It is never easy to connect the dots in various socio-political and economic trends in the world around us; least of all as it limps back post after the massive upheavals a couple of seasons ago. On balance, at the dawn of 2011, the mood in India is sombre — the scars from a rash of high-profile scams last year have barely begun to heal. At the same time, we are much better off globally than where we ended 2009 (and most certainly 2008) — the world economy appears to have allayed double-dip recession concerns, with recovery on track even if not fully out of the woods.
What would this year be like? I can stick my neck out to venture that it may be more difficult than the one gone by, with initial momentum from a rebound mostly dissipated. Global deleveraging remains a long haul — as we speak, we have merely shifted private debt onto public balance sheets. Recovery, too, is multi-speed, with stars in Emerging Markets but concerns in parts of the West. In the QE2 context, this implies that fiscal stimulus will stay a while, notably in the US and EU. Equally (though this may not impinge on the Indian story much), the highly correlated rates of change in economic growth trends (even if actual values vary) demonstrate the intertwined nature of modern markets. Given the massive relative size of the First World economies, this means national fortunes remain inextricably tied together.
There are other concerns too. The most critical is commodities — oil should already be giving sleepless nights to all energy-deficit governments. It is the tip of the iceberg — most essential items, notably foodstuffs, have high-strung demand-supply equations that can poop the 2011 party. Equally worrisome are rising inflation and asset bubbles threatening to derail the Emerging Markets narrative. Last but not least, the EU has to manage a mismatched fiscal belt-tightening (austerity measures in Greece and others that actually need monetary elbow room; and the absence of any in Germany, France — economies that can afford tighter policy!) and the Euro’s Draupadi-like nature. Obviously — an outside chance, nevertheless — a sovereign debt default will set the cat among the pigeons.
Not unlike 2010, the key remains a coherent, calibrated, and effective policy response. This is also my biggest concern. In a multi-speed recovery world, domestic political pressures can easily upset the current global consensus. Such a breakdown is not unimaginable. It could manifest as First World protectionism born of persistent structural unemployment, or as rampant Chinese assertiveness. In fact, how the world manages an unavoidable rebalancing of global power would be this decade’s most significant megatrend, apart from the transnational commodity supply crisis and the ogre of terrorism or localised discontent.
No doubt we will watch much of these trends unfurl this year and going forward. In my first post in 2011, however, I sign off on a happy note — a tribute to Mankind's achievement on two fundamental metrics — average income and life expectancy, over the last two centuries. Go watch!
What would this year be like? I can stick my neck out to venture that it may be more difficult than the one gone by, with initial momentum from a rebound mostly dissipated. Global deleveraging remains a long haul — as we speak, we have merely shifted private debt onto public balance sheets. Recovery, too, is multi-speed, with stars in Emerging Markets but concerns in parts of the West. In the QE2 context, this implies that fiscal stimulus will stay a while, notably in the US and EU. Equally (though this may not impinge on the Indian story much), the highly correlated rates of change in economic growth trends (even if actual values vary) demonstrate the intertwined nature of modern markets. Given the massive relative size of the First World economies, this means national fortunes remain inextricably tied together.
There are other concerns too. The most critical is commodities — oil should already be giving sleepless nights to all energy-deficit governments. It is the tip of the iceberg — most essential items, notably foodstuffs, have high-strung demand-supply equations that can poop the 2011 party. Equally worrisome are rising inflation and asset bubbles threatening to derail the Emerging Markets narrative. Last but not least, the EU has to manage a mismatched fiscal belt-tightening (austerity measures in Greece and others that actually need monetary elbow room; and the absence of any in Germany, France — economies that can afford tighter policy!) and the Euro’s Draupadi-like nature. Obviously — an outside chance, nevertheless — a sovereign debt default will set the cat among the pigeons.
Not unlike 2010, the key remains a coherent, calibrated, and effective policy response. This is also my biggest concern. In a multi-speed recovery world, domestic political pressures can easily upset the current global consensus. Such a breakdown is not unimaginable. It could manifest as First World protectionism born of persistent structural unemployment, or as rampant Chinese assertiveness. In fact, how the world manages an unavoidable rebalancing of global power would be this decade’s most significant megatrend, apart from the transnational commodity supply crisis and the ogre of terrorism or localised discontent.
No doubt we will watch much of these trends unfurl this year and going forward. In my first post in 2011, however, I sign off on a happy note — a tribute to Mankind's achievement on two fundamental metrics — average income and life expectancy, over the last two centuries. Go watch!
Posts
1 comments:
Great video -- does kinda add perspective :)
I would have expected that things would be a lot more cheery in India as it is though -- corruption ain't all that new -- right dude?!
-A
Post a Comment