Tags: financial | new york | globalization | obama

No Easy Path to Right Global Financial Woes

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In this Tuesday, Sept. 8, 2015, file photo, a Wall Street street sign is framed by an American flag hanging on the facade of the New York Stock Exchange. Global stock markets were higher Monday, July 18, 2016, after Wall Street gains and better Chinese economic data helped to defuse jitters over Turkey's failed coup. (AP Photo/Mary Altaffer, File)

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Friday, 23 Sep 2016 12:01 PM Current | Bio | Archive

It's the annual gathering of world leaders in New York this week, and for most of them, it's time for group therapy. Around the globe, leaders of all stripes seem afflicted with the same malady: low approval ratings. Morgan Stanley's Ruchir Sharma has pointed out that the median approval rating for the leaders of the top 20 emerging and developing economies has dropped by 17 points over the last decade.

What is going on?

Sharma argues that the cause is economic. Global growth has slowed from a post-World War II average of 3.5 percent to 2 percent since 2008. There is no region of the world that is growing faster today than it was before the global financial crisis. And yet, the very rich continue to prosper.

Sharma notes that the number of billionaires globally has doubled, to more than 1,800. Seventy of them live in one city, London.

But, in fact, the problem is deeper than simply a slowdown. There is a wider sense of political paralysis, which leads to public frustration. The underlying causes for this anger are even more fundamental in many Western countries. Growth in the West has been falling since the 1970s, including in the United States. Productivity growth has never returned to postwar levels, except for a brief period in the 1990s.

As I argue in a forthcoming Foreign Affairs essay, today Western countries face four structural challenges — demography, globalization, automation and increasing debt burdens. The demographic challenge might be the most fundamental. In almost every advanced economy, fertility has dropped sharply, from Japan to South Korea, Germany to Italy.

The number of centenarians in Japan is more than twice what it was a decade ago, with 32,000 people in the country expected to turn 100 just this year.

Globalization and the information revolution boost growth overall, but they concentrate the costs on skilled and semi-skilled workers, particularly in basic manufacturing industries that once provided large numbers of stable, high-paying jobs.

As a response to the global financial crisis, governments have taken on huge debts. In addition, the aging population means that spending on the elderly is crowding out the investment needed for growth — in infrastructure, education, science and technology.

Facing these forces, leaders have no easy path to restore growth and revive their countries. Deep, radical reforms are unpopular, and in this climate do not seem to lead to roaring growth. Ireland, Portugal and Mexico have all enacted broad market reforms, and yet, growth has not come booming back. Japan has spent hundreds of billions on stimulus plans and yet it is just muddling along.

Thus, even the leaders who come to office with strong public approval and much promise find themselves trapped by the same forces. Very quickly their approval ratings begin to drop and new populist anger grows. Italy's reformist Prime Minister Matteo Renzi has seen his numbers fall below 30 percent. The populist Greek leader, Alexis Tsipras, is down to 19 percent.

President Obama outlined many solutions to the problems of growth and inequality in his speech Tuesday to the United Nations. He explained how the United States has focused its reform and recovery efforts on helping the middle class gain better access to jobs, health care, training and housing.

He argued that furthering these efforts — with new investments in child care, infrastructure and basic research — would keep this momentum going. He pointed out that immigration and assimilation can work for all of society.

But the policy solutions he put forth and the ones that other countries are adopting are all small-bore, specific and incremental. They are wonky efforts to nudge the market, government and people in ways that will work gradually. Meanwhile, the populists promise dramatic, bold solutions that sound much more satisfying.

Donald Trump tells Americans that their lives are hard and there is a simple reason for it: foreigners. They steal American jobs, burden America's welfare state and make Americans less safe. His solution is to get tough on them. That will make the country great again, he promises.

It's not hard to understand the appeal of simplicity in a complex world. There is little drama in plans to expand early childhood education — and yet they work. The persistent and energetic efforts at reform do pay off. Sensible, fact-based, market-friendly government policy makes a difference.

A recent Census Bureau report, showing the biggest one-year drop in poverty in America in almost 50 years, highlights that these efforts in America are working.

To America's north, Canada is handling a slowdown in growth, welcoming thousands of refugees, and celebrating diversity. And the two major leaders in the Western world with the highest approval ratings today are Barack Obama and Justin Trudeau. The center can hold.

Fareed Zakaria hosts CNN's "Fareed Zakaria GPS," and makes regular appearances on shows such as ABC's "This Week" and NBC's "Meet The Press." He has been an editor at large Time magazine since 2010, and spent 10 years overseeing Newsweek's foreign editions. He is a Washington Post (and internationally syndicated) columnist. He is author of "The Post-American World." For more of Fareed Zakaria's reports, Go Here Now.

© Washington Post Writers Group.

 
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It's the annual gathering of world leaders in New York this week, and for most of them, it's time for group therapy. Around the globe, leaders of all stripes seem afflicted with the same malady: low approval ratings.
financial, new york, globalization, obama
854
2016-01-23
Friday, 23 Sep 2016 12:01 PM
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