Der Schauspieldirektor What do We have Left from the Previous Decade To Address in the New Decade


(B) If the XX century was the one of globalization, the XXI century will have to be the one of sustainability. The first decade of this new century has been the theater of a worldwide renew of terrorist activity, growing economies in the developing world, and a severe global financial crisis. We are starting 2011, with a long list of things to do, many left over from the previous decade.

We Still Need To Put in Place a Sustainable Worldwide Economic Development

Let’s not carry our journey toward an unsustainable economic development for 2011 and beyond as we did over the last decade. The world needs to put the research and development efforts and the financing that will provide environment sustainability, in parallel to policies and measures for climate-change mitigation and adaptation. We need to accomplish many many things, and at least:
 Stopping the destruction of the Earth ecosystems
 Transitioning to sustainable electricity that do not use any fossil fuel
 Efficient buildings that make a better use of energy (for home, businesses and governments)
 Sustainable transport that do not use any fossil fuel
The path to a decarbonized world can only be built with global cooperation between all countries. We have a shared planet.

Soon 7 Billion on the Planet Putting More Pressures on Water and Food

Producing more clean water and food for a growing worldwide population is still going to be a major challenge for many countries of the developing world as well as many parts of the developed world. We will reach 7 billion between 2010 and 2012 and 9.2 billion in 2050 according to the projections of the United Nations. Growth in the world human population is coming mainly from Asia (in particular China and India), and Africa with the remaining from South America. But with higher standards of living and better education, fertility rates in the developed world have been rapidly dropping. If instead of being 7 billion of human beings on our planet, we would be only 3.5 billion, just half of it, the fundamental questions of “why what and how” to pursue sustainable economic development would not be a priority.

The New Comers to the Developing World: Africa, Vietnam, Turkey, Indonesia…

Vietnam, taking the lead over China for outsourcing, Malaysia and even Thailand, despite its political turmoil over the last two years, are enjoying strong economic growths in Asia. But probably, the biggest economic development to come in Asia might be Indonesia that benefits from a growing and huge middle class, and relative political stability. In the Middle East, Turkey is emerging as the most vibrant economy. And Latin America with stronger democracies, and under the leadership of Brazil and Chili will still keep its pace of expansion (to the exception of Mexico that has not solved its drug war). But the hope is that in this decade, Africa could emerge from its poverty. Africa’s emerging economies are South Africa, Egypt, Algeria, Botswana, Libya, Mauritius, Morocco, and Tunisia. Together these countries match the average GDP per person of the BRICs. Those new BRICs countries are the ones with political stability, controlled inflation, diversified economy, and a young population.

Failure from the US and China To Establish Coordinated Economic Policies

Following the 2008 financial crisis, the overspending (or deficit) countries such as the US and most of Western Europe (the UK, France, Spain, Greece, Portugal, Ireland, Iceland) as well as Dubai, and Australia have started a massif effort to deleverage, by reducing both their private and public spending, and importing less. Unfortunately, while the deficit countries are spending less, the underspending (or surplus) countries such as China, Germany, Japan, and some Asian developing economies have not been spending more on both private and public consumption and saving less. As a result, we have a global excess of productive capacity due to a shortage of aggregate global demand. The failure in particular from the US and the Chinese governments to establish global policies to correct those trade imbalances is reducing the prospect of global economic growth for everyone on the planet.

Solving the Currency Crisis, the US Dollar, the Chinese Renminbi and the Euro

While the overspending countries have a depreciation of their currencies (in particular the US dollar and the Euro) in order to reduce their trade deficits, the underspending countries have resisted the appreciation of their currencies (in particular the Renminbi) because they are either unable or unwilling to reduce their savings, and sustain growth through higher spending on their domestic consumption. As a result, the only way the deficit countries can achieve real depreciation is via deflation while the surplus countries have growing risks of inflation.

In Europe, while maintaining the eurozone with a weaker euro strengthens the German economy, the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) countries with their large external deficits are still very much in need of strong financial support in order to be maintained within the Euro as they implement painful fiscal and structural reforms. More than ever, Europe needs to leverage the benefits of the Eurozone and a single currency.

Economic Growth is Much Needed in the US and in Europe to Reduce Unemployment and Deficits

While the developing world is expanding in the planet and so reducing global poverty, the US economy needs growth after a recovery simulated by the government stimulus and quantitative easing from the Federal Reserve. But so far, US corporations, which are operating very profitably, are not investing in the US but growing their workforces mostly outside the US. The US is still facing many internal challenges: housing crisis, degradation of its education, health care costs, and aging infrastructure. Europe needs badly policies that restore competitiveness and growth. Many European countries need the courage to free their labor markets, liberalize some of their national services, and correct abuse or misuse of some of their social programs. Without growth, it will be difficult both for the US and Europe to lower their unemployment rates and stabilize their public and private debts as a share of their GDPs.

Successes in addressing all those challenges for 2011 and beyond will require global cooperation, global innovations, global policies, and global regulations.

Globalization has both benefits and requirements.

How to avoid a double-dip global recession” Nouriel Roubini
A survival strategy for the Eurozone” Nouriel Roubini
The US-China dialogue of the deaf” George Soros
Where are the jobs? For many companies, overseas” Pallavi Gogoi
The World in 2011, The Economist
The Road to an Unsustainable Economic Development for 2010 and Beyond” A Silicon Valley Insider
Our Journey to a Sustainable Economic Development for 2010 and Beyond” A Silicon Valley Insider
The Public Debts of the Developed Nations Could Well Lead to the Next Financial Crisis”, A Silicon Valley Insider.

Note: The picture above is one among many theaters. Der Schauspieldirektor is a divertissimento from Mozart.

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Categories: Economy, Sustainability