Finance
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
Resilience: What it is and why it’s needed
Lee Howell addresses the question: What does it mean for a country to show resilience in the face of risks it cannot manage alone?
From natural disasters to financial shocks, global risks are exogenous events, which go beyond the capacity of a country or corporation to manage on their own. Traditionally, the practice of risk management has focused almost entirely on preventable risks, where a culture of strict compliance can mitigate, or even avoid, worst-case outcomes. Filling the analytical gap on global risks, the World Economic Forum publishes annually its Global Risks report to assess...
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February 27, 2013
Developing Future Social Protection Systems Retirement Income
The report, Developing Future Social Protection Systems – Retirement Income, is the first project of a series on social protection systems by the World Economic Forum’s Financial Services Team and focuses on retirement-income schemes around the world. 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 not only to address the long-term problems associated with these challenges but also to take short-term action.The...
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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
Next generation networking
If this has happened to you – and it probably has – you know how frustrating it is: You have two close friends; both are smart, talented and at the top of their game. They’re remarkable individuals, but together they could be world-beaters. They’re a classic case of “one plus one equals three” … if only someone could connect them.
Yet, try as you might, you can’t manage to make the game-changing introduction. Your friends live in different cities or countries, or speak different languages, or are just too busy. Or all of the above.
The Forum, you see, has two friends of its...
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February 20, 2013
Closing the Gaps: Financial Services Needs of Next-Generation Companies
Closing the Gaps: Financial Services Needs of Next-Generation Companies documents the emergence of a new breed of young and innovative global competitors that have managed rapid expansion, often without the full benefit of traditional financial services. The Report, produced in collaboration with The Boston Consulting Group, documents how these “next-generation companies” (NGCs) have achieved market-leading growth beyond their home markets, deploying non-legacy business models and pioneering products.NGCs have invigorated the metabolism of global commerce with streamlined services and...
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February 20, 2013
Biased against clean investment?
Between 2004 and 2010 annual global investment in renewable energy, energy efficiency and associated technologies soared from just over US$ 50 billion to about US$ 250 billion. Clean energy technologies also became cheaper – most notably solar photovoltaics, but also wind turbines, LEDs, batteries and all the associated control technologies – so that each dollar of investment started to buy a lot more equipment.
Recently, however, progress has stalled, and 2012 was the first year in which investment globally dropped, by 11%. Yet it would need to increase to between US$ 750 billion and US$ 1...
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February 19, 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
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
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
What will the financial system of tomorrow look like?
Vivek Sen on the building of a more resilient financial system
In the wake of the global financial crisis, policy-makers are pursuing broad regulatory changes to many parts of financial services in an attempt to better align its social values and costs. This, in conjunction with an array of highly public scandals, has led to significant questions around the proper role of the financial services industry worldwide. The deepening trust divide between society and the financial services industry has negatively impacted economic and social relationships, and not to mention the effectiveness and...
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January 26, 2013
Leading through adversity: Resilience in crisis
Corporate crisis can lead to four clear emotions exhibited by employees: denial (ranging from conspiracy theories to false information), shock (resulting in a sense of numbness and disbelief), shame (leading to withdraw) and anger (a sense of betrayal and frustration).
So, how do companies augment human resilience?
The first is to create a corporate culture where ethical conduct is valued. It is important to develop an ambience in which employees and stakeholders trust the new management in its commitment to doing business with utmost integrity. Also important is to restore a belief, at all...
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January 23, 2013
Building a more resilient world
Judith Rodin, President, The Rockefeller Foundation, shares her thoughts on resilient dynamism
Resilient Dynamism is an apt theme for this year’s World Economic Forum’s annual meeting, because each year we see more than ever that we cannot predict where or when the next major shock or disruption to our wellbeing will manifest.
Perhaps it will emerge from our global financial system, just as we saw when the U.S. housing bubble burst and the ensuing credit crisis in Reykjavik rippled across the world. Perhaps it will be a result of our changing global climate, which caused the floods in...
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January 23, 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
How can financial systems be truly resilient?
This year’s theme of the World Economic Forum Annual Meeting 2013, Resilient Dynamism, may seem a little contradictory – how can anything be resilient and dynamic at the same time?
The last couple of years have certainly proven that events take place at an unparalleled speed. We only need to think back to how unimaginable a break-up of the Eurozone was five years ago and yet, for the last 12 to 18 months, this has been discussed as one of the “real” solutions to the euro crisis. We are experiencing a transformational change in our thinking of preparedness – from preparing for known events to...
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January 16, 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
Why no Glass-Steagall II?
Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley.
MANILA – Eighty years ago this month, Ferdinand Pecora, the cigar-chomping former assistant district attorney for New York City, was appointed chief counsel for the US Senate Committee on Banking and Currency. In subsequent months, the hearings of the Pecora Commission featured many sensational revelations about the practices that led to the 1930’s financial crisis.
More than that, the Commission’s investigation led to far-reaching reform – most famously, the Glass-Steagall Act, which...
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January 10, 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
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
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
How can we unlock finance to fight climate change?
In a series of blog posts curated by the World Economic Forum’s Climate Change Initiatives, a number of leading voices will present their perspectives on climate change. Contributions are linked to the Forum’s Green Growth Action Alliance project and the Forum’s Global Agenda Council on Climate Change. In the following post, Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, shares her perspective on climate change.
In the past few years we have learned valuable lessons about climate change. We have learned that the changes we need to make...
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November 30, 2012
International Monetary System: How long will the dollar dominate?
The latest annual report of the Global Agenda Council on the International Monetary System presents a sobering assessment of the state of the world in mid-2012.The economy is slowing down again – not everywhere – but the slowdown is already widespread enough to be self-reinforcing. And the public policy responses have so far been inadequate.G20 summits, after early promise, have become disappointing, with a lack of clear leadership on display. The US remains preoccupied with domestic fiscal issues and the euro area has repeatedly failed to present a durable solution to its continuing debt...
