Economics
Will 3D printing kill the supply chain?
The additive manufacturing revolution is underway, and product supply chains lie directly in its path of creative destruction. Which ones, if any, will survive?
In additive manufacturing – also known as 3D printing – a computer-controlled laser melts materials such as plastic or a mixture of alloys according to a blueprint that is programmed into the machine. An object is made by building up ultra-thin layers of the material one by one.
The technology reduces waste to a minimum because material is added (hence the term “additive”) in the precise quantities needed to make an item. In addition...
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August 2, 2013
Finding the right economic reform strategy for Europe
Together with fiscal consolidation, structural reform is the new European mantra. International organizations and European Union bodies regard such reform as a prerequisite of economic recovery, growth, and alleviation of the unemployment plague.
Indeed, the agreement reached between the Greek government and the “troika” (the International Monetary Fund, the European Central Bank, and the European Commission) includes a 48-page list of detailed reforms. Not all countries are given such a long to-do list, but, since new EU legislation was adopted in 2010, specific recommendations are addressed...
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August 1, 2013
Can Silicon Valley be replicated?
Everyone wants to know how to build the next Silicon Valley: an innovation hub that draws talent and capital, and that creates jobs, companies, and whole new industries. Developed-country governments scramble to subsidize technology that could be the Next Big Thing. Emerging-market policymakers hope that incentives like tax breaks and free land will induce innovators to settle and prosper there. But most of these well-meaning schemes are missing an essential ingredient: demand.
Demand for innovation in specific areas of technology has been the common force behind all high-tech hot spots, as...
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July 31, 2013
Misreading China’s economic rebalancing
The punditocracy has once again succumbed to the “China Crash” syndrome – a malady that seems to afflict economic and political commentators every few years. Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China skeptics.
Yes, China’s economy has slowed. While the crisis-battered West could only dream of matching the 7.5% annual GDP growth rate that China’s National Bureau of Statistics reported for the second quarter of 2013, it certainly does represent an appreciable slowdown from the 10% growth trend recorded from 1980 to...
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July 30, 2013
The Arctic’s economic time bomb
“The global impact of a warming Arctic is an economic time bomb,” says Gail Whiteman, one of the authors of a fascinating and headline-grabbing study in this month’s Nature. Whiteman, along with Chris Hope and Peter Wadhams, warns of the catastrophic climate impact of methane being released from a rapidly thawing Arctic. The study puts a US$ 60 trillion price tag on mitigating the risk.
The authors argue that:
“…integrated analyses of Arctic change must enter global economic discussions. But neither the World Economic Forum (WEF) in its Global Risk Report nor the International...
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July 26, 2013
Who’s afraid of banking reform?
Nearly five years after the worst financial crisis since the 1930’s, and three years after the enactment of the Dodd-Frank financial reforms in the United States, one question is on everyone’s mind: Why have we made so little progress?
New rules have been promised, but very few have actually been implemented. There is not yet a “Volcker Rule” (limiting proprietary trading by banks), the rules for derivatives are still a work-in-progress, and money-market funds remain unreformed. Even worse, our biggest banks have become even larger. There is no sign that they have abandoned the incentive...
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July 26, 2013
Will technology be able to tackle climate change?
How can technology help tackle climate change? It’s something we’ve been asking ourselves for a while now, and it came up again during strategic talks between the US and China earlier this month. In his opening remarks, US Secretary of State John Kerry summed up the issue: “How will we pioneer new energy technology that is in fact the solution to climate change?”
There is some cause for hope: advances in nanotechnology mean we can build faster, high-energy-density batteries and lighter, stronger materials for more energy-efficient transportation. From graphene-based solar cells to...
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July 26, 2013
Why economics needs economic history
The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.
Strikingly,...
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July 25, 2013
Can 3D printing improve our lives?
How will 3D printing change the world? Today, you can read about jewelry and custom can openers, much as three decades ago you could have read that the personal computer would enable people to keep their recipes organized. Of course, PCs became much more useful than that. Many entrepreneurs and small businesspeople can now run their entire operations on a computer, and people keep their recipes not only organized, but also online. They also track their workouts, monitor their babies, and amass huge collections of digital friends (for better or worse).
The Internet changed the balance of power...
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July 25, 2013
Should markets be pessimistic about China’s economic future?
China’s growth has slowed considerably since 2010, and it may slow even more – a prospect that is rattling investors and markets well beyond China’s borders. With many of the global economy’s traditional growth engines – like the United States – stuck in low gear, China’s performance has become increasingly important.
But now growth rates for Chinese exports and related indices in manufacturing have fallen, largely owing to weak external demand, especially in Europe. And the Chinese authorities are now scaling back the other major driver of their country’s growth, public-sector investment, as...
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July 24, 2013
How can NGOs stay ahead of the game?
It has long been clear that many non-state actors have more influence on international policymaking than a great many sovereign states. No one doubts the impact that major multinational corporations and terrorist organizations can have, for better or worse. But the role of a number of international non-governmental organizations (INGOs) has been more significant than is generally recognized, and what makes the best of them tick is worth exploring.
According to current estimates, there are some 40,000 NGOs operating internationally, with the overwhelming majority focusing primarily on health,...
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July 24, 2013
What is ailing the BRICS and other emerging markets?
During the last few years, a lot of hype has been heaped on the BRICS (Brazil, Russia, India, China, and South Africa). With their large populations and rapid growth, these countries, so the argument goes, will soon become some of the largest economies in the world – and, in the case of China, the largest of all by as early as 2020. But the BRICS, as well as many other emerging-market economies – have recently experienced a sharp economic slowdown. So, is the honeymoon over?
Brazil’s GDP grew by only 1% last year, and may not grow by more than 2% this year, with its potential growth barely...
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July 23, 2013
Europe’s zombie banks
What is wrong with Europe’s banks? The short answer is that the sector is too large, has too little capital, and contains too many players that lack a viable long-term business model. It is the combination of the last two factors – an overabundance of banks with no sustainable way to turn a profit – that constitutes the most serious and most difficult problem.
The banking sector’s size is a cause for concern because, with total liabilities amounting to more than 250% of the eurozone’s GDP, any major problem could over-burden public budgets. In short, the banking sector in Europe might be too...
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July 22, 2013
Do all economic bubbles burst?
You might think that we have been living in a post-bubble world since the collapse in 2006 of the biggest-ever worldwide real-estate bubble and the end of a major worldwide stock-market bubble the following year. But talk of bubbles keeps reappearing – new or continuing housing bubbles in many countries, a new global stock-market bubble, a long-term bond-market bubble in the United States and other countries, an oil-price bubble, a gold bubble, and so on.
Nevertheless, I was not expecting a bubble story when I visited Colombia last month. But, once again, people there told me about an ongoing...
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July 19, 2013
Should the European Central Bank be rebuilt?
The monetary union was always a grand gamble. It established the ECB for an immense region that itself was not a state — a trans-European institution with governmental duties that does not represent any government in particular.
The founding fathers of the euro did not anticipate all the ramifications flowing from this peculiarity. In fact, every expansion of the Eurozone has led to an automatic enlargement of the ECB council, without taking account of increased complexity of governance and monetary policymaking, including funding conditions for governments or refinancing of private...
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July 16, 2013
How can China get the right kind of growth?
For more than three decades, China’s GDP has grown by an average of more than 10% annually. But former Premier Wen Jiabao rightly described this impressive growth performance as “unstable, unbalanced, uncoordinated, and unsustainable,” highlighting the many economic, social, and environmental costs and challenges that have accompanied it. Now China must choose between the export-based, investment-driven growth model of the past and a new, more viable economic order.
Cheap credit and perverse incentives – such as promotions for officials who contribute most to GDP growth – have led to massive...
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July 16, 2013
Should emerging markets fix their exchange rates?
According to the IMF, the last decade has seen a number of countries actively managing their exchange rates (see Habermeier et al. 2009, IMF 2012). Brazil, Chile, Colombia, Turkey, and other emerging markets with announced inflation-targeting regimes have engaged in considerable intervention of their exchange rates and have accumulated substantial reserves as the flow of foreign capital into these countries has increased (see Aizenman and Hutchison 2010; Céspedes, Chang and Velasco 2012). Are these policies a good way for emerging countries to protect themselves from the large swings of...
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July 15, 2013
Communication lessons for central banks
The United States Federal Reserve and the People’s Bank of China are not typically seen as two peas in a pod. But they have had similar experiences in recent weeks – and neither has been a pleasant one.
The Fed’s bout of indigestion started with Chairman Ben Bernanke’s June 19 press conference, where he warned that the Fed’s purchases of long-term securities might start to taper off if the economy continued to perform well – specifically, if unemployment fell to 7%. Stock prices swooned. Yields on US Treasuries spiked. Emerging-market currencies weakened on fears that capital flows from the...
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July 12, 2013
Can reducing working hours save jobs?
Short-time work means that the government subsidises the reduction of the working time of an employee to prevent firing. Many countries allow a firm to use this instrument when the demand for its products is lower than its production potential. Since more firms face a shortfall of demand in recessions, there is a rule-based component of short-time work. This is similar to the income-tax system where the tax bill drops automatically with lower income (without modifying the tax code). In addition, policymakers facilitate the access to short-time work in recessions. Thus, there is also a...
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July 12, 2013
How to fit 10 billion people on one planet
Earth is home to millions of species. Just one dominates it. Us. As we continue to grow towards a global population of 10 billion, we are facing an unprecedented planetary emergency, writes Stephen Emmott in an edited extract from his new book.
There are now more than 7 billion of us on Earth. As our numbers carry on growing, we continue to increase our need for far more water, far more food, far more land, far more transport and far more energy. As a result, we are accelerating the rate at which we’re changing our climate.
There is a politically agreed global target – driven by the...
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July 11, 2013
Can increasing urban migration benefit China?
The latest population census conducted in China in November 2010 portrayed a rapidly urbanising country, with the urban population reaching 49.7%, up 13.5 percentage points compared to 2000.
After decades of highly regulated urbanisation – which led to significantly undersized cities (Au and Henderson 2006) – the unprecedented pace and scale of urbanisation fed by massive rural-labour exodus brings in new challenges and opportunities.
With one billion people expected to live in Chinese cities by 2030, the country now faces extremely challenging policy choices in the management of the...
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July 9, 2013
Is bad news for gold good news for the global economy?
In principle, holding gold is a form of insurance against war, financial Armageddon, and wholesale currency debasement. And, from the onset of the global financial crisis, the price of gold has often been portrayed as a barometer of global economic insecurity. So, does the collapse in gold prices – from a peak of $1,900 per ounce in August 2011 to under $1,250 at the beginning of July 2013 – represent a vote of confidence in the global economy?
To say that the gold market displays all of the classic features of a bubble gone bust is to oversimplify. There is no doubt that gold’s heady rise to...
