While our ancestors embraced the continuum of\nhappily-ever-after stories, in had come rushing two friends, hand in hand, that\nalthough led to a significant creation of new opportunities but did introduce\ndisruption and polarization both within and between societies and economies,\nnames being, Globalization and the Fourth Industrial Revolution. That\u2019s where\nthe World Economic Forum begins its story. <\/p>\n\n\n\n
In the year 2018, they went ahead and introduced the\nnew Global Competitiveness Index 4.0, a much-needed new economic compass, built\non 40 years of experience of benchmarking the drivers of long-term\ncompetitiveness. The index presents itself as an annual yardstick for\npolicy-makers and economists to minimize the amount of importance given to\nshort-term reactionary measures and instead analyse and forecast their\nlong-term impacts. The index has organized itself into 12 pillars, namely,\nInfrastructure, Institutions, ICT adoption, Health, Skills, Macroeconomic\nStability, Product Market, Labour Market, Financial System, Market Size,\nInnovation Capability, and Business Dynamism. <\/p>\n\n\n\n
The report got published in 2018 and the index\nrevealed a reality that showed the world economy in a surprisingly sub-optimal\nstate. It\u2019s been 10 years since the financial crisis with central banks has roughly\nbeen injecting a net amount of 10 trillion dollars into the global economy with\nproductivity-enhancing injections such as new infrastructure, R&D and Skill\ndevelopment. Clearly, Monetary policies seem to be running out of steam and\nthere is a much-needed urgency for economies to rely on fiscal policy,\nstructural reforms and public incentives to allocate more resources towards the\nfull range of factors of productivity.<\/p>\n\n\n\n
The 2019 report, additionally looks to the future,\ndefining two significant issues of the next decade-building shared prosperity\nand managing the transition to a sustainable economy along with questioning\ntheir compatibility with competitiveness and growth. <\/p>\n\n\n\n
Hence let\u2019s not waste any time further and get right\ninto the global findings and their implications. First, the profound\ncompetitiveness deficit seems to act as a huge deterrent towards improving\nliving standards. With a decade left to reach the 17 Sustainable Development\nGoals (SDGs) as pointed by the United Nations, the world is far from being on\ntrack. On Goal 8 (Decent Work and Economic Growth), the least developed\ncountries (LDCs) have religiously been missing the 7% growth target since 2015.\nHunger is climbing up the stairs again with one out of nine people in the world\nvictimized leading to an almost certain miss of the \u201czero hunger\u201d target set by\nGoal 2. <\/p>\n\n\n\n
Second, Productivity Growth started slowing down right\nbefore the financial crisis and has decelerated since its aftermath.\nFurthermore, with an intention to revive productivity many of the structural\nreforms introduced did not quite fall in place.<\/p>\n\n\n\n
The 2019 results of the GCI 4.0 reveal the size of the\nglobal competitiveness deficit. The average GCI score across the 141 economies\nstudied is 60.7, meaning that the \u2018distance to the frontier\u2019 stands at almost\n40 points. On nine of the 12 pillars, the average gap globally stands at more\nthan 30 points. Advanced economies perform consistently better than the rest of\nthe world, but overall, they still fall 30 points short of the frontier.\nSingapore, the best performer overall, still falls 15 points short of the\nideal. <\/p>\n\n\n\n
Now while the debate can be the fact that the\npredicted slowdown is unlikely to manifest itself as huge as the Great\nRecession (2008-09), what needs to be understood now is Governments are left\nwith fewer policy options today than they did back then in order to stimulate\nAggregate Demand. Secondly, monetary policy might not seem to deliver as some\ncountries are already experiencing a liquidity trap. And finally, the\ngeopolitical context undoubtedly appears far more challenging than in 2007,\nwith gridlock in the international governance system, and an escalating trade\nand geopolitical tensions fuelling uncertainty, which holds back investments,\nand increases the risk of supply shocks. Although loose monetary policy\nmitigated the negative effects of the global financial crisis, it may have also\ncontributed to reducing productivity growth by encouraging capital\nmisallocation. <\/p>\n\n\n\n
Since the Great Recession, policymakers have time and\nagain attempted to revive the global economy through the unconventional\nmonetary policy. But despite the massive liquidity inflow, productivity growth\nhas failed to give a positive response. With extremely low-interest rates and\nconstraints regarding capital flow, banks have become less and less interested\nin lending to businesses and favoured firms that were not credit-constrained as\ncompared to the others who might have held more potential in productivity.\nUnder such circumstances, the only appropriate option to re-start growth from\nstagnation is by stimulating investment-led growth. In addition, a revived\nfiscal policy that incentivizes green investments could offer an opportunity to\n\u2018de-carbonize\u2019 the economy. <\/p>\n\n\n\n
The above persistent issues do summon for a policy\nintervention but as history teaches us lessons, it should be limited to certain\nareas. To begin with, Openness and International Collaboration must be the need\nof the hour. No country, no matter how advanced, can never overcome environmental\nchallenges basing on national policies alone, they need to discuss shared\nsolutions to climate change. Secondly, carbon taxes and subsidies. The prices\nof carbon-intensive commodities do not efficiently capture the exact cost owing\nto unaccounted negative externalities. <\/p>\n\n\n\n
Seventy-six percent of emissions are still not subject\nto carbon pricing. Phasing out subsidies to fossil fuels and implementing\nbolder carbon pricing schemes must be paired with measures that minimize the\npotential social costs of these reforms. Third, Incentives for Green R&D.\nThe limitations and the continuous increase in demand explain why fossil fuels\nstill account for about 80% of total energy consumption, despite the\nsignificant decrease in the cost of electricity production from renewable\nresources. More investments in research are needed to overcome these technical\nlimitations and develop new technologies. <\/p>\n\n\n\n
Finally, Green Public Procurement. Some countries have\nalready started to introduce environmental standards in technical\nspecifications, procurement selection, and award criteria, and have inserted\nenvironmental performance clauses into contracts. Despite potential\nimplementation challenges, green public procurement can signal a major policy\nshift and break from the lock-in effects of status-quo technologies and\nproduction models. <\/p>\n\n\n\n
The solutions might appear far-fetched but if delved\ndeeper into emerge as the simplest solutions to this worldwide fiasco.<\/p>\n","protected":false},"excerpt":{"rendered":"
Now while the debate can be the fact that the predicted slowdown is unlikely to manifest itself as huge as the Great Recession (2008-09), what needs to be understood now is Governments are left with fewer policy options today than they did back then in order to stimulate Aggregate Demand.<\/p>\n","protected":false},"author":23,"featured_media":62361,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[22],"tags":[195,186],"class_list":["post-62360","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-global-economy","tag-global-competitiveness-report","tag-global-slowdown"],"yoast_head":"\n