{"id":63320,"date":"2023-05-04T07:19:33","date_gmt":"2023-05-04T05:19:33","guid":{"rendered":"https:\/\/revistaidees.cat\/?post_type=newspaper&p=63320"},"modified":"2023-05-04T14:33:43","modified_gmt":"2023-05-04T12:33:43","slug":"diari-de-les-idees-un-sistema-economic-mundial-en-turbulencies","status":"publish","type":"newspaper","link":"https:\/\/revistaidees.cat\/en\/analisis\/diari-de-les-idees\/diari-de-les-idees-un-sistema-economic-mundial-en-turbulencies\/","title":{"rendered":"Diari de les idees – An unstable global economic system"},"content":{"rendered":"\n

Global growth forecasts published by the International Monetary Fund (IMF) in its latest Fiscal Monitor<\/em><\/a> put it at 2.8% for this year and 3% on average over the next five years, the worst medium-term outlook since 1990. The COVID-19 crisis has shaken globalisation by disrupting supply chains, a situation that has been aggravated by the energy crisis triggered by the war in Ukraine, generating a period of high inflation. Central banks, having doubted the structural nature of the price increases, have been forced to intervene by raising interest rates. Moreover, the impacts of the poly-crises of recent years have only worsened the debt situation in many developing countries and the challenges are increasing: rising interest rates, the dollar, agricultural commodity prices and the urgent need to find financing to combat climate change.<\/p>\n\n\n\n

All this in a context where the ageing of the world’s population (especially in the United States and Europe), the scarcity of resources, the environmental emergency, the stabilisation of the Chinese economy, and the increased regionalisation of international trade, are all factors that indicate that an economic slowdown is inevitable. This prospect of a more constrained global economy thus implies an obligation to be more attentive to the quality of growth than to its quantity. This therefore means setting priorities where aid to the poorest countries and the fight against climate change have to be at the top of the list in order to achieve levels of prosperity compatible with the finiteness of the planet.<\/p>\n\n\n\n

Despite this, the IMF continues to recommend a return to austerity policies to deal with inflationary outbreaks, a policy that many economists consider inappropriate because what it actually causes is a worsening of the situation, since instead of correcting the cycle when there is low activity, what it does is to further aggravate the downturn. Nor have austerity policies been useful in reducing debt, but rather to increase it, precisely because they lead to a reduction in income that forces households, companies and governments to take on even more debt. Yet both the IMF and the politicians and economists who defend them are immune to counter-arguments and empirical evidence.<\/p>\n\n\n\n

It is therefore surprising that the IMF itself has published a report showing that these restrictive policies do not work. Thus, chapter 3 of the latest issue of the World Economic Outlook<\/em><\/a> presents the results of research conducted in 33 emerging and 21 developed economies between 1980 and 2019. The authors admit that consolidations have negligible effects on debt ratios, not only because they are often not accompanied by other necessary measures, but also because they tend to slow GDP growth. They also recognise that, in contrast, fiscal expansion results in debt reductions in different cases and circumstances, precisely because this expansion generates GDP and revenue growth. Finally, they conclude that it is the increase in activity, supply and demand, and not tightening, that is responsible for about one third of the debt reduction observed during this period.<\/p>\n\n\n\n

Consequently, the policies proposed and imposed by the IMF seem rather to be the result of cognitive and ideological biases based exclusively on information that coincides with its own expectations, using models that limit knowledge of reality and ignore or misinterpret much of the available data.<\/p>\n\n\n\n

Another aspect that also raises questions in this unstable economic and financial context is the growing rumour that a certain de-dollarization of world trade might be underway. Although the dollar is currently used in 84.3% of international trade transactions (in comparison, the Chinese yuan accounts for only 4.5%), the prospects for the success of a currency issued by the BRICS (Brazil, Russia, India, China and South Africa) are no longer a pipe dream and, unlike previous initiatives such as the digital yuan, this hypothetical currency could be in a position to challenge the dollar’s commercial hegemony. Indeed, the BRICS have a significant trade and balance of payments surplus, which makes them very attractive to foreign investors. Given that one of the main drawbacks of gold as an asset class for global investors is that, despite its risk-reducing value, it does not generate interest, in these early moves that are being detected to assess the viability of an alternative currency to the dollar, the BRICS plan to base it on other metals with intrinsic value, such as rare earth metals, which would bring interest to investors.  Ultimately, what is most relevant and significant is that the emergence of a new currency driven by the major economies of the global south and China as a competitor to the dollar in world trade would not mean the replacement of the US currency in international trade transactions, but the emergence of a new multipolar global monetary order similar to the new international geopolitical order that is taking shape.<\/p>\n\n\n\n

With regard to the situation of the Eurozone in this context of change, it has never fully recovered from the sovereign debt crisis of 2008. Indeed, it still has to deal with the consequences of implementing structural reforms and measures to tackle economic imbalances. Moreover, the Eurozone is made up of countries with widely varying rates of economic growth, with the northern countries characterised by surpluses while those in the south are weighed down by low productivity, weak investment and a weak banking sector. With a view to strengthening the Eurozone, the digital euro project launched by the ECB in 2021 is to be welcomed, and although the final decision will not be taken for a few years, the likelihood of a digital euro seems increasingly likely. At the same time, the European Commission is carrying out preliminary studies to launch the corresponding legislative process and it is quite possible that it will make its proposal public in May. Thus, in the autumn, the ECB’s Governing Council could decide to move to a phase where it would develop and test the technical solutions and commercial arrangements necessary to provide and distribute a digital euro.<\/p>\n\n\n\n

Finally, the EU is engaged in a debate on the Commission’s proposed fiscal guidelines at the end of 2022. Agreement on a revised fiscal policy framework is crucial for the stability and prosperity of the EU. Indeed, credible fiscal rules, together with a commitment to respect them and the right instruments to enforce them, are essential to ensure sound public finances across the EU. This is why the Commission has recently put forward concrete ideas on what these rules could look like, based on some key principles: a flexible approach to the pace of fiscal adjustment in line with each Member State’s public debt; the design of medium-term fiscal and economic strategies that ensure debt sustainability; the implementation of growth-enhancing reforms and investments; and the enforcement of rules that must be realistic, credible and assumed by all.<\/p>\n\n\n\n

\n\n\n\n

Photography: Adobe Stock.<\/sub><\/p>\n\n\n\n

Mar\u00eda Garc\u00eda, trainee student at the CETC, has participated in this issue of Diari de les idees<\/em>.<\/sub><\/p>\n","protected":false},"excerpt":{"rendered":"

Global growth forecasts published by the International Monetary Fund (IMF) in its latest Fiscal Monitor put it at 2.8% for this year and 3% on average over the next five years, the worst medium-term outlook since 1990. The COVID-19 crisis has shaken globalisation by disrupting supply chains, a situation that has been aggravated by the energy crisis triggered by the war in Ukraine, generating a period of high inflation. Central banks, having doubted the structural nature of the price increases, have been forced to intervene by raising interest rates. 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