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July 9, 2013
FDI surges: Not all capital waves are alike
Capital flows often come in waves. An extensive literature has documented ‘surges’ and ‘bonanzas’ in capital flows (e.g. Forbes and Warnock 2012, Reinhart and Reinhart 2009, Ghosh et al. 2012). While capital flows can bring many benefits the literature has also documented the risks associated with this cyclical nature. Indeed, they can contribute to amplifying economic cycles, fuel credit booms, appreciate the real exchange rate, and can be subject to sudden reversals (Calvo et al. 2008).
The perceived wisdom is that there is a pecking order among capital flows, with...
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July 8, 2013
Have banks helped or hindered India’s poor?
For better or worse, the 2008 financial crisis has put the financial sector again at the centre of public debate. Several commentators have suggested that financial liberalisation contributed both to the financial crisis and to growing income inequality (e.g. Krugman 2009 and Moss 2009). On a more general level and as in the case of other policy areas associated with the Washington consensus, financial liberalisation has been controversial among academics and policymakers, as it is not clear whom the benefits of expanded credit allocation accrue to.
Cross-country evidence has linked...
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July 4, 2013
Getting young Europeans back to work
European leaders are rightly concerned about the record level of youth unemployment in the EU. According to the latest Eurostat figures, the rate of unemployment among those under the age of 25 reached over 23 per cent in the EU and over 24 per cent in the eurozone in April 2013. Four countries (Greece, Italy, Portugal and Spain) now have youth unemployment rates above 40 per cent, of which two (Greece and Spain) have rates above 50 per cent. The alarming situation has prompted European Council President Van Rompuy to place the issue at the top of the agenda at today’s EU summit. The main...
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July 4, 2013
Are low interest rates a time bomb?
The Centre for Economic Policy Research (CEPR) recently organised a conference at the Brewers’ Hall, London, on 10 June 2013 titled ‘A long-term environment of low nominal interest rates: what are the consequences for the financial sector’?
The workshop marked the launch of CEPR’s new research initiative on financial regulation. It brought together academics, policymakers and practitioners to discuss existing theory and empirical evidence on the implications of an extended phase of unconventional monetary policy, i.e., monetary policy operating at the ‘zero lower bound’; as well as the...
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July 3, 2013
The old economies strike back
The impact of Abenomics on Japan’s economy is gradually beginning to be felt. Annual GDP growth in the first quarter has been revised upward, to 4.1%, exceeding market expectations and providing a strong indication that the Japanese economy is finally recovering, after two decades of stagnation. Consumer spending is particularly robust, as wages show signs of upward movement.
Moreover, the currency depreciation in the wake of the Bank of Japan’s efforts to increase the annual inflation rate to 2% is expected to benefit exporters, though a substantial effect on the trade balance is yet to be...
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July 3, 2013
Do housing bubbles always cause financial crises?
The Global Crisis sparked a vibrant debate about what factors contributed to the Crisis. One question remains central to the debate:
Were global imbalances or excessive credit growth the key suspects?
Borio and Disyatat (2011) conjecture that the main causal factor of the financial Crisis was not ‘excess saving’ but the ‘excess elasticity’ of the international monetary and financial system. Obstfeld (2012) has noted that “[t]he balance sheet mismatches of leveraged entities provide the most direct indicators of potential instability, much more so than do global...
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July 2, 2013
Will Europe end in Croatia?
Despite its many woes, the European Union remains a lodestar for poorer states outside its borders. Indeed, the gravitational pull of the EU’s enlargement process has been the most important factor in the reconstitution of economic, political, and civic life in the western Balkans since the end of the post-Yugoslav wars of the 1990’s.
Read more at Croatia’s accession to the EU on July 1 provides a welcome boost to a region that has been placed on the back burner as a result of “enlargement fatigue” and the EU’s crisis-induced introspection. Enlargement advocates also point to the deal signed...
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July 2, 2013
China’s credit squeeze is no black swan
Lending between banks in China almost ground to a halt last month, as money market rates rose to record highs of 25% and the People’s Bank of China (PBOC) refused to turn on the taps to add liquidity to the system. Some feared a credit crunch comparable to the aftermath of the Lehman Brothers crisis in 2008. However, with the stock market sliding, the PBOC performed a volte-face and began to inject funds to ease the crisis. Looking at what this means for the future of China’s banking system, Liao Min writes:
For us here in China, the cash squeeze was not considered a sudden shock or a “...
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July 1, 2013
How migration makes the world richer
One defining feature of the world economy in recent decades is increasing migration. These cross-border flows have led to concerns in immigrant-receiving countries about the effects of migration on labour markets and welfare states. In turn, the countries of origin worry about the potential negative consequences of this human ‘brain drain’.
Thus there is growing interest in understanding and quantifying the costs and benefits of migration. However, as noted by Hanson (2009), global welfare analyses of migration are scarce, particularly when compared to the attention researchers have paid to...
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July 1, 2013
Does boom and bust really matter?
Boom and busts in asset prices and credit and, more generally, ‘financial imbalances’ have been the subject of a lot of public attention in the wake of the global financial crisis and the Eurozone crisis. All major jurisdictions have been establishing macroprudential authorities and there is a lively discussion on whether financial stability should be an objective for central banks alongside price stability. However, nobody seems to have asked the person in the street whether they care about financial imbalances at all.
The ideal way to conduct this analysis would be to design an appropriate...
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June 28, 2013
How deregulation destroyed Spanish banks
The motivation of economic liberalisation is to foster competition in order to increase allocative efficiency, economic growth and social welfare. This paradigm hinges on the assumption that firms maximise value and that more competitors in a market automatically leads to more competition.
However, this view does not take into account the link between regulation and corporate governance, and its influence on firms’ behaviour. When regulatory constraints are removed, the outcome may critically depend on the interaction between corporate governance and firm behaviour, particularly if behaviour...
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June 27, 2013
What an iPod tells us about the competitiveness revolution
The rise of global value chains is posing new challenges to analyses of international trade and countries’ competitiveness. Traditional measures are based on the assumption that all activities in the production of a good take place in the domestic economy, using domestic input only. However, with the increasing fragmentation of production across borders and the increasing use of foreign inputs, this assumption can no longer be maintained.
There is an increasing need for alternatives. Johnson and Noguera (2012) and Koopman et al. (2013) proposed a new measure of the domestic value added...
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June 26, 2013
How can China clean up its toxic air?
Earlier this year, striking pictures of major Chinese cities shrouded in thick haze alerted the world to a worrying by-product of the country’s economic growth: toxic air.
The haze, which engulfed streets and buildings from Beijing to Sichuan Province, was caused by a number of factors. Rising energy consumption, coal-fired plants, vehicle emissions, urban construction and weather conditions all played a part.
China’s coal-dominated energy sector is seen as one of the main culprits. In 2002, coal accounted for 63.9% of primary energy consumption. In 2011, the figure rose to 69.1...
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June 25, 2013
Libor verdict: a rotten egg for British bankers?
Last year’s Libor scandal was a shock to the body politic in London. Despite all that had gone before, the public and their representatives were stunned to learn that bankers had systematically undermined the foundations of a global market benchmark – one with London in its name to boot – for personal gain. Britain’s Chancellor of the Exchequer, George Osborne, felt compelled to launch a parliamentary inquiry. On June 19, after a year’s work, the Parliamentary Commission on Banking Standards finally laid a large egg.
Bankers will certainly regard the outcome as what in England we like to call...
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June 25, 2013
How inefficient companies defy the logic of the market
A spectre is haunting the world’s developing countries – the spectre of the “informal” economy. For some, the informal sector includes all businesses that have not been registered with the authorities. For others, it refers to businesses that escape taxation. The International Labor Organization defines it as comprising firms that are small enough to fall outside the labor code.
Whatever the definition, what has concerned many economists and gained policymakers’ attention is that the size distribution of firms in developing countries has a long tail. Compared to developed countries, an...
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June 24, 2013
Can we design corruption out of the system?
David Cameron, the host of the G8 summit in Northern Ireland, is trapped between a rock and a hard place, when it comes to fighting corruption. He was expected to meet the significant expectations of the public while facing the considerable challenge of ensuring that all his fellow G8 leaders agreed on specific, concrete steps.”
The summit’s agenda was ambitious. Cameron pledged to tackle tax evasion in overseas territories under British jurisdiction, strengthen government accountability and boost trade by breaking down hurdles to the free flow of goods and services. He took the lead...
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June 24, 2013
Global Value Chains and challenges to trade
In the wake of the financial crisis, the topic of Global Value Chains (GVCs) – the way in which different business processes are spread out around the world, from designing a product to making it and selling it – has captured growing attention in policy circles. Indeed, the World Economic Forum itself has published a significant study on the subject.
The newfound focus on GVCs reflects in many ways a fundamental change in how companies seek to innovate, manufacture, sell and service their products. Thirty years ago, the bulk of trade occurred under a “build it here, sell it there” model....
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June 20, 2013
Don’t aim for business as usual – take a moonshot
Innovation is the lifeblood of technology companies – and increasingly, of any business seeking to prosper in today’s digital world. The web is a hugely powerful platform for sharing and implementing ideas, and has changed society and business forever. Online, anyone with an idea can be an entrepreneur; small ideas can reach and sometimes change the world. To stay at the forefront of innovation you need to stay at the forefront of the web.
Ecommerce is to many the most visible shift and has created great opportunities, for small and medium businesses especially. Economic studies found that...
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June 20, 2013
What to tell a 23-year-old who wants to join a start-up?
At a workshop on innovation I attended a while ago, one of the most revealing moments came when participants were asked to answer the following question: “If you were to advise a 23-year-old to work in a start-up, which one would you recommend?”
To my surprise (and, it has to be said, horror) it transpired that among the 40 or so people who replied, less than a handful referred to genuine start-ups, with the majority citing companies such as Google, SAP or Facebook. This said two things to me: firstly, there is a distinct lack of knowledge and awareness of the start-up environment (especially...
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June 19, 2013
Does high home ownership cause high unemployment?
Unemployment matters. It is a major source of unhappiness, mental ill-health, and lost income. Yet after a century of economic research the determinants of unemployment are still imperfectly understood, and jobless levels in the industrialised nations are currently around 10%, with some over 20%.
If you search for ‘unemployment’ in the Web of Science, within the Social Science Citation Index a list of around 21,000 articles appears. For economics journals alone, there are approximately 10,000. The most prominent among these are:
The Shapiro-Stiglitz model of unemployment as a worker...
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June 18, 2013
Five key issues for the future of development
Debates are raging on what should replace the Millennium Development Goals (MDGs) after 2015 and the future of development in general.
Adding their voices to the debate, 35 World Economic Forum Young Global Leaders recently met with leaders of organizations in Washington, DC – ranging from the World Bank and IMF to USAID and the US Congress – to address the challenges that lie ahead. The realization is sinking in that policy dialogue needs to ensure inclusive conversations on:
1. The changing poverty map
Huge numbers of people have been lifted out of poverty, especially in large emerging...
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June 17, 2013
Lessons from the Greek crisis
A visit to Greece leaves many vivid impressions. There are, of course, the country’s rich history, abundance of archeological sites, azure skies, and crystalline seas. But there is also the intense pressure under which Greek society is now functioning – and the extraordinary courage with which ordinary citizens are coping with economic disaster.
