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Amid Global Slowdown, Asia as Saving Grace?

Posted on 11 October 2012 by elainehuang

By Suvendrini Kakuchi

TOKYO, Oct 11 (TerraViva) – Developing countries – ­relegated to the sidelines in the West-led postwar expansion – have emerged as the saving grace against the backdrop of calls for a new economic model that can ease the ravages of globalisation and address the lack of confidence in market-based systems.

   Indeed, thinking global to support economic growth in developing countries in a way that expands domestic productivity and stimulates global demand has been a core message at the annual meetings of the World Bank and International Monetary Fund (IMF) underway in Tokyo this week.

   Financial leaders and influential policymakers have also identified the importance of investment in infrastructure and technology transfer in order to boost sustainable growth in developing economies.

   “The envisaged global superhighway has not realised enough growth in the world,” said International Monetary Fund (IMF) managing director Christine Lagarde, pointing out that economic expansion is currently being recorded mostly in developing countries.

   Speaking at a discussion on globalisation here, Lagarde says the key economic challenge today is the decreasing job opportunities for youth, suggesting that nations can help each other in meeting these challenges.

   “I fear an intergenerational conflict if our financial model leaves increasing debt for the younger generation,” she warned.

   Western economies in particular have been hit with massive unemployment among the younger generation. Unemployment rates are as high as 50 percent in countries such as Spain and Greece, both dealing with severe austerity plans imposed by global financial lending institutions.

   But Asia, by contrast, has been recording expansion. China, Asia’s growth engine, has shown an average annual 10 percent GDP growth over the past decade and is now the world’s second largest economy.

   But even that expansion is slowing down as Asia and Africa feel the impact of slow demand in the West, a situation that has raised new fears of further global recession.

    In a statement after a meeting Thursday, the Group of Twenty Four, comprising rapidly developing and emerging economies, stressed the importance of a significant mobilisation of resources and investment, especially in infrastructure.

   It also called for strengthening existing financial architecture and institutions, but said it anticipated a large funding gap given the scale of needs.

   “We are seriously concerned about the fragility of the global economic and financial situation, particularly in view of low growth and continued uncertainties and risks within the Euro area, notwithstanding the recent policy actions and the buttressing of firewalls, as well as risks from possible aggressive fiscal tightening in the United States,” the G-24 said in a communiqué released here.

   “Moreover, instability in financial markets, fiscal adjustments and deleveraging by banks has impacted growth, with adverse effects on the economies of many emerging market and developing countries,” it added. “World trade growth has sharply decelerated and the flow of capital (to these countries) has become more erratic.”

   Klaus Schwab, founder and executive chairman of the World Economic Forum, says the time has come when no country, business, organisation or civil organisation can think individually or in isolation. “To ease fears that point to an expanded global recession, we need to think on a global partnership base. Leadership needs to be distributed collectively,” he said.

   Japan, host of the IMF-WB meetings and currently struggling with growth rates of less than 3 percent, has been working to play a key role in the exploration of a new economic way to go forward.

   While government subsidies to companies have helped to restrain unemployment – now around 4 percent – Japan has also been grappling with increasing inequity since its rapid post-war economic development ended in a long recession for the past three decades.

   Participants agreed that globalisation is here to stay, but that the search continues for a more inclusive model where rich countries share policymaking and technology with frontier economies to create a more balanced allocation of natural resources and achieve sustainable growth.

   This means an acknowledgement of the emerging scenario where secure jobs are no longer the norm. “The young must be supported and educated to create their jobs,” Schwab said.

   Liberian President Ellen Johnson Sirleaf explained there is an imperative need to invest in countries such as hers, where the government struggles to provide badly needed funds to empower vulnerable sectors.

   “We need a new economic model that emphasises having sustainable growth in developing countries that is based on scaling up our infrastructure that can shift the emphasis where natural resources can be secure,” stressed Sirleaf. (END/SK/TV/IPSAP/JS/12)

1 Comments For This Post

  1. Peter Says:

    Asia is definitely not a saving grace, and is by no means sustainable. The fact that their GDP has increased despite economic downturn in the West means little in relation to the employment of youth. GDP is a measurement of of economic transactions, and most of those transactions are occurring in a more exclusive sector; the financial sector.

    Westerners gaze at Asia in bewilderment and excitement as they see a world bustling with economic activity. Were one to actually spend some time there, they would see the precariousness of such a vision. I don’t claim to know some “truth” that you don’t, but at least a partial truth: that is, that current youths are hustling to cut a piece out of the economy to feed themselves, especially in Asia. It’s a violent a depressing process; rural youths are more or less sent to cities to earn cash money for the family who, do to “development” and “infrastructure” now need that cash money to pay for taxes and manufactured products.

    “We need a new economic model that emphasises having sustainable growth in developing countries that is based on scaling up our infrastructure that can shift the emphasis where natural resources can be secure.” Didn’t the old Capitalism of the 20th century claim to do the same thing? They didn’t use the term “sustainable,” but they always claimed to have some grand scheme to “save the youth.” They simply had faith that the economic system would solve problems faster than it could create problems. You (smug, over-analytical ‘financial leaders and policy makers’) propose a similar solution; “green technology” will save us.

    And what do these solutions leave for us? The ability to just barely eek out a material existence? How do you plan to make continuous investments in technology over human capital and employ everyone? You create a machine which replaces 100 workers and expect that by providing an “education” that all of those displaced workers will be put to work inventing better machines which replace more people?

    Here’s an idea; actually accept livelihood creation (and use that term, because that is what we’re really talking about) as the goal of economic “development,” and achieve that goal by any means possible, even if that means using more labor intensive techniques. Just indulge us with such dignity; that we may be able to earn our livelihood honestly.

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