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WORLD POPULATION
Global Issues
• Global issues are so important that they may literally determine the future of the human species.
• Global issues impact all social, environmental, economic, health, and security concerns.
• and those concerns are, in themselves, global issues
Global ıssues
• Global issues are issues that:
– Have significant impacts for large numbers of people
– Are trans-national
– Are persistent, or long-acting
– Are interconnected
Interconnected
• Global issues are interconnected, which means that a change in one – whether for better or worse – exerts pressure for change in others.
• Narrowing the gap between rich and poor, for example, could positively impact food security, health, population, and the economy.
Are trans-national/trans-boundary
• Global issues are trans-national, or trans-boundary, in that they are beyond the capability of any one nation to resolve.
• The United States, for example, despite its vast wealth and powerful military, cannot by itself address issues like global warming.
Persistent or Long Acting
• Global issues are persistent or long acting in that they may take years, decades, or even generations to be fully felt, and may require similar time frames to be resolved.
• Globalization makes economic crisis as a global issue
The current major global concerns are over several “E”s
• These E’s are as follows:
– Economy
– Energy
– Exchange Rates and External imbalances
– Europe/Eurozone
– Emerging market economies
– East as in Middle East
– East as in Far East
– Earnings/Equity markets
Economy
• The US and the global economy experienced in 2008-2009 their worst recession in decades
• The housing and mortgage bust led to an economy wide recession in the US as there were spillovers of the housing recession to other sectors of the economy (autos, manufacturing, consumer durables)
• The liquidity and credit crunch that started in the sub-prime mortgage market spread to all credit and financial markets as this was not just a sub-prime problem: sub-prime, near prime and prime mortgages, commercial real estate mortgages, credit cards, auto loans, student loans, leveraged loans
• Also the US consumers (consumption is 70% of aggregate demand) were shopped-out, saving-less and debt-burdened
Economy
• This was both a liquidity crunch and a credit crunch the driven by serious solvency problems given over-leverage of households, financial institutions and the corporate sector
• The myth that the rest of the world could decouple from the US recession was shattered in 2008: there was massive re-coupling first in financial markets and then in the real economy. Recession in most advanced economies (US, Eurozone, Japan); recession or massive growth slowdown in emerging market economies)
• Issue ahead: the US and global recession are close to bottoming out. So the issue is: what will be the shape of the economic recovery: V or U or W-shaped?
East as in Middle East
• Further turmoil in the Middle East (the Iraqi security situation; tensions between Israel and its neighbors; the risk of a military confrontation between Israel/US and Iran on the nuclear issue) would affect oil prices that could increase further.
• Also, such oil market turmoil affects skittish investors’ mood and consumer confidence as it increases uncertainty and reduces real incomes.
• The Middle East and oil prices are a major source of geo-political tension on global markets.
• Previous US and global recessions have been associated with stagflationary oil price shocks
East as in East Asia
• China experienced rapid economic growth and overheating in the 2003-2008 period
• But the US recession led to a massive growth slowdown in China in the fall of 2008. But the aggressive policy reaction of China has lead to a robust growth recovery. Is it sustainable given its dependence on exports?
• Dynamism of the IT sector in India contributed to high growth in the last few years. But India faces severe fiscal problems and the need for major structural economic reforms. Recent recovery of India after the fallout from the global financial crisis
• East Asia suffered severely from the US recession given its trade openness. How strong will be its recovery?
• Japan’s recession in 2008-09 was very severe. Will its recovery be sustainable?
Linkages between the U.S. and the rest of the world occur via various channels
• Trade
• Capital flows and FDI (Europe, Japan, Emerging markets)
• Value of the US dollar
• US monetary and fiscal policy
• Global stock markets and financial links
• Developments in oil and commodity markets
• Political shocks and risks
• Global investors and corporate confidence
A quadruple global crisis unfolds
• In the prime of globalization, we are experiencing an accumulation of four interrelated crises, mutually feeding on each other:
• Climate change crisis
• oil and energy (price) crisis
• Food (and hunger) crisis
• Financial and economic crisis
A quadruple crisis unfolds
• The consequences of these crisis - individually and even more so combined - for development and all stakeholders involved (people, governments, civil society, private sector, NGOs, multilateral agencies) may be devastating.
• Hence there is an urgent need to develop effective strategies to prepare for all eventualities and to compensate and counter any negative fall-out.
The new global slowdown
• Profound and deepening financial and economic crisis affecting all countries - the impact of real global interdependency -, requiring injection of (hundreds of) billions of US$ by Governments a) into banking sector to maintain liquidity of banks and uphold their ability to provide credit - and b) to provide economic stimulus programmes of a Keynesian nature
• Real estate/housing market meltdown - with many foreclosures and personal bankruptcies
• Stock and commodity market crash and shrinking confidence/trust in economy
The new global slowdown 2
• Deep and long global economic recession looms for ALL countries - with high unemployment, shrinking tax receipts, lower exports and trade, decrease in value of currencies, decreasing tourism income, reduced consumption levels - and the specter of deflation
• Oil and commodity prices are in a steep fall, affecting the income of many oil-producing (developing) countries - while lessening the burden for the majority of the developing countries, which had absorbed
The multilateral fallout
• Will governments and multilateral agencies be able to maintain their professed commitment to fight climate change and environmental degradation - or will that be sacrificed for straightforward economic survival action and other more immediate priorities??
• Will any sectoral priorities be sacrificed or pushed back?
• Overall - will there be a need to redefine multilateralism - towards more collaboration?
What happened in previous financial crises, and what are the lessons for today?
There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).
Among the key lessons of previous major financial crises are:
•Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity
•Early intervention by central banks is more effective in limiting their spread than later moves
•It is difficult to tell at the time whether a financial crisis will have broader economic consequences
•Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.