Inevitably, a visit also leaves questions. In particular, what should policymakers have done differently in confronting the country’s financial crisis?
The critical policy mistakes were those committed at the outset of the crisis. It was already clear...
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June 14, 2013
‘Currency wars’ should not be on the G8 agenda
The term “currency wars” is a catchy way of saying “competitive devaluation.” In the wake of the sharp fall in the value of the yen over the last six months, owing to the monetary component of Japan’s efforts to jump-start its economy, the issue is expected to feature prominently on the agenda at the G-8’s upcoming summit in Northern Ireland. But should it?
According to the International Monetary Fund, competitive devaluation occurs when countries are “manipulating exchange rates…to gain an unfair competitive advantage over other members…” But a key point is often missed when the term “...
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June 13, 2013
It’s in the interests of business to save our seas
We never thought we could “fish out” the world’s oceans; the concept just didn’t exist. But it’s happened. In 1992, Canada’s government banned cod fishing in the North Atlantic in recognition that this enormous, once world-class fishery had collapsed as a result of overfishing. Today, they’re still waiting for the fish to return, and Canada has lost US$ 200 million of high-value protein and 40,000 jobs. Worse, the Food and Agricultural Organization estimates that 87% of all measured fish stocks are fully or over-exploited. The blunt truth is: sustainable seafood management is no longer an...
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June 7, 2013
Guidelines for a secure future in Myanmar
I have worked now for 20 years in countries such as Cambodia or Laos, which experienced the same rapid opening to the world that Myanmar faces today. Every time there is a real sense of hope and optimism. However, everyone knows that such rapid opening does not go without challenges.
To me, the real challenge is to ensure that the country and its people get maximum benefit from new opportunities, while mitigating the numerous risks that that go hand in hand with these same opportunities. These can include:
Economic risks – The country and its people are seen as a way for companies (both local...
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June 6, 2013
Charting ASEAN’s competitiveness landscape
Competitiveness will feature prominently in the programme of the 2013 World Economic Forum on East Asia, taking place this week in Nay Pyi Taw, Myanmar’s capital. And rightly so: competitiveness is a critical driver of both prosperity and integration.
The Global Competitiveness Report 2012-2013 paints a mixed picture of ASEAN’s competitiveness. In the ranking of 144 economies, Singapore comes in second overall behind Switzerland. Cambodia, ASEAN’s worst performer, places 85th among the 144 economies studied (Myanmar and Lao PDR are not included). This profound competitiveness divide partly...
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June 6, 2013
How real estate will drive integration in ASEAN
The 10 countries comprising the Association of South East Asian Nations (ASEAN) – established in 1967 – represent a myriad of economies, cultures, languages and governments. Levels of development and globalization across ASEAN differ dramatically and the diversity presents a challenge to achieving effective economic relations, growth and sustainability. In 2007, ASEAN leaders took up the challenge and agreed on a regional Economic Blueprint – a roadmap to integrate the 10 economies into a single market with a shared production base.
Recognizing the benefits that a common economic system would...
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June 5, 2013
How can businesses in Myanmar serve society?
At its up-coming regional meeting in Nay Pyi Daw, the World Economic Forum will consider how to inspire inclusive transformation in Myanmar. The first session on this topic will ask the question “how can businesses balance shareholder and stakeholder interests to partner in Myanmar’s growth agenda?”
Shareholders and stakeholders may not always have the same views or priorities regarding the appropriate role of business in Myanmar. Companies will need to take account of these varying interests so that, together, they contribute to Myanmar’s growth. To do this, companies will first need...
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June 5, 2013
How ASEAN can lure tourists and keep its soul
Southeast Asia, with its great outdoors and rich, diverse culture, has the potential to be a strong global brand in tourism, especially when the 10-member Association of Southeast Asian Nations (ASEAN) comes up with a Schengen-like single visa for visitors and as infrastructure spending boosts capacity to host visitors. From the beaches of Bali, Boracay and Phuket, to the urban skylines of Singapore and Kuala Lumpur, and the palaces and temples of Bangkok and Angkor Wat, this region could be the multi-faceted tropical destination.
Promoting ASEAN as a single tourist destination is indeed part...
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June 4, 2013
ASEAN’s financial development gap
In 2015, the 10 members of the Association of Southeast Asian Nations (ASEAN) are expected to create an integrated regional market called the ASEAN Economic Community (AEC). This will, in effect, create an economic union with the intent of facilitating trade, strengthening political ties and increasing financial harmonization across the region.
At the 13th ASEAN Summit in 2007, it was agreed that in order to fully realize the benefits of economic integration it would be necessary to narrow the development gap between member countries. From this realization came the Initiative for ASEAN...
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June 1, 2013
Top 10 quotes from Jordan – day 3
Palestinian and Israeli business leaders call for peace; Arab women transform the workplace; educators bring innovation into the classroom. Catch up on the most thought-provoking quotes and impassioned pleas at the World Economic Forum in Jordan.
“We are issuing an urgent call to action to all leaders to break the impasse and put as their top priority the pursuit of the peace process.”
Munib R. Masri
Chairman, Palestine Development & Investment – Padico Holding, Palestinian Territories, in the session: Breaking the Impasse.
“Most of my life has been...
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May 27, 2013
Europe’s lost Keynesians
There is no magic Keynesian bullet for the eurozone’s woes. But the spectacularly muddle-headed argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the “anti-austerity” masses apparently believe that there are easy cyclical solutions to tough structural problems.
The eurozone’s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union. This is not a problem with which Keynes was...
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May 23, 2013
China’s interest-rate challenge
NEW YORK – China’s successful transformation from a middle-income country to a modern, high-income country will depend largely on the reforms that the government undertakes over the next decade. Financial reforms should top the agenda, beginning with interest-rate liberalization. But liberalizing interest rates carries both risks and rewards, and will create both winners and losers, so policymakers must be prudent in their approach.
In 2012, the People’s Bank of China allowed commercial banks to float interest rates on deposits upward by 10% from the benchmark, and on bank loans downward by...
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May 22, 2013
From austerity to a balanced growth agenda
In a recent set of studies, Carmen Reinhart and Kenneth Rogoff used a vast array of historical data to show that the accumulation of high levels of public (and private) debt relative to GDP has an extended negative effect on growth. The size of the effect incited debate about errors in their calculations. Few, however, doubt the validity of the pattern.
This should not be surprising. Accumulating excessive debt usually entails moving some part of domestic aggregate demand forward in time, so the exit from that debt must include more savings and diminished demand. The negative shock adversely...
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May 21, 2013
Strength lies in diversity for Africa
Although Africa comprises 54 countries, each with their unique challenges and opportunities, many of Africa’s economies are highly dependent on extractive industries. This makes them vulnerable to shocks when commodity prices fluctuate. However, diversification is taking root in these extractive industries. The 2012 Ernst & Young Africa attractiveness survey indicated that 64% of FDI capital invested into African manufacturing from 2003-11 has gone into beneficiation-type activities in the extractive sectors, allowing African economies to derive greater value from their natural resources...
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May 21, 2013
Can MENA achieve financial inclusion?
It’s been nearly two and a half years since Mohamed Bouazizi’s act of self-immolation ignited protests in Tunisia and marked the beginning of the Arab Spring movements. Since then, the Middle East and North Africa (MENA) region has undergone considerable changes, including the overthrow of governments in Tunisia, Egypt, Yemen and Libya, as well as the enactment of reforms across a number of other countries.
The motives behind the uprisings and protests varied across the region, but what was relatively ubiquitous was the demand for a more equitable and inclusive society. It is still too early...
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May 17, 2013
Can Free Trade Agreements support ‘Factory Asia’?
Free trade agreements (FTAs) have been proliferating in Asia for more than a decade. Production networks and the product-fragmentation trade that they generate have been growing for a much longer period. In fact, since ‘Factory Asia’ emerged, well before FTAs (Baldwin 2008). They are clearly not necessary for the formation of production networks, but can they support production networks’ further growth and/or spread?
Empirical studies cannot provide a clear answer because they produce mixed results, possibly reflecting dual causality – growth in fragmentation trade may be inducing FTAs, or...
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May 15, 2013
Africa is not the new China, it’s the new Africa
While preparing for the World Economic Forum on Africa, which took place last week in Cape Town, I read about Africa being “the next China”. I wondered about that comparison before, but can today say from a business perspective that it is inaccurate.
China is a single country with one legal and tax system, one currency and with one highly empowered government. Africa is a continent consisting of 54 different countries, many with multiple national languages, and the quality of governance within these countries varies, to say the least. Therefore, foreign investors must focus on having broad...
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May 14, 2013
Scientific African
At the World Economic Forum on Africa last week, I was part of a small group of people working to connect science and technology with the larger business agenda. Moderated by Lanre Akinola, Editor of This Is Africa, the panel included Gunilla Carlsson (Swedish International Development Cooperation Minister), Claver Gatete (Rwandese Finance and Economic Planning Minister) and Frans van Houten (Royal Phillips Electronics CEO and Chairman).
The consensus of the panel was that Africa’s science and innovation agenda will be driven by contemporary challenges such as agriculture, health and...
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May 14, 2013
Paving a new silk road through Africa
Unreliable as they might come in Africa, statistics all indicate that the continent is ready to take off economically. Six out of the 10 fastest growing economies over the past decade were African – a fact that has too easily been overlooked in the shadow of much more publicized growth numbers in China and India. Foreign direct investment into Africa has grown more than three-fold over the past 10 years to US$ 46 billion in 2012. And trade with China, where I am writing this, has exploded from US$ 11 billion to US$ 166 billion over the same time.
With China now by far the biggest single...
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May 10, 2013
Unlocking South Africa’s economic potential
While much of the developed world is struggling to recover from the debilitating crises of the past few years, sub-Saharan Africa is experiencing an economic renaissance of sorts. According to the January 2013 update of the International Monetary Fund’s World Economic Outlook, sub-Saharan Africa is expected to grow an impressive 5.8% in 2013 and 5.7% in 2014. Only developing countries in Asia are forecast to have a higher growth rate over this period.
South Africa, the region’s largest economy, is not unfamiliar with strong growth. Since 2000, its GDP has climbed an impressive 45.7%, and its...
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May 9, 2013
Unleashing Latin America’s entrepreneurial spirit
In 2012, poverty in Latin America fell to a 30-year low and over the past decade 35 million additional jobs have been created, while women’s share of the labour force has grown steadily. This is a cause for celebration.
The countries where these changes have been most profound – Chile, Peru, Colombia, Brazil, Panama and Mexico – are those which recognize the power of entrepreneurialism, creating an environment in which business can grow. This demonstrates that the interests of responsible business are aligned with those of society. Where there is rule of law, good governance, effective public...
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April 22, 2013
The Reinhart and Rogoff debacle
What’s at stake: The authors of the widely acclaimed book on the history of financial crises, This Time is Different, have faced the mother of all academic backlashes after a group of economists identified important flaws (including basic coding errors) in their analysis of the relationship between public debt and economic growth. They, in particular, debunked the now popular notion that there is a debt threshold (90% of GDP) after which economic growth decreases in a nonlinear way. The availability of the dataset (in Stata) has also allowed an econometrician raise serious doubts on the idea...
