The global economy may be recovering, but the questions posed at Davos are as challenging as ever

Wages will not grow much, and the funds for quality healthcare and schooling will not be there, unless Britain is competitive in world markets

Share

A few weeks ago, The Onion, the satirical US website, ran the headline:  “Recession-Plagued Nation Demands New Bubble To Invest In.” Like all good parodies, it contained enough truth to be funny. Indeed, the notion is one that the world’s policymakers, as they gather in Davos for their annual meeting this week, would do well to ponder.

After all, this is very much the pattern since the banking crash. Trillions of dollars have been pumped into the listless economies of North America, Europe and Japan to support asset prices – property, shares, bonds, commodities – and prevent the great recession turning into another great depression. In normal times, such action would have generated bubble upon bubble. So extreme were the circumstances, however, that it barely averted a global deflation.

The question for Davos is what next? And the answer is most certainly not to pump in still more trillions to try to reinflate bubbles of imaginary paper wealth. Having done all they can to prevent a catastrophic collapse in demand and liquidity, some of the more fundamental economic factors undermining growth and living standards in the West have not received quite the same attention from policymakers – what in happier times we called the “supply side”.

Some brains are already turning their attention to this. One Davos regular, former US Treasury Secretary and President of Harvard Larry Summers, has already raised the idea of Western “secular stagnation”. In its way, it is nothing new. One of the persistent themes at Davos, and anywhere else where intelligent discussion of economics has taken place, is the historic shift in wealth and power from the old Western powers, and towards the young, developing economies, especially in Asia. It is analogous to the rise of Britain in the 19th century, and the US between the two world wars.

Now, the effects of this new shift in the balance of economic power are becoming tangible. Much of the discussion in the UK, for example, about living standards and the quality of public services is against such a backdrop. Wages will not grow much, and the funds for quality healthcare and schooling will not be there, unless Britain is competitive in world markets. Similarly, the greatest global economic imbalance of all – the US-China trade balance – is, at its simplest, explained by a relative decline in US competitiveness and exporting prowess.

If Western politicians refuse to push through economic reforms – or, rather, voters refuse to face them – then strikes, riots and rows about “fair shares” and resentment towards elites will be the dominant political forces as a cake that is static or shrinking must be divided.

Powerful sectional interests, archetypally unionised public sector workforces, may do relatively well out of this; but those without a voice or much industrial muscle, usually the poorest, will do badly. In such circumstances, blaming immigrants and “unfair” trade usually figures as well, and political parties of the maverick right tend to prosper, while globalisation gets a bad name. Sound familiar? No one should expect the powerful folk at Davos to have all the answers, but at the very least it is their responsibility not to duck the question.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

MANCHESTER - SENIOR COMMERCIAL LITIGATION -

Highly Attractive Pakage: Austen Lloyd: MANCHESTER - A highly attractive oppor...

Senior Marketing Manager - Central London - £50,000

£40000 - £50000 per annum: Ashdown Group: Marketing Manager (Campaigns, Offlin...

Head of Marketing - Acquisition & Direct Reponse Marketing

£90000 - £135000 per annum: Ashdown Group: Head of Marketing (B2C, Acquisition...

1st Line Service Desk Analyst

£27000 - £30000 Per Annum: Clearwater People Solutions Ltd: Our client who are...

Day In a Page

Read Next
Norovirus the food poisoning bug that causes violent stomach flu  

A flu pandemic could decide next year’s election

Matthew Norman
J. Jayalalithaa gestures to her party supporters while standing on the balcony of her residence in Chennai. Former film star Jayalalithaa Jayaram is one of India's most colourful and controversial politicians  

The jailing of former film star Jayalalithaa Jayaram is a drama even Bollywood couldn’t produce

Andrew Buncombe
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn