Michael Spence, Advisory Board Co-Chair of Asia Global Institute, delivered the keynote address for AGD 2016 where he identified the key issues of our time.
The current time is challenging; there is confusion over outlook and growth patterns are not resilient.
Our economies are growing in a manner that is neither sustainable nor inclusive. Public and private investments are way below the levels that are needed and leverage is rising. We have increased the gross leverage of the global economy by 57 trillion dollars, yet we have in various, spots higher unemployment. We have high and rising wealth and an income inequality in most places. While monetary policy has certainly saved us, we have also managed to elevate asset prices, causing a divergence with real economy performance. The impact on monetary policy of an asset crisis has ran out of steam, we are even in a position where we might have a reset.
This is a time of confusion: technology is promising but it seems only accessible by people in the middle class; there are fears of robots replacing 30 per cent of the workforce in developed countries; stock market is going down. But making a transition would be easier if we make the effort to restore resilient growth patterns at the same time.
Despite the confusion there are also factors suggesting hopeful changes.
There is huge potential to eliminate poverty, to transform economy through technologies, and there is enormous breakthrough in artificial intelligence and machine learning in the last decade. We also have the potential to counter effectively the anti-inclusiveness forces that happen in a lot of our economies. For example, economic and social performance needs to be measured more effectively in a multi-dimensional fashion, and the world should not focus exclusively on economic growth and per capita GDP.
Most of those non sustainable growth patterns have to be reversed: making the transition would be easier if efforts are made to restore resilient growth patterns.
Opportunities to restore resilient growth patterns are there but it will require big effort and good leadership.
The journey getting there from where we are now is going to be lengthy and complex. There are very big lags between the recognition of potential for some of these technologies than the actual realization. It will require significant changes in mindsets, organizational forms including business ones and especially impacting the patterns of investment in human capital.
Presently the world is not on the path to do this well. It is a global project and it is far from clear that existing institutions of governance are up to the task.
China and Asia to play a bigger role in creating a resilient growth pattern for the interdependent world economy
For resilient growth patterns to be restored, significant changes are required at local, subnational, national, and significantly, also at global level.
This takes us back to the mission of the Asia Global institute. China, as a country that has made significant movements in this direction, understands by experience the growth model. China has created institutions that were mentioned before, the One Belt One Road, the Asian Infrastructure Investment Bank; there have been attempts to up the level of investment in the neighborhood – Central/ East/ South Asia & West Africa, starting on an international basis. There are hopes that China can use its G20 presidency to try to bring at least some of the pieces into place that would reduce or change in the way we go about dealing with inclusiveness and sustainable growth patterns.
One way to look at this world is everybody is dragging everybody else down. The network structure of this global economy is different than it was 20 years ago, economies in the world are now interdependent. The flip side of that coin is that more effective growth strategies across a range of countries and regions would spillover positively to each other and reinforce the transition to more sustainable growth patterns.