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April 20, 2013
Economic policy’s narrative imperative
The best advice I received when taking up policymaking responsibilities in Turkey more than a decade ago was to take “a lot of time and care to develop and communicate the ‘narrative’ to support the policy program that you want to succeed.” The more that economic policy is subject to public debate – that is, the more democracy there is – the more important such policy narratives are.
The crisis faced by the European Union and the eurozone is a telling example of the need for a narrative that explains public policy and generates political support for it. A successful narrative can be neither...
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April 19, 2013
Developing Latin America’s equity markets
Despite making considerable strides over the past two decades, Latin America’s equity markets are still underdeveloped compared to other regions. Of the eight Latin American countries covered in the World Economic Forum’s Financial Development Report 2012 – Argentina, Brazil, Chile, Colombia, Mexico, Panama, Peru and Venezuela – six rank in the bottom quartile with respect to equity market development.
Why is having a developed stock market important and what do I mean when I say that Latin America’s equity markets are “underdeveloped”?
To answer the first question, we have to delve into the...
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April 19, 2013
A brief guide to the Reinhart-Rogoff discussion
One of the intellectual pillars helping to make the case for austerity was Growth in a Time of Debt, published by Carmen Reinhart and Ken Rogoff (R&R) in 2010.
It received a lot of attention, primarily for appearing to demonstrate that if a government’s debt levels went above 90% of GDP, it would trigger recession.
“Our key finding is that growth rates are about 1 percentage point lower in periods of high debt. One percent doesn’t sound like a lot, but if you have a population that’s growing at 1% a year, 2% growth rather than 1% means your income per capita is going up, not...
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April 18, 2013
Escaping Latin America’s inequality trap
It’s no coincidence that the continent with the worst levels of inequality – Latin America – is also the most dependent on commodities. However, while the general economic dangers of over reliance on commodities are well documented, from Dutch disease to the natural resources curse, not enough attention is paid to the way a glut of commodities can feed social inequality.
While governments cheer the record price of commodities because the income tops up the public coffers, they do not fully realize that relying too heavily on commodities is a simmering and unsustainable recipe for unrest....
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April 18, 2013
The use and abuse of monetary history
Imagine two central banks. One is hyperactive, responding aggressively to events. While it certainly cannot be accused of ignoring current developments, its policies are widely criticized as storing up problems for the future.
The other central bank is unflappable. It remains calm in the face of events, seeking at all cost to avoid doing anything that might be construed as encouraging excessive risk-taking or creating even a whiff of inflation.
What I have just described is no mere hypothetical, of course. It is, in fact, a capsule depiction of the United States Federal Reserve and the...
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April 17, 2013
Did you know…? Ten facts about Latin America
From GDP growth to the size of the Amazon, here are ten facts and figures you should know before the start of the World Economic Forum on Latin America, taking place in Lima, Peru, from 23-25 April:
Latin America is the most urbanized region in the world, with about 80% of its population living in cities.
Latin America’s GDP stood at US$ 5.6 trillion in 2011; with a population of 589 million, the per capita Gross National Income came to US$ 8,575 (World Bank).
GDP in Latin America and the Caribbean is predicted to grow by 3.6% in 2013, picking up from 3% in 2012. This compares with a...
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April 16, 2013
A risky outlook for the global economy
In the last four weeks, I have traveled to Sofia, Kuala Lumpur, Dubai, London, Milan, Frankfurt, Berlin, Paris, Beijing, Tokyo, Istanbul, and throughout the United States. As a result, the myriad challenges facing the global economy were never far away.
In Europe, the tail risk of a eurozone break-up and a loss of market access by Spain and Italy were reduced by last summer’s decision by the European Central Bank to backstop sovereign debt. But the monetary union’s fundamental problems – low potential growth, ongoing recession, loss of competitiveness, and large stocks of private and public...
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April 15, 2013
Can technology trigger sustainable growth?
It is fantastic to see capitalism helping to address some of the world’s most pressing social problems – talent from corporations is moving to not-for-profit companies to spearhead impressive social causes, and the evolving models of social entrepreneurship and corporate social responsibility are promising. There is a trend for for-profit businesses to focus their resources on social problems, especially since the disillusionment with financial capitalism across the globe has triggered a search for new models of sustainable economic growth.
However, to what extent have we been able to solve...
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April 13, 2013
Forum Live Interview with Paul Bulcke
Paul Bulcke, CEO of global food giant Nestlé, argues that the social contract between business and society only appears to be broken; economic activity still creates great value for society. He believes it is governments, not businesses, that are too short-term in their thinking and that civil society, politicians and economic activity have to be re-connected. Sustainable use of water is key for Nestlé and for humanity in general, he says, claiming that his company has increased production while halving water use. “We’re working permanently for a better future. I’m really upbeat,” he...
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April 13, 2013
The risks of ultra-low interest rates
As policymakers and investors continue to fret over the risks posed by today’s ultra-low global interest rates, academic economists continue to debate the underlying causes. By now, everyone accepts some version of US Federal Reserve Chairman Ben Bernanke’s statement in 2005 that a “global savings glut” is at the root of the problem. But economists disagree on why we have the glut, how long it will last, and, most fundamentally, on whether it is a good thing.
Bernanke’s original speech emphasized several factors – some that decreased the demand for global savings, and some that increased...
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April 12, 2013
The Promise of Abenomics
Joseph E. Stiglitz on how “Abenomics” can help Japan’s economic recovery
Japanese Prime Minister Shinzo Abe’s program for his country’s economic recovery has led to a surge in domestic confidence. But to what extent can “Abenomics” claim credit?
Interestingly, a closer look at Japan’s performance over the past decade suggests little reason for persistent bearish sentiment. Indeed, in terms of growth of output per employed worker, Japan has done quite well since the turn of the century. With a shrinking labor force, the standard estimate for Japan in 2012 – that is, before...
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April 8, 2013
Europe’s lost-and-found decade
Sentiment in European financial markets has turned. For the moment, the possibility of a Greek exit from the Eurozone is off the table. If interest-rate spreads on Spanish and Italian government bonds are any guide, bondholders are no longer betting on a Eurozone breakup. European stocks even rose in the week following last month’s inconclusive Italian elections.
Investors evidently believe that Europe’s leaders will do just enough to hold their monetary union together. But, at the same time, it is unlikely that Europe’s economy will follow the pattern of emerging-market crises and rise,...
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March 19, 2013
Europe, Italian style
Michael Spence discusses how Italy’s reform program will affect the Eurozone
Last summer, after two years of growing uncertainty, systemic risk in the Eurozone finally began to wane, as conditional commitments came together. Italy and Spain offered credible fiscal and growth-oriented reforms, and the European Central Bank, with Germany’s backing, promised intervention as needed to stabilize the banking sector and sovereign-debt markets.
Unfortunately, that trend may be reversing. Growth in the Eurozone has turned negative overall, significantly so in the south. Unemployment stands at...
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March 19, 2013
The economist’s stone
Jeffrey Frankel discusses how fiscal expansion might be appropriate under some conditions
This year marks the 100th anniversaries of two distinct institutional innovations in American economic policy: the introduction of the federal income tax and the establishment of the Federal Reserve. They are worth commemorating, if only because we are at risk of forgetting what we have learned since then.
Initially, neither the income tax nor the Fed was associated with the explicit concepts of fiscal and monetary policy. Indeed, it wasn’t until after the experience of the 1930’s that they came to be...
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March 18, 2013
ASEAN’s rise in the global economy
Ronald Mendoza, Young Global Leader, Class 2013, discusses why ASEAN’s success is due to collaboration and not competition
I repatriated to the Philippines in late 2010, after 15 years working abroad on international economic development policy. The Asia I left behind in the mid-1990s was on the verge of a deep crisis that would see many countries in the region rethink their development models. Yet today, the continent appears to have a renewed exuberance and energy, even as the rest of the world continues to dig out of the last global crisis.
Some have argued that the VIPs (Vietnam,...
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March 15, 2013
Why investing in education is good for business
Vikas Pota, Young Global Leader Class 2013, explains why the private sector should invest more in education
The thing I really don’t understand is why no big business figure has stepped forward to take a leadership position on improving education. It seems odd on many levels, particularly as it is the private sector that benefits from an educated, skilled workforce.
Let’s take the evidence: a UNESCO policy paper released just before this year’s World Economic Forum Annual Meeting highlights that the private sector’s contributions to education are less than 0.1% of the profits of some of...
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March 15, 2013
Europe’s moment of truth
Ann Mettler explains why it’s time for European leaders to speak the truth about the crisis
“Nothing beats the truth.” These were the passionate words of Enda Kenny, Prime Minister of Ireland, when asked last week about the spring European Council on 14-15 March. He was talking about a moment of reckoning for the continent’s leaders as they confront increasingly hostile electorates – most recently exhibited in Italy, where voters sent a clear signal against austerity.
Now it’s payback time for the years – even decades – of denial, of make-believe that the prosperity that Europe enjoyed...
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March 13, 2013
What is Italy saying?
Joseph E. Stiglitz explains why the EU’s Economic and Monetary Union was a means to an end, not an end in itself.
The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters.
The European project, as idealistic as it was, was always a top-down endeavor. But it is another matter altogether to encourage technocrats to run countries, seemingly circumventing democratic processes, and foist upon them policies that lead to widespread public misery.
While Europe’s leaders shy away from the word,...
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March 13, 2013
How safe is the dollar?
Martin Feldstein, Professor of Economics at Harvard University, addresses the dollar’s real trade-weighted value
The United States’ current fiscal and monetary policies are unsustainable. The US government’s net debt as a share of GDP has doubled in the past five years, and the ratio is projected to be higher a decade from now, even if the economy has fully recovered and interest rates are in a normal range. An aging US population will cause social benefits to rise rapidly, pushing the debt to more than 100% of GDP and accelerating its rate of increase. Although the Federal Reserve and...
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March 4, 2013
Action needed on retirement income schemes
Giancarlo Bruno discusses the fiscal sustainability of retirement income systems
Social security systems around the world – in developed countries and emerging markets alike – are facing substantial challenges as a result of changing demographics, fiscal constraints, economic instability and volatile financial markets. It is apparent that there is a need to not only address the long-term problems associated with these challenges but also to take short-term action.
Many developing countries are confronted with the challenge of introducing or expanding social protection systems and subsequent...
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February 27, 2013
America’s sequestered recovery
Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley and a member of the World Economic Forum’s Global Agenda Council on Women’s Empowerment
The United States is confronting another round of cuts in federal government spending, this time threatening to trim at least 0.5 percentage points from GDP growth and to precipitate a loss of at least one million jobs. Automatic across-the-board spending cuts, the so-called “sequester,” would reduce spending by $85...
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February 25, 2013
Financial regulators’ global variety show
Howard Davies, former Chairman of Britain’s Financial Services Authority, shares his thoughts on the world’s financial systems
In the early phases of the financial crisis, it was fashionable to argue that the United States’ system of regulation needed a fundamental structural overhaul. Differences of opinion between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) had obstructed effective oversight of investment banks and derivatives trading (only the US believes that it makes sense to regulate securities and derivatives separately)....
