paper proposal for a forthc. WB Conference on Evolutionary economic policies

18 marzo 2010
To the atn of
Otavano Canuto
Vice-President
WB

A frame for XXI Century Policies

The paper starts with the a priori, intuitive assumption that the 2007-11 quasi-Great Depression is nothing but a signal of the worst to come. Even if macro-economic indicators had to improve in the immediate years after, as they probably will – for a while.

Section 1

Summarising the basic theoretical modules arguing for the unsustainability of XXI C. Capitalisms; reasons why we exclude the “climate change” bubble from these basic theories.
A) Demographic bubble (MALTHUS-DARWIN; we enlarge here the scope of “Evolutionary Economics”, back to the roots): the real problem versus climate heat rethoric
B) misdistribution of income and net savings (MARX-MANDEL-CHESNAIS, KEYNES-KALECKI-MINSKY, SRAFFA-PASINETTI, AGLIETTA)
C) specification of B): East\West regional dualism substitutes for N\S (A. WEBER)
D) technologies-institutions mismatch (SCHUMPETER – DOSI – Perez 2002)
E) further specification of D): a missing energy revolution (SCHUMPETER).

Section 2

Hypothesis c) is detailed here, not because it is euristically superior to the other ones, or more plausible. Just because the Author has been working upon it as a regional scholar.
Mentioning the inter-relations in between the 5 tenets, in eclectical approaches.

Section 3

Policies, prognoses stemming fron the 5 alternative\complementary diagnoses:
A) Malthus was right, and Marx wrong. It is too late: there will be democides and many wars; how to improve emergencies. Climate extremes (now heat) are a normal regulator of overpopulations. In the coming Ice Age (beyond XXI), underpopulation will rule.
B) A new GLOBAL FISCAL POLICY: a serious, unsolvable political puzzle; the transition from US to Chinese imperialism will make things worst in the 1st half of the Century. Are Imperialisms the only workable kind of harmonization of fiscal policies?
C) Just 1 solution: accept and smooth the Western decline (Cacciari 1994); don’t force the East to grow beyond thresholds, just to boost the Western actives; it just doesn’t work;
D) divergence: demand of an Open Democracy – versus old and new Totalitarianisms;
E) the “reverse salient” model (HUGHES) suggests that an energy Revolution is not behind the corner – there is a lot of basic research and  problem solving before. Therefore, here too “emergency” policies are key in the next decades: essentially, a strong energy-saving bias in all technologies and organisations (deepening the post-1973 trajectory).
All the approaches, also because optimistic theories are not focussed upon and reviewed here, stress the absolute agenda-and-time priority of strong and comprehensive emergency policies in the next decades, in a number  of fields: not surprisingly, quite opposite to Naomie Klein (2008). They are the necessary conditions to improve, or at least mitigate LR scenarios.
enzo fabio arcangeli
references
– Massimo Cacciari 1994, Geofilosofia dell’Europa. Milano: Adelphi. http://www.italialibri.net/opere/geofilosofiadelleuropa.html
– Naomie Klein 2008,  The Shock Doctrine. NY: Metropolitan Books. http://www.naomiklein.org/shock-doctrine
– Carlota Perez 2002, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. Cheltenham, U.K.: Edward Elgar. http://www.carlotaperez.org/
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doctor doom’s 2009

Nouriel Roubini has now a weekly column on Forbes, where some synthesis is made of the much richer rge material (unique, very deep and informative news “clusters”; regular blogs or interventions by some of the best macroeconomists). This is an invitation to read regularly, as an amateur, both “Doctor Doom” Forbes column, and the free sections of rge-monitor.com (while a professional economist is obliged to subscribe to rge):

Doctor Doom

A Global Breakdown Of The Recession In 2009

Nouriel Roubini, 01.15.09, 12:01 AM EST

Forecasting pain, from the U.S. to Australia.

pic

With the industrial world already in outright recession and the emerging world navigating toward a hard landing (growth well below potential), I expect global growth to be flat (around -0.5%) in 2009.

This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then–via a variety of channels–on the rest of the global economy.

Here is a global breakdown of my forecast.

The United States economy is only halfway through a recession that started in December 2007 and will be the longest and most severe in the post-war period. U.S. gross domestic product will continue to contract throughout all of 2009 for a cumulative output loss of 5%.

One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6% in the wake of a sharp fall in personal consumption and private domestic investment.

I see the real GDP growth contraction playing out through the year as follows: first quarter 2009: -5%; second quarter 2009: -4%; third quarter 2009: -2.5%; fourth quarter 2009: -1%–adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009.

This forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; I also predict significantly weak growth recovery–well below potential–in 2010. (…)

The latest cyclical upswing in the Eurozone was largely driven by a temporary but powerful boost to domestic investment from disappearing risk premia in the aftermath of the adoption of the single currency and by external demand from a buoyant world economy.

Both demand sources fizzled out by the second half of 2008, leaving the Eurozone as a whole and its largest members exposed to diverging deleveraging patterns in the face of suboptimal EMU-wide automatic fiscal stabilizer mechanisms.

The latest record-low readings of leading and sentiment indicators point to a severe recession ahead in 2009 that shapes up to be worse than the 1992-93 crisis. For the Eurozone, I expect a below-consensus contraction in real GDP of around -2.5% (…)

We believe China will experience a hard landing in 2009, with growth unlikely to exceed 5%, a sharp slowdown from the 10% average of the last five years. The reversal of capital flows and high credit cost will pull down India‘s growth significantly, to around 5% in 2009 from an estimated 6% in 2008.

END  OF NOURIEL’S QUOTATION

This graph, now in the front page of the Greenberg geo-eco think thank of the CFR (where we always read two of our favourite blogs: Follow the money by the International Economics “Sherlock Holmes” Brad Setser (*); and the delightful political incorrectness of  Amity Shlaes’ Forgotten man: healthy antidotes to FDR or BO’s santifications), is quite informative.

RAQ (Rarely Asked Q.) Did u know, before having looked at it, that the 2nd NewEconomy bubbbbbble (2003-07)  was much more  pervasive cross-country, than the so much advertised 1st one (1994-2001)?

2growths_oneline_cfr

(*) We are much more than friends, in brotherhood from decades with Otaviano Canuto, himself an rge blogger, Catou and all their beautiful family. Nonetheless, our esteem of Otaviano as an economist made a big jump upward a few weeks ago, when we discovered, in an exchange of comments on a recent post, he had … something to teach to Brad. Before, we believed anything alike impossible, i.e. beyond human limits.