SESSION THREE: Brave New World
Questioning Anglo-Saxon model Dominant, deregulated FINANCIAL MARKETS: - Key promise securitisation – reduced risk - proved false - Economy actually MORE vulnerable to financial disruption
Questioning Anglo-Saxon model Debt-driven CONSUMER SPENDING as primary engine of growth: - Since WWII, US shifted from production to consumption - More profitable to finance goods than produce them
Questioning Anglo-Saxon model The investment gap: - Focus on present / consumption rather than future / investment - Private sector spends less on research & investment than economically ideal - After Great Depression, state investment provided crucial growth boost via: - GI Bill - Interstate System - Defence Department
The future of capitalism Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits, until debt becomes unbearable. The unpaid debt will lead to the bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to Communism. Karl Marx, 1867 “The rich need a dose of capitalism. Capitalism punishes those who invest in companies that fail. ” – The Guardian, 24 March 2009
Economic lesson from Norway “As a socialist, I have always said that the market can’t regulate itself. But even I was surprised how strong the failure was. ” - Kristin Halvorsen, finance minister, Norway
New role for government OBAMA: overhaul Washington’s approach to education, health care, science and infrastructure all in effort to “lay new foundation for growth”
New role for government GREATER ROLE GOVERNMENT: - more palatable since global crisis - government still able raise capital at reasonable rates GOVERNMENT CAN STIMULATE or TRANSFORM an economy - Obama stimulus package attempts both (SA too): - jump start job creation - down payment on solving bigger problems (education, health, energy, science & infrastructure) Two goals often conflicting (at least short-term)
New growth sector: energy Oil consumption since 1980:
New growth sector: energy
New growth sector: education - Goldin & Katz: The face between education and technology - 20 th century: US century because investment in education - Education increases economic pie and distributes more equitably
New state role: formidable agenda OBAMA: - attempt resolve financial crisis & recession - face fierce opposition as tries restructure economy FDR: - Social Security, Interstate System & GI Bill - lay foundation for sustained period of robust grow
SA developmental state The role of the developmental state is “sharing risk, cofinancing investment and jointly engaging with the banking sector in constructing a vibrant growing economy”.
US labour market reflects change “These jobs aren’t coming back … Firms are making strategic decisions that they don’t want to be in their businesses. ” – John E Silvia, chief economist, Wachovia
US labour market reflects change SEVERE JOB LOSSES: NEW JOB OPPORTUNITIES: - auto manufacturers - education and health - financial services - environment and energy - retailers - government and public service - manufacturers - science and technology
US labour market reflects change
Brave new world: growth sectors UNDERPEFORMERS GROWTH SECTORS - Retailers: luxury goods - Basic consumer goods - Auto manufacturers - Alternative energy: related technology and manufacturing - Financial services - Manufacturers: consumer goods - Residential construction and related industries - Infrastructure and related industries
US and CHINA: trading places?
CHINA: infrastructure boom
CHINA: a global green leader “Save energy, cut emissions” - Energy efficiency - Reduce pollution - Tackle global warming
CHINA: the emerging superpower - China more assertive on world stage - Using dollar reserves to secure resources - Pressuring for reform of IMF and World Bank
GREEN: the future growth sector FUTURE GREEN ISSUES: - Energy technology, the next revolution - Natural capital - Sustainable development
GREEN: energy technology MASDAR CITY: World’s first zero waste, zero emissions city
GREEN: concept of natural capital “Until we learn to pay a realistic price for all the benefits and services we derive from nature, we will never get ourselves on to a truly sustainable path. ”
GREEN: sustainable development KEY ISSUES: • Biodiversity • Water • Energy • Food • Pollution • Climate change
“I don’t care whether you’re driving a hybrid or an SUV. If you’re headed for a cliff, you have to change direction. That’s what the American people called for in November, and that’s what we intend to deliver. ” - Barack Obama
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