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February 22, 2013
What will nonprofits look like in 2043?
Like businesses, non-profit organizations must discover how to be successful in the wake of new disruptive forces.
In the past five years, social media has put a spin on fundraising, Big Data has made donors keener on evidence-based return on investment (ROI), and collective impact is becoming an even more established pillar of humanitarian work.
If we look to the far horizon, how does the non-profit world look? What new forces have influenced the non-profits of 2043? Has the role of implementer and beneficiary shifted, or even flipped? I think by considering the following three trends, we...
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February 22, 2013
Can sustainability be profitable?
It’s hard for companies to recognize that sustainable production can be less expensive. That’s in part because they have to fundamentally change the way they think about lowering costs, taking a leap of faith that initial investments made in more-costly materials and methods will lead to greater saving down the road. It may also require a willingness to buck conventional financial wisdom by focusing not on reducing the cost of each part but on increasing the efficiency of the system as a whole.
Rapidly developing economies are often portrayed as sustainability laggards – focused more in...
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February 20, 2013
Rebalancing the state’s balance sheet
Michael Spence, a Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution.
Until recently, relatively little attention was paid to states’ balance sheets. Measurement and reporting were neglected. Even today, states’ liabilities receive considerable attention, while their asset sides receive significantly less.
In an earlier era, states owned substantial industrial assets. This “commanding heights of the economy” model was rejected largely because it seriously under-performed, especially when state-...
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February 18, 2013
Can reducing taxes on travel boost Growth?
Tom King, Head of Government and Industry Affairs at British Airways, makes a case for reducing taxes on travel and tourism
As economies across the globe continue to search for sustained growth, the promise of increased export income from inbound tourism has become ever more attractive. In the United Kingdom, the government has set out its ambition to treble the number of Chinese tourists it attracts to Britain – to 500,000 a year by 2015. Growth in tourism forms an important part of the economic strategies of many leading economies and is an important engine for job creation.
Yet many of the...
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February 14, 2013
The battle of the bond benchmarks
Jeffrey Frankel, Professor of Capital Formation and Growth at Harvard University, discusses the shift from traditional benchmark indices to GDP-weighted indices
Some prominent institutional bond investors are shifting their focus from traditional benchmark indices, which weight countries’ debt issues by market capitalization, toward GDP-weighted indices. PIMCO, one of the world’s largest fixed-income investment firms, and the Government Pension Fund of Norway, one of the largest sovereign wealth funds, have both recently made moves in this direction. But there is a risk that some investors...
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February 12, 2013
The economics of 2033
Barry Eichengreen, Professor of Economics and Political Science at the University of California,
The economics profession has not had a good crisis. Queen Elizabeth II may have expected too much when she famously asked why economists had failed to foresee the disaster, but there is a widespread sense that much of their research turned out to be irrelevant. Worse still, much of the advice proffered by economists was of little use to policymakers seeking to limit the economic and financial fallout.
Will future generations do better? One of the more interesting exercises in which I engaged at...
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February 11, 2013
Economic perspectives from Davos
Jock Mendoza-Wilson shares his thoughts on the Annual Meeting 2013
Coming back to the office and reality after four days on Magic Mountain lends itself to finding perspective about the discussions and debates that took place at the World Economic Forum Annual Meeting in Davos. The biggest challenge is trying to distil just what those four days of meetings amounted to in terms of knowledge, learning, and useable information and relationships.
Firstly, the tone in Davos seemed more upbeat than in recent years. The positive growth figures for China and the US, and a return to stability of sorts...
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February 7, 2013
Does a circular economy make sense?
Dame Ellen MacArthur addresses the business opportunities of a circular economy
The debates I was involved in at this year’s World Economic Forum Annual Meeting had a different tone, one that acknowledged the need for systemic change.
This means looking at how the economy could be redesigned to function better at a fundamental level, as well as bring more economic benefit and a positive cycle of development. This would allow developing countries to access the same technologies, products and services which we have enjoyed in the industrialized world.
Feeding this momentum are our economic...
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February 6, 2013
Austerity in small places
Daniel Gros, Director of the Center for European Policy Studies, discusses how austerity affects small countries
Interest in small countries’ economic policies is usually confined to a small number of specialists. But there are times when small countries’ experiences are interpreted around the world as proof that a certain policy approach works best.
Nowadays, Greece, the Baltic states, and Iceland are often invoked to argue for or against austerity. For example, the Nobel laureate economist Paul Krugman argues that the fact that Latvian GDP is still more than 10% below its pre-crisis peak...
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February 5, 2013
Has fiscal stimulus failed?
Raghuram Rajan is Professor of Finance at the University of Chicago Booth School of Business and the chief economic adviser in India’s finance ministry.
Two fundamental beliefs have driven economic policy around the world in recent years. The first is that the world suffers from a shortage of aggregate demand relative to supply; the second is that monetary and fiscal stimulus will close the gap.
Is it possible that the diagnosis is right, but that the remedy is wrong? That would explain why we have made little headway so far in restoring growth to pre-crisis levels. And it would also...
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February 4, 2013
Is the euro crisis over?
Jean Pisani-Ferry is Director of Bruegel, an international economics think tank, Professor of Economics at Université Paris-Dauphine, and a member of the French Prime Minister’s Council of Economic Analysis.
Financial crises tend to start abruptly and end by surprise. Three years ago, the euro crisis began when Greece became a cause for concern among policymakers and a cause for excitement among money managers. Since the end of 2012, a sort of armistice has prevailed. Does that mean that the crisis is over?
By the usual standards of financial crises, three years is a long time. A year after...
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February 1, 2013
Why is Germany bringing home its gold?
Simon Johnson, professor at MIT’s Sloan School of Management, explains why Germany’s fascination with gold is a red herring
Germany’s gold is on the move. For the first time since official gold transactions became more transparent, the Bundesbank has given notice that a significant portion of its holdings will be transferred home from France and the United States. Ostensibly, this is just a matter of monetary housekeeping. But why now?
One possibility is that German policymakers believe that we are approaching an every-country-for-itself scenario – and only gold guarded by one’s own...
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February 1, 2013
Will Europe’s fiscal compact work?
Jeffrey Frankel, Professor of Capital Formation and Growth at Harvard University, discusses the future of Europe
CAMBRIDGE – At the start of 2013, the eurozone’s “fiscal compact” entered into force, owing to its ratification on December 21 by a 12th country, Finland, a year after German Chancellor Angela Merkel prodded eurozone leaders into agreement. The compact – technically called the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union – requires member countries to introduce laws limiting their structural government budget deficits to less than 0.5 % of...
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January 31, 2013
Meeting America’s growth challenge
Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley.
BERKELEY – The United States continues to recover from its deepest economic slump since the Great Depression, but the pace of recovery remains frustratingly slow. There are several reasons to anticipate modest improvement in 2013, although, as usual, there are downside risks.
Prolonged recession or a financial crisis in Europe and slower growth in emerging markets are the main external sources of potential danger. At...
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January 31, 2013
Planting the seeds of a bio economy
Feike Sijbesma and Steen Riisgaard discuss how agriculture will become central to the economyIn a bio-based economy, the agricultural and biotech sectors together will be able to provide the world with food and fuel, with both product streams enhancing each other instead of competing.World leaders are currently meeting at the World Economic Forum Annual Meeting in Davos to discuss “Resilient Dynamism”. Both resilience and dynamism will be needed indeed if we are to build a new economy that provides the right solutions and technologies to ensure decent living standards for all, while...
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January 24, 2013
Business with a purpose
Jock Mendoza-Wilson shares his thoughts on the future of business
In Davos this week, the need for innovation and dynamism and a return to confidence, particularly in slow recovering Europe, were high on the agenda. The role of business in driving this task is key. But, with trust in business and its leaders at a low, just what is the purpose of business and what is its role in society?
It is increasingly recognized that it is impossible to maximize shareholder value in the longer term (whether for a public or private business) without taking into account fully the external issues and...
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January 24, 2013
Looking forward to “the age of equality”
Luis Alvarez, CEO of BT Global Services, shares his thoughts on the sharing of knowledge through technology.
I’ve sat through a few presentations on the global economy in the past couple of years where I could be forgiven for thinking the world’s about to end.
There’s no doubt business leaders have sensed that times are changing. And anyone who feels their position in the world order is under threat is entitled to feel gloomy.
But I believe things can get better.
Yes, there are serious challenges, from the debt crisis, an ever-increasing global population, urbanization and an ageing...
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January 24, 2013
Wanted: 600 million workers
The future of the economy depends on getting people with the right skills to match the next generation of jobs, says Bradford L. Smith.
We stand in the midst of a global economic tragedy. Around the world, new job opportunities are being created that offer the promise of prosperity. Yet hundreds of millions of people find themselves locked out of these opportunities because they lack the necessary education and skills.
Unless current trends are reversed, this opportunity gap will deepen, creating even greater income disparities and stifling economic recovery worldwide. To avoid this outcome...
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January 24, 2013
What Europe must do to catch up
Thorsten Groth on the measures that should be taken to make Europe more competitive. Read the World Economic Forum’s Rebuilding Europe’s Competitiveness report.
History shows that sustained prosperity is best achieved through a winning combination of distinct competitiveness strengths. Currently, however, Europe as a whole faces a competitiveness deficit compared to other advanced countries, as well as a competitiveness divide within Europe. Fundamentally, these competitiveness challenges have caused many problems such as stagnating economic growth, rising unemployment and fiscal...
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January 24, 2013
Fuelling Africa’s bright future
Graham Mackay, CEO of SABMiller, on the water, food and energy challenges that need to be addressed to ensure Africa’s future. He is participating in the Annual Meeting session, De-risking Africa.
There are currently 2 billion middle-class consumers in the world and the number is projected to reach 5 billion by 2030. Much of the increase will come from developing markets.
This growth is an exciting opportunity for the many people whose lives and livelihoods will improve; but it will place further demands on the world’s finite resources such as water, energy and agricultural inputs,...
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January 23, 2013
The challenges facing business leaders at Davos
S.D. Shibulal, Chief Executive Officer of Infosys Ltd, on the themes preoccupying business leaders at this year’s Annual Meeting in Davos.
The State of the Global Economy
At the beginning of 2013, we are faced with a business environment that is increasingly dynamic. The macroeconomic environment continues to be challenging and currency markets remain volatile. With this backdrop, businesses and business leaders alike are grappling with the need to drive growth, innovation and profitability for their organizations. However, businesses and societies have no choice but to rise above these...
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January 22, 2013
Four pillars of good business
Takeshi Niinami, CEO of Lawson and GAC chair, on why “doing the right thing” will lead to sustainable growth.
In the 21st century, diverse societies are globally connected due to transportation and technology and all share concerns related to energy, climate change, poverty, healthcare and human rights. One country, region or sector of a society cannot on its own provide the solutions to address such a complex web of issues. Thus, the engagement in global agendas must be multiregional and multidisciplinary.
