World economy threatened by sabre-rattling trade-wars
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The Organisation for Economic Cooperation and Development, the OECD, has released its economic outlook for 2019-2020 at the establishment’s annual forum this week.
This year also marks the 20th anniversary of the OECD Forum which works with civil society groups, along with public and private stakeholders to shape the future direction of the world economy.
The progrnostic is not good - unless the world puts an end to trade-war sabre-rattling.
Walking away from the OECD today - from that old French chateau, that appears to have been re-fitted by the designers of “Minority Report” - you couldn't help but wonder exactly had happened?
In the aftermath, there was only one simple conclusion:
Today’s economic outlook basically confirmed what everyone has been thinking over the past 24 months - two years since the US government launched its “America First” policies in earnest and started hacking away at the roots of the institutions, partnerships, balances and counter-balances that have been laboriously built-upon since the end of World War II.
Is the glass half-full?
Having followed the headlines of late, it would appear that the ongoing US-China Trade war is ratcheting-up, not simmering down. And this has not gone unnoticed by the movers and shakers at the OECD.
The news of the previous 48-hours hung like a cloud over the procedings, notably Google’s announcement that it will not allow the Chinese Telecoms manufacturing giant Huawei use its Android operating system on its mobile devices
I8t also follows the announcement of a tariff-hike of 25 percent tariffs on $200 billion worth of Chinese goods. Beijing is expected to espond to in kind.
The opening message from OECD Secretary General Angel Gurria this morning was very simple.
If we are to look at the current state of the global economy, we’ be inclined to think the glass is half full – as unemployment and inflation are low and global GDP is due to rise by 3.4 percent in 2020.
But these jobs are low skilled and low wage, and inflate the data.
And the rise in global GDP should be double the amount - nearer to seven percent on an annual basais.
Not mincing his words, Gurria stressed that the world is not in a good place, and trade tensions are driving uncertainty.
Gurria said: “Growing trade tensions drive uncertainty, thus business investment is hit and global growth is stifled. This in turn will undermine people’s well-being: jobs will be disrupted and consumers’ purchasing power will be hurt.”
Dystopia or Utopia?
Like it or not, the economy is built on the global capitalist system and if the markets are jittery, that hits investor confidence. If people don’t invest, they just sit on whatever cash they have and wait for things to blow over as can be remembered following the world global nose-dive over a decade ago.
Not investing, the secretary general said; will have considerable repercussions our future generations. "Investment is the seed of tomorrow’s growth. When you don’t invest today, you have a [negative] impact that is quite fast… it’s a question of logic," he said.
So Gurria’s bottom line is that liberal trade has been good for the world, despite what anti-globalisation activists have been fighting against for decades and indeed what one could see among a majority of the Yellow Vests movement here in France
The issue now should be how do we make globalization work for everyone? From the corporate investor to the small-to-medium enterprises to cottage industries?
There are a myriad issues that need to be tackled, but what crops up time and time again, is bridging the gap of the digital divide.
According to the latest OECD report, 46 percent of the world’s businesses don't have access to broadband and THAT is holding the world economy back.
47 percent of the world’s businesses don't have access to proper transport infrastructure and THAT is holding the world economy back.
So the un-even pace of rolling-out well designed, future-proof digital infrastructure (and tangible transport infrastructure) is stifling the world’s economic growth.
Also, with the automation of pretty much everything, governments need to future-proof the peoples’ future, providing them the skills required to retain a dignified place in society, as it is essentially lower income people who are the most vulnerable to robots taking over their jobs and livelihoods.
Where do you start?
For the OECD’s Chief Economist, Laurence Boone, the first thing that has to be tackled are those trade disputes emerging across the globe. And the rules of the previous century no longer apply.
This has also been brought up at every recent meeting of global institutions - from the OECD, to the International Monetary fund, to the World Bank - that we cannot tackle the economic and development problems of the 21st Century with tactical models that date from the 1990s.
So what was the upshot of today’s global, economic forecast for 2019?
Global growth is too weak.
Lack of action will have long-term consequences.
And if China’s economy catches cold, the world will catch pneumonia.