By Dr B K Mukhopadhyay
The World Bank has just warned that developing economies were facing a difficult 2016 after last year growing at their slowest rate since the 2008 global fincial crisis. Side by side, the IMF Boss Christine Lagarde opined that, after years of success, developing economies needed to confront profound changes now under way. The warning comes amid growing concerns at both the fund and the World Bank over the slowdown underway in emerging economies.
Accordingly, they are facing a “new reality” that is significantly slowing the pace of economic convergence with the rich world and risks leading to further fincial market volatility - “Growth rates are down, and cyclical and structural forces have undermined the traditiol growth paradigm…..On current forecasts, the emerging world will converge to advanced-economy income levels at less than two-thirds the pace we had predicted just a decade ago. This is cause for concern.”
Any downward tilt in this block is not going unnoticed in as much as a 1 per cent slowdown in emerging markets would cause already weak growth in advanced countries to slow by about 0.2 percentage points.
Whither the Security – Food, Water and Energy!
900 million people already go hungry and 2 billion people are malnourished in spite of the fact that per capita food production continues to increase. Overeating, undernourishment and waste are all on the rise. Side by side prices of food grains are rising globally. Prices for staples such as corn and wheat have been rising on intertiol markets, triggered by severe droughts in a number of countries and weak monsoons in other parts. A possible second global food crisis cannot be ruled out. Oxfam has forecast that the price spike will have a devastating impact in developing countries that rely heavily on food imports, including parts of Latin America, North Africa and the Middle East. It is better not forgotten that food shortages in 2008 led to civil unrest in 28 countries.
The UN predicts that we must increase food production by 70 percent by mid-century. This, in turn, will place additiol pressure on already stressed water resources, at a time when need is also there to allocate more water to satisfy global energy demand – which is expected to rise 60 percent over the coming 30 years – and to generate electricity for the 1.3 billion people currently without it. It is crystal clear that there will not be enough water available on current croplands to produce food for the expected 9 billion populations in 2050 if current trends and changes towards diets common in western tions are any indication. Undoubtedly, with 70 percent of all available water being in agriculture, growing more food to feed an additiol 2 billion people by 2050 will place greater pressure on available water and land. Competition for water between food production and other uses will intensify pressure on essential resources. What would happen to the world’s poor [the majority depending on agriculture for their livelihoods and already suffering from water scarcity] can be guessed if they remain at the mercy of fragile global food system!!
Very importantly: the Intertiol Water Magement Institute (IWMI) said the best way for countries to protect millions of farmers from food insecurity in sub-Saharan Africa and south Asia was to help them invest in small pumps and simple technology, rather than to develop expensive, large-scale irrigation projects. Accordingly, “.....Farmers across the developing world are increasingly relying on and benefiting from small-scale, locally-relevant water solutions. [These] techniques could increase yields up to 300 percent and add tens of billions of US dollars to household revenues across sub-Saharan Africa and south Asia.”
Next, what about the ageing population? Population ageing – when older people become a proportiotely larger share of the total population – is happening in all countries, but it is happening fastest in poor countries. Yes, ageing in the 21st Century is a celebration and at the same time a challenge. Of the 15 countries with more than 10 million older people, seven are in the developing world. Two out of three people aged 60 or older live in developing and emerging economies. By 2050, this will rise to nearly four out of five. By 2050, the older generation will be larger than the under-15 population. In just 10 years, the number of older people – defined as over 60 – will surpass 1 billion people – an increase of about 200 million people over the decade.
It cannot be denied that one of the major reasons for Chi’s economic growth has been the utilization of the manpower in the working age group. In many developing countries with large populations of young people the challenge is that governments have not put policies and practices in place to support their current older populations or made enough preparations for 2050. While important progress has been made by some countries in adopting new policies and laws on ageing, more needs to be done to fulfil the potential of older people. Governments, intertiol organisations and civil society have to commit fully to a concerted global effort to realign policy to the realities of 21st-century demographics.
No doubt, recent reform measures in emerging economies like India have been raising fresh hopes.
In Lieu of conclusion
It has been the fact that the angst among investors over slowing growth, particularly in Chi, and how authorities are responding has also led to a volatile start to the year in fincial markets. There has been an inherent debt bias embedded in the global tax system. More generally, the intertiol monetary system would benefit from a higher share of equity compared with debt flows.
If not addressed promptly, the consequences of these issues are likely to take unprepared countries by surprise.
So, the going cannot be termed as satisfactory in as much as in the overall sense growth rates are down, and cyclical and structural forces have undermined the traditiol growth paradigm Taking into account all of the relevant variables it is clear that though oil and metals prices have fallen by around two-thirds from their most recent peak, yet supply and demand side factors suggest that they are likely to stay low for a sustained period.
To conclude as to the overall situation IMF Boss’ observations is very meaningful - “Overall, a global shift toward more long-term, equity-based capital flows would alleviate concerns about reversals, and lessen the need for insurance. It would also reduce the size of fincial buffers that emerging and developing countries need to maintain.” Rightly, the call is there - policymakers are to keep monetary policy loose and use fiscal policy and structural reforms to boost growth with less reliance on debt and greater use of equity fincing. Yes, the urgent need is there to examine instruments that alter the composition and ture of intertiol flows — away from short-term debt and toward longer-term equity flows.
Actually speaking, a global-friendly-environment encompassing bold leadership, good governce and disciplined multi-lateral trade framework is yet to emerge, though of crucial immediate requirement. It is thus to be agreed upon that health of the global economy hinges too heavily on how these emerging economies perform in the days to come especially when a number of European economies are still limping and the US economy has a lot still to do to weather the possible storm of recession recurrence.
(The Writer, a noted Magement Economist, an intertiol Commentator on Business and Economic Affairs and Principal, Eminent College of Magement and Technology, can be reached firstname.lastname@example.org)