The establishment in 1999 of the UN Global Compact was a clear sign that corporations...
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January 22, 2013
Skills gaps, job-hopping and dwindling loyalty
Dennis Nally, Senior Partner at PwC, on the challenges companies face to recruit and retain talented people.When it comes to talent, CEOs agree: while there have never been so many educated and mobile people in the world, recruiting the right ones – and getting them to where they are needed most – is more difficult than ever.This challenge comes up time and again in my conversations with business leaders around the world. And it was also one of the key findings of PwC’s recent Global CEO Survey. Over half of the CEOs surveyed – and 62% in the Asia-Pacific region, home to the world’s largest...
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January 22, 2013
Breaking out of bribery’s vicious circle
Following a slew of corporate scandals, Huguette Labelle, Chair of Transparency International and Annual Meeting co-chair, makes the moral and financial case for cleaning up business.
A lack of integrity caused grievous harm across the private sector last year. The reputation of several big banks was left in tatters after they paid more than US$ 2 billion in fines and sacked CEOs for a slew of failures that included rate rigging, money laundering and evading sanctions.
These scandals crippled reputations and came hot on the heels of the revelations of dishonesty, lack of ethics and...
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January 21, 2013
A dynamic vision for employment
Kris Gopalakrishnan, Co-Founder and Co-Chairman of Infosys, India, shares a new vision for employment and economic growth.
At the World Economic Forum Annual Meeting 2012 in Davos-Klosters, world leaders gathered to deliberate what the future might look like, to align stakeholders around that vision and to inspire the realization of that vision. One year later, integrating people, systems and technologies to that end remains an indisputable leadership challenge. Hence the need for Resilient Dynamism to overcome the hurdles and to make the most of transformational opportunities ahead.
One such...
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January 19, 2013
When East meets West on the global economic stage
Since I took the decision a little over a year ago to relocate to Hong Kong, I have had a ringside seat at the fundamental shift which is taking place in the world’s economy and social structure – the repositioning of the centre of gravity for the global economy from West to East.If you accept that this shift is taking place, then you also accept that Asia as a region should have an increasing role on the global economic and political stage. US President Barack Obama certainly seems to recognize this point; his “pivot to Asia” has been well documented and was reinforced when he made a visit...
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January 15, 2013
Can the centrists hold on?
Kemal Derviş, a former minister of economy in Turkey, administrator of the United Nations Development Program (UNDP), and vice president of the World Bank, is currently Vice President of the Brookings Institution.
WASHINGTON – In most advanced democracies, a large center-right party competes with a large center-left party. Of course, the extent to which an electoral system favors large parties – by having high popular-vote thresholds to enter parliament, or through winner-take-all constituencies – affects the degree of political fragmentation. But, by and large, the developed democracies are...
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January 14, 2013
The World in 2030
Author: Joseph Nye is a professor at Harvard and author of The Future of Power.
CAMBRIDGE – What will the world look like two decades from now? Obviously, nobody knows, but some things are more likely than others. Companies and governments have to make informed guesses, because some of their investments today will last longer than 20 years. In December, the United States National Intelligence Council (NIC) published its guess: Global Trends 2030: Alternative Worlds.
The NIC foresees a transformed world, in which “no country – whether the US, China, or any other large country – will be a...
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January 9, 2013
Is there a monetary regime transition in the emerging world?
Andrés Velasco, a former finance minister of Chile, is a visiting professor at Columbia University.
SANTIAGO – Is inflation targeting – the rule that most of the world’s major central banks (though not the United States Federal Reserve) use to set interest rates – in its death throes? Many analysts seem to think so.
Mark Carney, currently Governor of the Bank of Canada, has not even taken over his new job at the helm of the Bank of England, yet he has already announced that he might change the BoE’s policy anchor. In Japan, the Liberal Democrats won December’s general election after having...
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January 7, 2013
Which risks worry you the most?
From the prospect of the United States teetering over a metaphorical “fiscal cliff” to all too real natural disasters wreaking havoc in Manila or Manhattan, risks of every kind have loomed large over the last year. Tomorrow, the World Economic Forum’s Risk Response Network will publish its Global Risks 2013 report, capturing a broad swathe of expert opinion on the most pressing risks to face mankind over the coming decade.
By identifying 50 global risks – from water supply crises to fiscal imbalances – and tracking every year how they are perceived in terms of likelihood, impact and...
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January 7, 2013
The post-crisis crises
Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.
NEW YORK – In the shadow of the euro crisis and America’s fiscal cliff, it is easy to ignore the global economy’s long-term problems. But, while we focus on immediate concerns, they continue to fester, and we overlook them at our peril.
The most serious is global warming. While the global economy’s weak performance has led to a corresponding slowdown in the increase in carbon emissions, it amounts...
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January 7, 2013
Will a lack of leadership put the world at risk?
“The US-led geopolitical order is gone and is not being replaced,” warns Ian Bremmer, president of the Eurasia Group, in the latest of the World Economic Forum’s presidential briefings for the Annual Meeting 2013 in Davos-Klosters.
In a stark survey of the current geopolitical landscape, Bremmer points to the growth and cultural divergence of emerging economies, the distraction of the US’s traditional allies and its new unwillingness to fulfil its traditional “world leader” role, as the main reasons why a potentially dangerous global leadership vacuum is emerging.
He believes this vacuum “...
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January 7, 2013
How can competitiveness bolster resilient dynamism?
For more than three decades, the World Economic Forum has been working on the topic of national competitiveness, in an effort to understand and measure what drives national productivity and prosperity.
Being competitive requires countries to have in place a mix of factors such as solid infrastructure, a healthy and educated workforce, efficient markets, and a propensity for technological adoption and innovation. Over the years, we have continued to integrate the latest thinking and priorities into our work, with a goal of supporting national and regional efforts towards improved economic...
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January 3, 2013
Europe at the crossroads: unity or fragmentation?
The Forum:Blog has prepared a special series on “Resilient Dynamism, the main theme of 2013’s Annual Meeting in Davos, Switzerland. Guillaume Amigues, Community Manager for Europe at the World Economic Forum, offers a positive and realistic view on the future potential of Europe.
Future generations may see this period in Europe’s history as transformational for the continent. Monetary union and the very survival of the euro were under imminent threat thanks to the debt crisis.
But as Standard & Poor’s raises its credit rating for Greece, and European bailout funds start flowing again for...
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December 21, 2012
The eurozone’s delayed reckoning
Nouriel Roubini is Chairman of Roubini Global Economics and a professor at the Stern School of Business, NYU.
NEW YORK – The risks facing the eurozone have been reduced since the summer, when a Greek exit looked imminent and borrowing costs for Spain and Italy reached new and unsustainable heights. But, while financial strains have since eased, economic conditions on the eurozone’s periphery remain shaky.
Several factors account for the reduction in risks. For starters, the European Central Bank’s “outright monetary transactions” program has been incredibly effective: interest-rate spreads...
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December 19, 2012
Europe has nothing to fear but fear itself
Professor Klaus Schwab is Founder and Executive Chairman of the World Economic Forum. His e-book, The Re-Emergence of Europe, was published on 14 December and available free of charge at http://www.weforum.org/re-emergence-europe
The eurozone will not break up. The price of departure is simply too great for any one country. Indeed, when Mario Draghi announced on 6 September that the European Central Bank (ECB) would undertake unlimited purchases of government bonds, the continent crossed the bridge to its future.
Europe’s leaders must see that the drawbridge has been lifted behind them. They...
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December 14, 2012
Of law and chickens
I’m not an economist, but the principle of supply and demand strikes me as a wonderful principle to apply to justice and the rule of law, and a good yardstick to assess their provision.
In much of the developing world, the supply of justice is either well short of demand, or, like the old command economies, rule-of law products are thrown at the market regardless of consumers’ needs.
There is a crisis in the rule of law; there is a crisis of funding that creates shortages. And there is misallocation of resources, which creates distortions, and that in turn leads to a crisis of confidence.
Let...
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December 12, 2012
Are governments trying to “take over” the Internet?
Internet governance has been in the news recently, with some news outlets reporting that the United Nations is trying to “take over” the Internet, a claim that we want to clarify here.
Right now in Dubai, representatives from 193 member states are meeting at the World Conference on International Telecommunications (WCIT) to renegotiate the International Telecommunications Regulations (ITRs). The ITRs, a binding international treaty, were adopted in 1988 to regulate international telecommunications. To date, they have successfully fostered agreements between member states, allowing for the...
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December 11, 2012
Does foreign aid fuel corruption?
In a series of blog posts curated by the World Economic Forum’s Partnering Against Corruption Initiative (PACI), a number of leading voices will present their perspectives on anti-corruption in the run-up to World Anti-Corruption Day on 9 December. In the following post, Sophal Ear, Assistant Professor of National Security Affairs at the US Naval Postgraduate School and a Young Global Leader at the World Economic Forum, explains how foreign aid and corruption might be connected.Is Cambodia’s perennial bid to become a member of the United Nations Security Council an attempt by the current...
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December 3, 2012
The Financial Development Report 2012
The 2012 Financial Development Report ranks 62 of the world’s leading financial systems and capital markets, analysing the drivers of financial system development in advanced and emerging economies to serve as a tool for countries to benchmark themselves and establish priorities for reform. The rankings are based on over 120 variables spanning institutional and business environments, financial stability, and size and depth of capital markets, among other factors.The Report includes contributions from scholars on critical issues such as the regulation of the traditional and shadow banking...
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October 12, 2012
Global Competitiveness Report 2012-2013
The Global Competitiveness Report 2012-2013 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The Report series remains the most comprehensive assessment of national competitiveness worldwide. Access the data platform to visualize and download the data.This year’s report findings show that Switzerland tops the overall rankings in The Global Competitiveness Report for the fourth consecutive year. Singapore remains in second position with Finland, in third position, overtaking Sweden 4th). These and other...
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September 6, 2012
Where have all the truck drivers gone?
When people talk about the transport and logistics market, they usually think trucks, ships, planes and trains or even roads, airports and ports. What won’t be at the front of their minds are the people required to operate these assets, or the managers who plan the movement of goods across global supply chains.This is not merely an inconvenient fact. Right across the world, the industry is being undermined by a skills shortage which is impacting efficiencies, not just for the transport and logistics sector but also for the manufacturers and retailers who use their services.This is one reason...
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June 21, 2012
Can we build better supply chains?
The ability of logistics firms to connect suppliers and consumers across the world is essential for economic progress. Regrettably, it is too often taken for granted.So, as we launch the second annual report of the World Economic Forum’s Global Agenda Council on Logistics & Supply Chains, we have a chance to highlight some of the key issues facing the logistics sector worldwide.Top of the list is the role of logistics in the facilitation of international trade. As product supply chains become longer and more complex, companies face mounting logistical challenges, especially in emerging...