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July 4, 2012
A sustainable response to the global financial crisis?
The recent economic crisis was Western in origin but had global consequences. As trade finance dried up, global trade fell and demand collapsed. It revealed a divided and disconnected world.But can we respond to this crisis in a sustainable way? Is it possible to achieve solid, environmentally friendly economic growth that raises living standards as equitably as possible and is consistent with the Millennium Development Goals? I believe so.Growth can be green. High food and energy prices may pose economic and social problems but these can be addressed through environmentally friendly policies...
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May 24, 2012
Lessons from the crisis: a conversation with Jean-Claude Trichet
For over 30 years, whenever economic crises hit the world, Jean-Claude Trichet was at the center of action. As President of the European Central Bank from 2003 to 2011, Mr. Trichet has carried tremendous responsibility. At endless global meetings, he has helped coordinate – or at least avoided clashes between – the world’s central banks. In Europe, he has pushed for action at emergency summits that have sometimes descended into haranguing matches. In Germany, the ECB has faced fierce resistance over the massive extension of its lending to banks and intervention in...
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May 18, 2012
Is a BRICS Development Bank on the cards in Delhi?
The BRICS primary objective is to shift the centre of gravity in global economic governance. Its regional representation and combined economic weight offer tantalizing prospects, which probably outweigh substantial intra-bloc divergences in economic interests. Consider one major issue on the Delhi agenda – the mooted establishment of a BRICS Development Bank.Following Dominique Strauss-Kahn’s ignominious exit from the IMF, the Europeans quickly rallied around Christine Lagarde to preserve the ancièn régime. The US acquiesced in order to maintain its prerogative of anointing the president of...
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March 29, 2012
Impact Investing: how do we harness the hype?
There is a lot of hype about impact investing. Investors speak of a 1 trillion USD sized market. Social enterprises reposition their business model and restructure their financial model to attract, absorb and grow through investor capital. Despite the enthusiasm, the actual volume of impact investment transactions remains minimal at best. The Schwab Foundation for Social Entrepreneurship took this week at Davos to convene several important discussions about how to harness the hype and create results that are both practical and impactful.On Tuesday, before the Annual Meeting began, the Schwab...
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January 28, 2012
Why I would disagree with Professor Porter?
I heard today Mr. Porter talk about the mantra of making money as the center theme while doing stuff that can be construed as ‘social good’. He kept saying how one could scale up soon and make lots of money. He said capitalism is the only way of measuring sustainability. I completely disagree. Unfortunately, I raised my hand too late to tell Mr. Porter – “am sorry but I do not agree with you, Sir”.Capitalism in isolation is a perfect recipe for social disaster. Gone are the days when the poor were poor and rich were rich. The poor know about aspirations and rightfully so need to achieve them...
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January 26, 2012
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
Private investors
There is little doubt that private investors face a more challenging financial climate than at any time in a generation.As financial reforms gather pace attention is focusing on the impact that this is likely to have on the financial services industry, on private equity investors and on the wallets of professionals.Will there be appetite for more initial public offerings in 2011, thereby providing an exit for some companies' investors - this remains unclear. What is clear is that uncertainty will remain a feature of the landscape for some time to come. Eric Mindich, Founder and...
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November 10, 2010
Financial Development
The Financial Development Report measures and analyses the factors enabling the development of financial systems in a number of economies around the world. It aims to provide a comprehensive means for countries to benchmark various aspects of their financial systems and establish priorities for improvement. It is published annually so that countries can benchmark themselves and track their progress over time.The Report does not attempt to inform current or short-term events, such as the latest developments affecting the eurozone. Rather, it aims to serve decision-makers in developing a...
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October 24, 2010
Mobile Financial Services Development
Click below to browse and read the report and download the data files. Download Report PDF Launch PDF Reader Download Data FilesDownload Report PDF Launch PDF Reader Download Data Files Click on the image to interact with the report data. Create and share tables, maps and charts with the data analyzer. The Mobile Financial Services Development Report 2011 provides a comprehensive analysis of more than 100 variables across 20 countries in Africa, Latin America and Asia. Developed in conjunction with the Boston Consulting Group, the report measures the critical factors necessary to...
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October 20, 2010
Sustainable credit
In the aftermath of the global recovery attention is focusing on how to ensure greater stability amid concern about the susceptibility of some banks to ongoing turmoil and after-shocks in the financial markets.As banks repair their balance sheets and deal with huge writedowns concerns remain that with markets still reluctant to support leverage the severely diminished flow of credit may undermine a global recovery. It is accepted that the credit recovery will be slow and that policy moves by lawmakers may be required to address credit constraints. The International Monetary Fund has...
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October 20, 2010
New Financial Architecture
The Forum has looked at the driving forces shaping the global financial system and how these forces might affect governance and industry structure. Two reports on this subject have been published.The first report The Future of the Global Financial System: A Near-Term Outlook and Long-Term Scenarios1, published in January 2009 explored: How the financial crisis, and the changes it has precipitated in financial regulation and supervision, might affect the near-term structure of wholesale financial markets and how these changes would likely impact players in the banking, insurance...
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October 20, 2010
Financial Governance
The global financial crisis revealed major shortcomings in the system of institutional and regulatory governance. To move beyond the crisis, it will be necessary to improve current structures and develop a more fair and efficient structure of global governance that reflects changes in the global political and economic landscape.The principle of equal participation and inclusive cooperation should be followed in improving global governance. It is imperative to raise the voice and representation of developing countries.It has become a consensus of all parties to improve current structures...
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October 20, 2010
