Nobel-winning economist Michael Spence spoke at the World Bank yesterday about how economic convergence between developing and developed countries has been a 100 year-old process, the first half of which is now over, with the global economy now facing significant strains, stresses and challenges. Find out from my interview with him why he thinks globalization and growing interdependence has outrun our governance institutions and learn about what he sees as the most important challenges ahead. The full lecture is also well worth a view.
When it comes to answering the tricky question of why increased enrollment in higher education, one of the region's notable successes, has not translated into increased employment gains, one common theme is a mismatch of skills. The skills being taught just aren't relevant to the new global economy. Yet the 'Arab Spring' revealed a generation that had a very sophisticated grasp of new technologies, and that had come up with ingenious ways of using them to organize and mobilize. A generation that was also clearly capable of critical thought and effective communication. This was evident in the ability to identify and articulate a collective sense of economic and political exclusion. In Tahrir Square, they displayed a high degree of creativity and enterprise.
In addition to increasing globalization, which has been key to rapid growth for many countries, an emerging debate is which sector, services or manufacturing, could be the main source of growth for developing countries today. The East Asian middle and high income countries globalized through manufacturing-led activities, having followed the traditional development path from agriculture through manufacturing and only later to services. For the Middle East and North Africa (MENA) countries, which sector path to growth, services or manufacturing, could emerge and be fostered?
According to Nobel-winning economist Joseph Stiglitz, creating jobs amidst today’s low-demand, high-debt environment is a tall order. It will require viable structural employment policies, unemployment insurance for laid off people, and -- in the case of the US – facing up to the inevitable shift out of the manufacturing sector into services. Stiglitz, who delivered a DEC Lecture at the World Bank on September 26 on ‘The State of the Global Economy: An Agenda for Job Creation’, warned that far more is broken than the banking and financial systems in high income countries. He argues that a lack of aggregate demand is a huge problem that can only be fixed through smart public as well as private investment in education, infrastructure, and innovative technologies to protect the environment. He also described the current phenomenon whereby productivity in manufacturing is exceeding the rate of growth in demand in the sector, which means jobs on factory floors are being shed. In other words, technical change can induce large distributive consequences and lead to long term unemployment. Listen to my interview with him about what can be done to cure our current ills.
The World Bank is pursuing an ambitious program of reform to enable the institution to become more efficient and effective while also gaining more legitimacy among the developing countries that it serves, Bank President Robert Zoellick said today.
In a speech at the start of the World Bank-IMF annual meetings, Zoellick said the World Bank’s reforms would focus on improving development effectiveness, promoting accountability and good governance, and continuing to increase cost efficiency.
“To serve the changing global economy, the world needs agile, nimble, competent, and accountable institutions,” Zoellick told the meeting of the Board of Governors of the World Bank Group. “The World Bank Group will improve its legitimacy, efficiency, effectiveness, and accountability, and further expand its cooperation with the UN, the IMF, the other Multilateral Development Banks, donors, civil society, and foundations which have become increasingly important development actors.”
The power of public opinion is the power of ordinary citizens; it is the power of aware, engaged multitudes. And there is a way of understanding the spectacular events of 2008 in terms of the power of public opinion. Let's take just a few.
1. The first is the crisis in financial markets and the global economy. Whatever technical experts eventually decide to be the origins of the crisis, there is no doubt that public opinion has played a role in intensifying the crisis. It has done so through the collapse of public confidence in financial institutions generally. For what is 'confidence' but the opinion widely shared that the financial system is sound and your savings and investments are safe? That collapsed in so much of the world in 2008, beginning in the United States. There is no doubt that restoring 'confidence' will be crucial to ending the crisis; that means, recreating majority opinion in the stability and secure management of the global financial system.