilton with setting the US on the course of becoming an industrial power: Watch the full interview with Prestowitz at Big Think , here .
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