By Prashansa Srivastava
The Trade and Development Report of 2017 by the United Nations Conference on Trade and Development (UNCTAD) titled, Beyond AusterityTowards a Global New Deal highlights the state of the global economy and calls for ambitious alternative policy routes. Launching the report, UNCTAD Secretary-General Mukhisa Kituyi said, “A combination of too much debt and too little demand at the global level has hampered sustained expansion of the world economy”.
UNCTAD forecasts the dangers of hyper-globalisation which have led to a considerable concentration of economic power and wealth in the hands of a remarkably small number of people. It further notes the need to build more inclusive and caring economies to rebalance the global economy and achieve prosperity for all. It states that people should be put before profits, putting forward a twenty-first-century makeover to offer a global “new deal”.
Sluggish global economic growth
The report goes on to note the exclusionary and unbalanced nature of the world economy, stressing the adverse consequences of such inequality on the political, social and environmental global scenario. Austerity measures, undertaken in the wake of the financial crisis have exacerbated the state of the world economy. Austerity measures refer to official actions undertaken by governments that reduce the budget deficit by cutting spending or increasing taxes. The report warns that if an increase in wages or government spending does not occur, the world economy will be condemned to a state of continued sluggish growth or even worse.
Currently, growth is expected to reach 2.6 percent, slightly higher than in 2016 but well below the pre-financial crisis average of 3.2 percent. The world economy is picking up but not lifting off, with most regions registering small gains. The eurozone is expected to see its fastest growth since 2010 (1.8 percent) but is still lagging behind the United States of America. Latin America will see the biggest turnaround even if at a meagre 1.2 percent growth by exiting recession. China and Asia, on the other hand, are growing at a slow pace and will not be seen as growth pillars for the world economy. The default macroeconomic option of fiscal austerity is seen as the biggest obstacle to advanced economies.
A precarious future
In the words of Richard Kozul-Wright, the lead author of the report, “Two of the biggest socioeconomic trends of recent decades have been a debt explosion and the rise of super-elites, loosely identified as the top 1 percent”. The report shows that this inequality and instability makes for the world with inadequate levels of productive investment, precarious jobs and weakening welfare provision.
The state of the financial sector and the skyrocketing debt level are fundamental but not the only sources of anxiety. Problems linked to robots and gender discrimination loom large and will impact job prospects in developed and developing economies alike.
The way forward
The Trade and Development Report 2017 notes that now is the ideal time to crowd in private investment with the help of a concerted fiscal push. This new global deal will get the growth engines revving again, and simultaneously help to rebalance economies and societies. The Trade and Development Report 2017 calls for more encompassing policy measures to address global and national asymmetries in resource mobilisation, technological know-how, market power and political influence. The exclusionary outcomes caused by hyper-globalisation will perpetuate if no action is taken. Ending austerity, clamping down on corporate rent-seeking and harnessing finance to support job creation and infrastructure investment will be fundamental pillars of ensuring sustained growth.
The report states that appropriate regulation of the financial sector is the need of the hour. The suggestion of setting up a new global financial register to record who owns financial assets will also pave the way for fair taxation, boosting government revenue. To safeguard the labour force, wages need to rise in line with productivity and work insecurity needs to be corrected through legislative action and active labour market measures. The report also elucidates the need to adapt to climate change and promote the technological opportunities offered by the Paris Agreement under the United Nations Framework Convention on Climate Change.
An appropriate combination of policies, reforms and resources can enable the international community to reach sustainable development goals and accelerate growth.
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