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Has the global economic growth malaise become the 'new normal'?

David_N

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I certainly hope not.
Has the global economic growth malaise become the 'new normal'? | Business | The Guardian
The International Monetary Fund and others have recently revised down their forecasts for global growth – yet again. Little wonder: the world economy has few bright spots – and even those are dimming rapidly.

Among advanced economies, the US has experienced two quarters of growth averaging 1%. Further monetary easing has boosted a cyclical recovery in the eurozone, though potential growth in most countries remains well below 1%. In Japan, so-called Abenomics is running out of steam, with the economy slowing since mid-2015 and edging close to recession. In the UK, uncertainty surrounding the June referendum on continued EU membership is leading firms to keep hiring and capital spending on hold. And other advanced economies – such as Canada, Australia and Norway – face headwinds from low commodity prices.
Things are not much better in most emerging economies. Among the five Brics countries, two (Brazil and Russia) are in recession, one (South Africa) is barely growing, another (China) is experiencing a sharp structural slowdown, and India is doing well only because – in the words of its central bank governor, Raghuram Rajan – in the kingdom of the blind, the one-eyed man is king. Many other emerging markets have slowed since 2013 as well, owing to weak external conditions, economic fragility (stemming from loose monetary, fiscal, and credit policies in the good years), and, often, a move away from market-oriented reforms and toward variants of state capitalism.
Worse, potential growth has also fallen in advanced and emerging economies. For starters, high levels of private and public debt are constraining spending – especially growth-enhancing capital spending, which fell (as a share of GDP) after the global financial crisis and has not recovered to pre-crisis levels. That decline in investment implies slower productivity growth, while ageing populations in developed countries – and in an increasing number of emerging markets (for example, China, Russia, and South Korea) – reduce the labour input in production.
The rise in income and wealth inequality exacerbates the global saving glut, which is the counterpart of the global investment slump. As income is redistributed from labour to capital, it flows from those who have a higher marginal propensity to spend (low- and middle-income households) to those who have a higher marginal propensity to save (high-income households and corporations).

Moreover, a protracted cyclical slump can lead to lower-trend growth. Economists call this “hysteresis”: long-term unemployment erodes workers’ skills and human capital; and, because innovation is embedded in new capital goods, low investment leads to permanently lower productivity growth.

Finally, with so many factors dragging down potential growth, structural changes are needed to boost potential growth. But such an overhaul is occurring at a suboptimal rate in advanced and emerging economies, because all of the costs and dislocations are front loaded, while the benefits occur over the medium and long term. This gives opponents of reform a political advantage.

Meanwhile, growth remains below the diminished potential. A painful de-leveraging process implies that private and public spending need to fall, and that savings must rise, to reduce high deficits and debts. This process started in the US after the housing bust, then spread to Europe, and is ongoing in emerging markets that spent the past decade on a borrowing binge.

At the same time, the policy mix has not been ideal. With most advanced economies pivoting too quickly to fiscal retrenchment, the burden of reviving growth was placed almost entirely on unconventional monetary policies, which have diminishing returns (if not counterproductive effects).

The vilification of government spending isn't helping anything.
 
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Lafayette

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The vilification of government spending isn't helping anything.

American voters made the Massive Mistake of giving the HofR over to the Replicants in 2010, which prevented any Stimulus Spending to be passed. That mistake guaranteed that the slowwwww crawl-out from the Great Recession would take four-years longer than necessary.

See those four-years (from 2010 to 2014) depicted clearly here in this BLS Employment-to-Population Ratio infographic*:
latest_numbers_LNS12300000_2006_2016_all_period_M03_data.gif


So, in the 2010 midterms only 37.8% of the electorate voted. Where were the other 62.2% of the voting population that fateful day?

Spectating the elections on the BoobTube like couch-potatoes?

Well, they got what they deserved ...

*Btw, the reason the rapid decent of the country's Employment-to-Population ratio was stopped dead in 2010 is because of Obama's ARRA-spending bill passed in 2009 (when he took office along with a Dem Congress).
 
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Lafayette

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ONLY TIME WILL TELL

"Has the global economic growth malaise become the 'new normal'?"

I suggest that a better measure of "global growth" is that of the OECD, here. It is a better comparative of larger and smaller countries on more-or-less the same Learning Curve of both industrialization and the shift to a Services Economy. (Other nations, not members of the OECD tend to be more Agricultural in terms of GDP, and therefore of a differing data-set for purposes of comparison.)

Global OECD Growth in terms of that particular sub-set actually does not look all that bad, even if the major sectors of both the US and the EU are laggards and not leaders.

So the cure to the past economic malaise is in the making, but unfortunately some countries see it coming far too slowly. In Europe, the situation is getting haggard since, like most situations, the dissimilarity of national GDP-formation creates slower overall growth - and therefore higher levels of discontent manifested in the countries with still too high unemployment rates. German is doing better than most, and France is doing worst. (In fact, France has not known an unemployment rate below 7% since François Mitterand in the 1990s - that's a quarter of a century ago!)

On the international scene, the country to watch is the bull-in-the-china-shop (to misuse an aphorism). China is graduating postsecondary students at a very good rate yearly, and has a clearly robust habit at hi-tech patenting. But is it putting the students to good use when a large part of its industrial produce is high labor-content goods? It's Services Industry internally does not have the same stature of its Goods-Industries in terms of turnover - the former being domestic in nature, and the latter global.

In fact, some see China's decline to a lower growth rate due to the fact that the world is perhaps sated with "the Chinese price" of low-tech goods. (I, for one.) Their emphasis on lower cost-price has caused them to endure a bad reputation as regards product quality. And yet, Chinese manufacturers are quite capable of making state-of-the-art iPhones, when good-quality is imposed from elsewhere.

China is signing construction contracts abroad for significantly large projects, for instance, for electrification (both generation and delivery). Only time will tell, however, whether China has the economic wherewithal to compete with South Korea and Japan in terms of hi-tech produce and quality car-manufacturing as South Korea has accomplished ...
 
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