The Organisation for Economic Co-operation and Development (OECD) said last month that activity had been hobbled by weaker trade and investment in the past two years, as US President Donald Trump pursued a trade war with China.
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Trump appears to have struck a truce with China for now, under a “phase one” pact announced this month, but pre-existing tariffs remain in place and it will take time to demobilise their effects.
More broadly, the OECD contrasted proactive actions taken by central banks with the policy foot-dragging by governments in the face of climate change and the march of technology.
Industrialists and investors are having to correct their climate strategies even as Trump sits firm in his policy of denial. Oil giant Saudi Aramco recently had to trim back the volume of its gigantic share offering.
The International Monetary Fund was a little more optimistic in its latest World Economic Outlook, forecasting 2020 growth of 3.4 percent but warning nevertheless of a “synchronised slowdown and uncertain recovery”.
At a time of populism and protests around the world, politics will remain an economic wild card next year.
Trump heads into the November presidential election under an impeachment cloud, and Britain’s Brexit divorce from the European Union will likely be sealed next month, following Prime Minister Boris Johnson’s election triumph.
The rise of technological giants sitting on mountains of data is meanwhile challenging the distribution of wealth between governments and big business, and has the potential to reshape the world of work as artificial intelligence exploits that data.
The online arena has emerged as another front for Trump’s trade wars, after he threatened tariffs on France over its digital tax imposed on the likes of Amazon, Facebook and Google. Europe is threatening a collective response.
Ludovic Subran, chief economist of German insurance giant Allianz, sees a global “purgatory of growth” coming up.
Any systemic shock next year “will probably not be born in finance, but will be exogenous, for example a big regulatory shock on personal data, or in relation to the climate”, he said.
If Trump survives the impeachment process and wins a second term, he could “double the bet against China” at the risk of military confrontation, Subran added.
Trump and his potential challengers on the Democratic left are united in their hostility to the free-trade and liberalisation agendas that, they argue, hollowed out industrial America over the past decades.
The mistrust is felt well beyond the United States.
“We’re not worried about how to overcome a cyclical crisis, we know what to do,” said Ingo Kuebler, the staff representative at Mahle, a German automotive supplier that has already been forced to downsize as car buyers turn away from diesel engines.
“The big issue is transformation, digitalisation, electric mobility,” he told AFP, fretting that an influx of cheap Chinese car batteries means “we are dreading the loss of many jobs”.
Since the financial crisis a decade ago, central bank policies have led to negative interest rates spreading in some countries, squeezing bank profitability and inflating private debt.
With growth faltering, the debate about wealth distribution will likely become still more acute. Anger at inequality runs like a thread through protest movements from rich Hong Kong to developing Chile.
In 2018, according to Oxfam, 26 billionaires had as much money as the poorest half of the world.
“Even when people seem to enjoy basic material comfort, they may still experience the same level of misery and unhappiness as the poorest,” French academic Esther Duflo said in October after she won the Nobel Prize in economics.
US investor Steve Eisman of “The Big Short” fame thinks that another global crisis is unlikely, but the best that can be hoped for is a slow strangulation of growth.
“What will happen next time, whenever it does happen, will be your normal garden variety of recession where the economy slows and goes negative and people lose money. That’ll be painful enough,” Eisman told AFP.
“A systemic crisis? Once was enough for our lifetimes,” he said, reflecting back on the implosion of 2007-2008 that made hundreds of millions for his hedge fund when he correctly foretold the US subprime collapse.
The prescient strategy of Eisman and other investment mavericks was recounted in a book by journalist Michael Lewis and subsequent Oscar-winning movie.
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