What were the surprises at Davos in 2018? What are the defining economic trends this year? What do the financial and political elites have to offer to make our world better? These were the key questions discussed at a round table held at the Russia Today media agency.
"We heard a very strange claim made at Davos that supposedly the western countries had successfully pulled out of the 2008-2009 crisis by following some kind of a special plan and that they needed to come up with a new plan for the next 10 years," said the Chief Advisor to the Head of the Analytical Center Leonid Grigoriev. According to the analyst, the west handled the crisis very poorly. Europe actually made a huge mistake: in 2010 they started back-pedaling on efforts to stabilize their budgets thereby extending the crisis into 2011. "It's easy to understand from a purely human and political viewpoint why they are congratulating themselves on a job well done, however from the point of view of economic analysis it took them too long to pull out of the crisis. The economic growth of the west has been on the rise for the past 3 years. It started in 2015 when the oil prices stabilized at a level that oil companies and oil exporters were OK with and that was cheap enough for oil importers. So the economic growth of the west owes quite a bit to the stability of oil prices and the general expectation that they are not going to change much in the future," Mr. Grigoriev said.
The expert also raised the issue of inequality. "Nobody knows how to handle this problem. The only thing that's become painfully clear so far is that economic growth does not help reducing inequality," Mr. Grigoriev believes. The expert noted that there were several studies noting that since 1990 high GDP growth rates accompanied by high inequality in the US, Russia and many other countries had become the new normal. "This has happened because as the economy grows the rich are in a far better position to catch the financial windfall with only a very limited trickle-down effect. And this sort of thing happens in both the developed countries and the developing ones," the analyst said. As for differences between the countries, some improvements have been seen in the middle of the ratings thanks to fast paced growth in China and India. "However if we look at the top 30-35 richest countries and the bottom 50 poorest ones, what we see is that the gap between them has increased by quite a bit. The poorest and richest countries have not been moving towards some medium level, it's just that those countries that are in the middle of the rating have seen some improvements and now look much better," Mr. Grigoriev summed up.
According to the expert, all these factors are having a negative impact on global economic development. A number of global problems are still unsolved: poverty, growth in developing countries, efforts to prevent climate change. Recent years have seen a drop in savings which has fallen as a percentage of GDP across the world. The humanity seems to have forgotten about the relevant issues that were raised in the two major agreements signed in 2015: The Paris Agreement on Climate Change and the UN Agreement on Sustainable Development Goals. According to Mr. Grigoriev it is vital that people understand that long term global problems are going unsolved because of continued international tensions.
For a video recording of the event go to the website of the press center of Russia Today.
Photo: Russia Today