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June 20, 2012
Why G20 is also business’ business
It is all in the numbers: 64% of the world population lives in the G20 countries; 80% of global trade happens between its members; 90% of global GDP is generated by the G20. Therefore, it is only logical that global business leaders should play a role when the G20 meets in Los Cabos, Mexico, today. Their message is simple: we understand the challenges governments are facing and we want to help, because this is our business, too.At a time when rebuilding trust and confidence in the global economy is more important than ever, business has a considerable contribution to make. After all, it is...
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June 17, 2012
How to Build a More Competitive Europe
The European Union is going through its most profound crisis since its establishment more than 50 years ago. The dramatic economic downturn that most countries have experienced, coupled with a lack of agreement among politicians on how to reverse it, has given way to increasing social discontent, the rise of political extremism, and a general erosion of confidence among businesses and citizens in politicians and the European project as a whole.Until recently, the debate around how to regain this lost confidence and generate growth and jobs has been dominated by those in favour of fiscal...
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June 5, 2012
No exit?
The economic drama unfolding in Greece has an uncanny resemblance with Jean-Paul Sartre’s existentialist play, No Exit. The similarities go beyond the elements of absurdity and irrationality. Sartre’s most famous play is actually based around three dead characters condemned to live together for eternity. Many of Greece’s fellow Eurozone members could probably identify with this situation and especially with one of the characters when he says “l’enfer, c’est les auters.” [“Hell is the other people.”] But are the other Eurozone members really forced to live with Greece forever and...
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June 4, 2012
Capitalism: A means, not an end
Adam Smith’s notion of the ‘invisible hand’ has guided multitudes of people to promote ends which were not parts of their original intention. The market economy enjoyed its en vogue status throughout the 20th century and into the early 2000s. However, after the subprime crisis in the United States and the ongoing Eurozone crisis, questions have been raised on the efficacy and value of capitalism as the world’s economic system.If we view capitalism as a means to an end, rather than an end in and of itself, a different perspective rises. If the true goals of society are freedom and prosperity,...
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May 31, 2012
Thailand is Kitchen of the World
The importance of food and agriculture to Thailand is undisputable. About 40% of the population depends on agriculture for their livelihood and it contributes to about 10% of GDP. The country is the world’s leading rice exporter and has successfully positioned itself as the “Kitchen of the World,” with the annual value of food exports expected to exceed 1 trillion baht in 2012.Thailand has also reduced overall poverty levels in recent years. It has recorded consistent economic growth and at the macro level is a food surplus country. However, access to sufficient affordable and nutritious food...
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May 31, 2012
Gerald Lawless on Shaping East Asia
During this World Economic Forum on East Asia 2012, Gerald Lawless, Co Chair of the Meeting, took the time to answer some of Forum:Blog’s questions about how he sees the future of Shaping East Asia.1. Despite a cooling global economy, East Asia has continued to show promise for growth. How has the tourism industry contributed to this opportunity?There is a large amount of intraregional tourism in Asia and this is increasing year on year, particularly with the growth in outbound travel from China throughout the rest of the region. Also, generally in East Asia, the...
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May 31, 2012
Is Asia’s talent falling through the cracks?
I spend a lot my working time running my business and developing plans, processes and strategies for companies to attract and retain their best and brightest. These client companies range from the some of the biggest names on the Fortune listings to fast growing SMEs taking advantage of the booming Asian business environment. So far in 2012, I have also had the pleasure of travelling 80,000 miles to visit companies in Europe and North America.The almost omnipresent phrase in the business world nowadays seems to be the old McKinsey & Company cliché: “The War for Talent”. Admittedly, there...
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May 30, 2012
Together, boosting the benefits of Asian tourism
At the World Economic Forum in Bangkok, I’m thinking about tourism. Across South-east Asia, tourism is booming. There has been a 10% increase in the number of visitors since last year. This influx brings development, but also a multitude of challenges which need to be tackled by the industry itself, with the support of government and NGOs.First, tourism brings opportunities to seize and build upon. It can create a hugely positive impact on the development of countries: tourism contributes to nearly 11% of the GDP and, directly and indirectly, creates 25 million jobs. This growth will continue...
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May 30, 2012
Freedom to travel: opening markets by opening borders
The global economy is suffering from a prolonged downturn brought on by events ranging from fiscal crises in the West to natural disasters here in Southeast Asia. Policy debates worldwide increasingly reflect the need for economic growth and job creation. With global unemployment of 200 million and 40 million people projected to enter the labor force every year, 600 million jobs will need to be created over the next decade.There’s no single solution for achieving such a daunting task, but the contributions of the Travel & Tourism industry are too often overlooked in the debate over how to...
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May 24, 2012
Assessing the openness of borders
“The nation state: apartheid without political incorrectness”, writes Nicholas Nassim Taleb in his recent collection of aphorisms. Keen to break down barriers, leaders participating at the World Economic Forum Annual Meeting 2012 in Davos considered a rough measure of border openness, cobbled together from trade and travel metrics.The Global Enabling Trade Report 2012 and its Enabling Trade Index will be out next week, giving us a partial glimpse into how things are evolving. The good news seems to be that though barriers are still very much present, crossing borders is generally getting...
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May 21, 2012
Personal Data Needs Clear Trading Rules
In a series of posts related to the World Economic Forum’s Rethinking Personal Data: Strengthening Trust report, John Rose and Carl Kalapesi of The Boston Consulting Group discuss the importance of establishing clear rules so that the potential benefits of personal data can be achieved. You can download the report and see related videos, podcasts, and other materials on our Rethinking Personal Data page as of 16 May.Personal data is everywhere. We volunteer data about ourselves on social networks, payment providers capture information from our transactions, governments record our...
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May 15, 2012
“Homo Economicus” vs. “Homo Reciprocans”
Let’s play a game, shall we? Assume that you and I ended up in prison. We are being kept in different cells, completely isolated from each other. We are offered same deal separately: we have two options; we can either stay silent or confess. But if I confess and you stay silent I’ll go free and you will stay in prison for 10 years. If we both stay silent we will stay in prison for 6 months then we’ll go free. If we both confess we will stay in prison for 5 years. What would you do? Would you confess or stay silent?As I took my first economics lecture two years ago (microeconomics) I struck by...
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May 15, 2012
Hand Outs to Handshakes
Regardless of the issue you care about, or the industry in which you work, our day-to-day labours preoccupy us and hide from view significant long-term change. We can’t help it. Human nature compels us to look at the path in front, not the horizon ahead. But occasionally, we can’t fail to notice we’ve marched from the plain to the plateau.I had that experience this week in Addis Ababa, at the World Economic Forum’s Africa Summit. Participating as a member of the Forum’s Young Global Leaders community, I observed some amazing long-term changes.My “issue” is poverty and my “industry” is aid. I...
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May 11, 2012
Balancing economic growth with true sustainability
I am privileged to attend the World Economic Forum for the first time. For me, it is very poignant that this forum is taking place in Addis Ababa, Ethiopia. Addis is not only the home of the African Union but also at the heart of the new economic growth taking place on the continent.Talk here is that Africa’s projected growth rate for 2012 will be in excess of 5% and at a time of global uncertainty and general economic downturn. Talking to various delegates it seems that whilst there is a genuine worry around food security and high rates of youth unemployment, there is, at the same time, a...
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May 10, 2012
Can Ethiopia rise to its next big challenge?
Ethiopia is a fascinating location for this year’s regional World Economic Forum on Africa, not least because of the nation’s recent amazing progress, and the remaining challenges it faces. In many ways, both of these contrasts are symptomatic of the whole continent.Firstly, the progress. Seeing it is remarkable, especially for those in the West who are wedded to images of the famines of the 1980s. Ethiopian progress defies the stereotypes. Rapid economic growth, halved poverty rates, rapidly reduced rates of infant, under-five and malaria mortality and increased education enrolment rates are...
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May 10, 2012
Supporting sustainable development through mutual capitalism
The World Economic Forum is travelling to Ethiopia this week to bring together the voices of Africa and help transform the region. This blog post is part of the One Year One Change campaign, which shares visions for a better Africa with world leaders attending this week’s meeting in Addis Ababa. What change do you want to see in Africa by 2013? #1y1cAndrew Mitchell, Secretary of State for International Development of the United Kingdom, recently made the remark that that aid is a means to an end, not an end in itself, explaining that “ it is the private sector that creates...
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May 10, 2012
Why making stuff matters
For the past year, the World Economic Forum and Deloitte have collaborated on an initiative to understand how the global manufacturing ecosystem is evolving. The initiative has engaged senior manufacturing executives and policy-makers from around the world in a series of workshops in Brazil, China, India, the United States and the United Kingdom. The global production system is far more interconnected and complex than most people understand. Making even simple things, like clothing, involves multiple functions carried out by multiple firms spread across multiple nations, and supported by a...
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April 24, 2012
The End of Capitalism – So What’s Next?
This year’s World Economic Forum in Davos saw intense debate about the future of capitalism. Many participants were asking whether capitalism, with all of its excesses, still has a place in today’s world. The media, meanwhile, speculated that if even managers and bankers were raising doubts about the system’s future, then perhaps capitalism had already been laid to rest in Davos.The reports about capitalism’s imminent demise may be somewhat exaggerated, as the ideology of a free but socially committed and fairly regulated market economy was never questioned in Davos. However, there was some...
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April 18, 2012
Emerging ideas to emerging economies
‘Latin America comprises nine per cent of global GDP yet it accounts for less than 0.2 per cent of new patents,’ so said one of the panellists in a session here at World Economic Forum on Latin America, Puerto Vallarta. The panellist, Eduardo Wanick, President of DuPont Latin America, was highlighting the scope for Latin America to grow through increasing its ability to innovate.Having spent two days last week in Queretaro, near Mexico City, working with Imbera, a subsidiary of FEMSA (one of Mexico’s largest companies), there is a huge appetite for innovation in at least some parts of the...
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April 18, 2012
Can Latin America balance economic reform with sustainable growth?
This summer, Latin America will be front and centre on the world’s sustainability agenda, with two major international events planned for June: the G20 in Los Cabos, Mexico, which will have a strong focus on Green Growth, and the Rio+20 summit in Brazil. Given the region’s abundant natural resource base, dynamic growth projections and track record of innovation, can Latin American champions demonstrate the bold steps needed to reform the global economy while establishing a compelling commercial and policy framework for moving the world onto a sustainable growth path?As the region...
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April 16, 2012
From Borges to Paz
Jorge Luis Borges’s story “The Garden of Forking Paths” was the inspiration for the title of the latest report of the Inter-American Development Bank, “The World of Forking Paths – Latin America and the Caribbean Facing Global Economic Risks“. The story is about the revelation of a labyrinth that had many paths which fork again and again providing many alternative realities. The Borgesian fiction is becoming a reality. In the current Latin American economic story, many labyrinths are opening: a European labyrinth, US labyrinth, Chinese and Indian labyrinths, too. Without getting lost in them...
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April 11, 2012
What is the future for Russia’s economy?
Russia’s economy is at a turning point. Following a decade of spectacular growth fueled by high energy prices, the country could either use its newfound riches to finance much-needed modernization and become a driver of innovation and growth, or muddle through by continuing to rely on its large yet maturing hydrocarbon base. Russia may either become the big R or the great absent in tomorrow’s BRICS.In this context of uncertainty, the Forum has launched a year-long process to develop Scenarios for the Russian Federation to the year 2030. Building on the Forum’s previous competitiveness...
