Category Archives: Global

Technology: friend or foe to working people?

First, they came for the factory workers, but I did not speak out –

Because I was not a factory worker.

Later, they came for the bank tellers, but I did not speak out –

Because I was not a bank teller.

Soon, they’ll come for the taxi drivers, but I do not speak out –

Because I am not a taxi driver.

Are they coming for me?

***

This adaption of Martin Niemöller’s famous poem about the Nazis’ creeping reign of terror is supposed to illustrate the ambivalence of ordinary people to technological change.

We like the fact that TVs, computers, mobile phones and domestic appliances are better and cheaper than in the past. Progressive automation in manufacturing has been a key driver of the productivity gains that allowed this happen.

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Globalisation for Slow Learners

The IMF recently published its updated outlook for the global economy. The good news is that recovery from the crisis seems to be finally picking up some momentum after a decade of sub-par growth. The bad news, as they see it, is that this momentum could be stopped in its tracks if the sword of Damocles that is the threat of protectionism – whether emanating from Trump’s White House, May’s Westminister or elsewhere – falls. This could throw the process of globalisation into reverse, they worry, and slow growth in the size of the economic pie.

Alongside their biannual economic forecasts, the IMF also publishes its latest thinking on various themes. In light of increased focus on the issue of inequality since the global financial crisis, to which the recent rise in political populism has been attributed, the IMF provides a timely chapter on “Understanding the downward trend in labour income shares”. It explores the reasons why the share of wages in GDP has declined markedly – in advanced, emerging and developing economies alike – in recent decades. Between the mid-1970s and its 2006 low, the labour share has declined from around 55% of GDP to around 50% in advanced economies, before recovering only slightly since the financial crisis, while income inequality has increased significantly over the same period.

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Beyond the tyranny of GDP

Economists are fixated with what they can easily measure, but sometimes this means they can’t see the wood from the trees and focus on what is really important.

There are very good reasons why Gross Domestic Product, the sum of all goods and services produced for sale in an economy in a given time period, is the most widely watched economic indicator across the world. With adjustments for changes in prices over time and across countries, it is relatively easily comparable. When measured on a per capita basis, it is a useful – if far from perfect – proxy for the standard of living.

However, the intense focus on GDP numbers can distort public debate and political incentives as hitting growth targets becomes a holy grail. All growth is treated equally, no matter how broadly shared its benefits or how environmentally sustainable. People-centered priorities like jobs and incomes become secondary. Continue reading

Study: Liberalizing Foreign Investment in Services Boosts Manufacturing in Indonesia

Here is a post on the World Bank’s ‘The Trade Post’ blog written by Gonzalo Varela, Sjamsu Rahardja and myself on our recent working paper.

Austerity and Equality

Recent research by the OECD is unequivocal, if hardly surprising: reducing the fiscal deficit by raising taxes makes society more equal, but doing so by reducing welfare spending makes society more unequal. This holds for all 29 OECD countries studied, although the magnitude varies by country, depending on how large and progressive are their respective tax and welfare systems. Continue reading

Economic Premise: Service Sector Reform and Manufacturing Productivity

On foot of a recently published Policy Research Working Paper, exploring the potential for reforms to Indonesian service sector FDI policy to drive productivity in downstream manufacturing sectors, my co-authors and I have prepared a – much more digestible! – Economic Premise note for the World Bank’s Poverty Reduction and Economic Management Network. Published today, and available here.

Côte d’Ivoire: An Elephant at the Crossroads

cote_d_Ivoire_flagIn 2013, Côte d’Ivoire will be aiming to go one better than in 2012 across two fronts. The national football team will try to improve on last year’s runners-up spot in the African Cup of Nations, while the Ivorian authorities are targeting an increase in real GDP growth from 8.6% to 9%.

Having contracted by -4.7%  in 2011 on foot of the post-electoral political crisis that saw 3,000 people killed, real GDP rebounded strongly in 2012. Whether this represents a one-time recovery of lost ground or is indicative of higher trend growth remains to be seen. The Ivoirian authorities are aiming for double-digit growth rates from 2014 in a bid to position the country as an emerging market by 2020. Although slightly less bullish, the IMF expects a still impressive average growth rate of 7.5%  over the 2013-2015 period. Continue reading