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March 26, 2012
The Cost of Interdependence
You’ve heard it before: The world is a complex and interconnected place. But what does that really mean?It means that we live in a world where US mortgage lenders can bring down the global financial system, or where an Earthquake in Japan can overturn European energy policy. For me, it’s all about nonlinearity and emergent properties, which are fancy ways of saying that the whole is always greater than the sum of its parts.Nowhere have I seen this demonstrated more clearly than in the recent findings of Yaneer Bar-Yam’s team at the New England Complex System’s Institute where they have...
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March 13, 2012
How to encourage India-Pakistan trade
Every evening before sunset, with great pomp and nationalism, Indian and Pakistani guards participate in a flag-lowering ceremony at Wagah border, about 400 km north-west of New Delhi. Citizens on both sides cheer as guards conduct their choreographed routine, swiftly marching and high-kicking. Tourists on both sides take turns to hold their national flags and run a 100 metre distance towards the border gates, shouting patriotic slogans. Once they reach the gates, looking a bit confused, they turn around and run back to the starting point.India and Pakistan’s trade efforts have resembled such...
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February 29, 2012
When leadership is in our way
It is time to shift gears and to stop searching for best practice models on leadership within the Fortune 500 companies.Working in the field of social innovation is exciting for me, as it surfaces a variety of challenges but also opportunities across sectors to envision and implement social change. I recently attended the week-long World Economic Forum, held annually in the peaceful village of Davos in the Swiss Alps (actually 100 miles from my birthplace), and the conference provided a terrific forum for dialogue around social change and joint action.For many years, social entrepreneurs...
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February 27, 2012
Why blame capitalism?
There were at least three sessions dedicated to capitalism at the recent World Economic Forum Annual Meeting in Davos. Since then I have been thinking a lot about the issue. It is not that capitalism has failed, but it has been us as human beings who have failed in its implementation. If someone is to be blamed, it is us.Capitalism is only an economic system composed of human beings that has its roots in freedom, property rights and welfare via economic growth. Capitalism is supposed to provide economic opportunity and a better future for all. Yes, capitalism is based on capital accumulation...
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February 20, 2012
Economic Emancipation: How Africa is Coming Out of The Debt Trap
Africa must wake up, the sleeping sons of Jacob For what tomorrow may bring, may a better day come, Yesterday we were kings, can you tell me young ones Who are we today? – Nas and Damien MarleyAfrica is in the middle of a renaissance.The 1960s were a time of change on the African continent. Independence movements were seeing the fruit of their labour. Ghana’s first president, Dr. Kwame Nkrumah, who had led the independence drive for the then Gold Coast in 1957, had declared that there was a new African who would take his place in world affairs. In the years that followed, however, that new...
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February 10, 2012
Manufacturing for growth
Manufacturing is a sector that is not well understood. Yet, this industry is of strategic importance to the development of both emerging economies and developed markets. While manufacturing is not the solution to all problems, it is an innovative and high tech industry that generates many job opportunities.Manufacturing is no longer what it was in the 19th century; it is not dirty or reserved for blue collar workers. Think of the high tech and innovative products now manufactured around the world, like iPhones or Dyson vacuum cleaners. Indeed, modern manufacturing contributes to economic...
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February 10, 2012
Tuning in to more than corporate performance
In the worldwide marketplace, corporations are continuously being judged by vastly different audiences. From Germany to Brazil, today’s consumers are tuning in to more than just performance; they’re judging corporations on their citizenship. Yet, based on our findings in the inaugural Global Corporate Reputation Index, which was released at this year’s World Economic Forum Annual Meeting by Burson-Marsteller, Landor Associates, Penn Schoen Berland and Brand Asset Consulting, corporations aren’t getting or effectively processing that message.In fact, across the six countries (Brazil, China,...
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February 7, 2012
Why capitalism is like a broken down car
Professor Muhammad Yunus was at his provocative best here at the World Economic Forum annual meeting in Davos.In a special one to one debate with Rana Foroohar from Time magazine, he claimed that the current capitalist system simply had to be replaced altogether. He likened the current capitalist system to an old car. When you have an old car, he said, it starts to break down and you have to repair it. Then it breaks down again and you have to repair it again. This starts to happen more and more frequently until it is only logical to replace the old car with a brand new model.Logic dictates,...
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February 2, 2012
Davos 2012: Business needs to build trust
Despite the focus on Europe and its ailing currency, business responsibility was also on the Davos agenda with trust (or the lack of it) between business and society being the subject discussed. The high profile “Occupy” protests in New York, London, and this week in Davos, has focussed public attention on business behaviour and what it does with the wealth it creates.A new survey by PR firm Edelman, whose President, Richard Edelman, spoke at the business leadership session, revealed that trust in business had fallen from 56% to 53% of respondents, while trust in CEOs fell sharply by 12% to...
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January 28, 2012
How do we move toward “Shaping New Models”?
As the Davos Forum comes to an end, and after days of sharing, discussing and listening, I can’t help but feel disappointed and frustrated.Why?I arrived in Davos full of hope that new ideas would be heard, debated and welcomed. Unfortunately I can’t help feeling that no lessons were really learned from the recent crisis and that overall, Governments are fixated on macro-economic issues and on the next elections, while the corporate sector is in general looking at the next financial report and very much infused with their self-importance. Were the calls for transformation and for “Shaping New...
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January 28, 2012
Creating shared value
On Wednesday, a group of 65 corporate executives and social entrepreneurs came together in a private interactive session at Davos. Most social enterprises already collaborate with large companies, but now with the trend quickly shifting from traditional corporate social responsibility (CSR) to creating shared value (CSV). While CSR is often rooted in corporate giving and public relations, CSV is a much more long-term and equal partnership-oriented commitment. Corporates are realizing that the most effective and sustainable way to tap into new markets is through working with social...
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January 28, 2012
Economics or Science?
I had an interesting if minorly unpleasant introduction to Davos. Arriving on the World Economic Forum coach from Zurich, we transferred to the shuttle bus to take us to our first engagement as social entrepreneurs with the Schwab Foundation at the Morosani Post hotel. An Australian joined us in the bus. Engaging in conservation she told us she was a journalist from The Australian writing on economics. I complimented her on Australia’s leadership in introducing a carbon price. ‘What, the Suicide Tax!?’ she retorted. The conversation went downhill from there (to what would be a knowing smile...
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January 28, 2012
Innovative solutions required to fight the dark side of commerce
With so much pressure in Davos this week, spotting some tiny rays of sunlight among the heavy clouds hanging over the global economy is not the easiest of tasks to draw attention to the deeply murky issue of illicit trade. Estimates compiled by the Forum’s Global Agenda Council on Illicit Trade suggest that illegal and unethical components of international commerce have an annual value in the hundreds of billions of dollars and cause significant economic, environmental, social and political harm. They include human trafficking, illegal trade in natural resources, supply of counterfeit...
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January 28, 2012
Infosys’ S. D. Shibulal: Time to reverse the Domino Effect
It has been an exciting past three days at Davos. I have had good opportunities to meet business leaders from various industries in multiple forums, including one-to-one meetings, World Economic Forum sessions, the IT Governor’s sessions and also the Infosys Lunch Panel Discussion hosted by us. In the run up to this Annual Meeting, as I was watching the news, I sensed a basic skepticism from the media and society around the effectiveness of an event like this.However, what has transpired over the past three days reaffirms my belief that events like this give the ideal platform for business...
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January 27, 2012
More with Less: Will Consumers Buy It?
Despite the snow that continues to fall on Davos, CEOs will make the journey to the World Economic Forum’s Annual Meeting this week to talk seriously about how business can engage with citizens around the world to make consumption more sustainable. The discussion builds on four years of work by the Forum, culminating in our latest report: More with Less: Scaling Sustainable Consumption and Resource Efficiency.Here in Davos, at our sustainable consumption-related sessions, the business community will be focusing on the most important link in the value chain: the consumer. In the context of...
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January 25, 2012
Accenture’s Mark Spelman: Opportunity in uncertainty
If there’s one word that sums up the mood at the World Economic Forum this week, it’s uncertainty. Will the Eurozone crisis be resolved? Will there be new leaders in the White House, the Elysée or the Kremlin? Will the Chinese economy avoid a hard landing? Current high levels of corporate cash reserves suggest that uncertainty is holding back investment decisions. But this is, in fact, a time of great opportunity. If decision makers can agree on one thing to lift the mood in Davos, it would be that the world is not just uncertain, it’s also remarkably resilient.While mature...
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January 25, 2012
Infosys’ S. D. Shibulal: What my 17 year-old son taught me about business
The unprecedented sequence of events that started in 2008 and led to the global economic turmoil has taken the business world and its leaders by storm. Business leaders have since been devoting a significant proportion of their time and attention to dealing with the ongoing macro-economic uncertainties, and rightfully so. However, this short-term focus on macro-economic uncertainties is consequently blurring their focus on the long termI believe there are two critical realities that we must think deeply about. Firstly, companies that stay “relevant” to the new future have the right to survive...
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January 24, 2012
The World’s Poor: An Economic Opportunity
The world’s poor do not want to remain poor. It’s an important lesson for anybody working in global development. Many a development project, corporate philanthropy and NGO are designed with the view of the poor as a ‘beneficiary’ and often fail to scale and create sustainable impact.There are indeed development contexts that seek philanthropic capital to be put to work. And there are others where the poor are best served as economic actors, as clients of business models. What many seek are opportunities to be created, taking away bottle necks that prevent them from using their human and...
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January 23, 2012
Global Competitiveness
The Global Competitiveness Report 2012-2013 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The Report series remains the most comprehensive assessment of national competitiveness worldwide. Access the data platform to visualize and download the data.This year’s report findings show that Switzerland tops the overall rankings in The Global Competitiveness Report for the fourth consecutive year. Singapore remains in second position with Finland, in third position, overtaking Sweden 4th. These and other...
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September 7, 2011
Long-term Investing
Long-term investing has received fresh attention in light of the global economic crisis. Discussion has focused on how long-term investors – pension funds, sovereign wealth funds, foundations, endowments, insurers and family offices – are helping to stabilize financial markets, impact the time horizon of corporate managers and fund important long-term projects such as infrastructure and the development of a low-carbon economy. Yet the capacity of investors for long-term investing and their ability to play these critical economic roles has diminished in recent years. The Forum’s report,...
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March 23, 2011
Partnering Against Corruption Initiative
Join the leading global business voice on anti-corruption Anti-corruption - a strategic imperative for every CEOPACI - the leading global business voice on anti-corruptionPACI – bringing together cross-industry communitiesThe PACI Board, 2013PACI sectors and industriesPACI is active around the worldPACI is making a tangible impact in the fight against corruptionMore about PACIAnti-corruption - a strategic imperative for every CEOCorruption is identified as the top impediment to conducting business in 22 out of 144 economies, as measured in the World Economic Forum's Global...
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October 26, 2010
