Dr BK Mukhopadhyay
A noted management economist and an international commentator on business and economic affairs. He may be reached at email@example.com
Whither the developing world? Immense potential, least exploration – the future lies here indeed! Current trends indicate that the global economic recovery continues, albeit unevenly, in as much as while growth is a bit rapid in many emerging economies (BRICS), it still remains fragile in most advanced economies. In fact the global economy continues to improve amidst ongoing policy support and improving financial market conditions. As the latest trends indicate, world trade continues to pick up gradually, and in many developing regions the trade volume has almost returned to the pre-crisis levels owing to the robust growth in some large developing economies, mainly India and China, and the restocking of inventories.
The Talk of the Town
DRC (Democratic Republic of Congo) is one of the richest countries in the world in terms of natural and mineral resources. The land is so fertile, it could be one of the world’s largest exporters of fruit and vegetables (at the moment it is one of the largest importers). People say that you can almost just throw seeds on the ground and they will grow, yet some somewhere between 50-70% of the population doesn’t have enough food to eat and is malnourished. In terms of mineral wealth, in some parts of the country the story goes that you can pick up a handful of earth and almost sift diamonds and precious metals through your fingers. It has water in abundance; you can sink a well almost anywhere, yet the majority of the population has no access to safe, clean drinking water.
BRICS, coined by US investment bank Goldman Sachs to describe the five key emerging economic powers, has been predicted to account for an increasingly greater share of the world economy, which accounts for around 22 per cent of the global economy, compared to 16 per cent a decade back. Though Russia fell into its worst recession in the very recent past, yet the economy is expected to grow in 2018, mainly by a rebound of oil prices. While dollar-denominated assets were held heavily by China with the US Treasury, Brazil, with the ability to become a major player tomorrow in the world economy after locating huge deep sea oil reserves, and which slipped into recession a couple of years back, rebounded and grew thereafter. India is expected to grow by 7 per cent plus this year backed by consumer and government spending. Economies like Bangladesh, Vietnam, South Korea, among others, are also steadily coming up.
Routes Not Repetitive
The latest trend has been that new financial plumbing are in the making. London and New York are not about to lose their spots as the world’s leading centres, and they are being increasingly challenged by emerging market upstarts in a potentially lucrative area – management of fund being cut well away from the traditional centres. If the recent trends are any indication, spur of growth of financial centres in the fastest-growing economies would be there in view of prominent factors like rising trade between emerging economies, cross-border mergers, and acquisition by some companies as well as move by developing world businesses to raise capital in each other’s markets.
The intra-emerging markets movements of funds are quite evident – flows between Africa and India, India and China, and India and Korea have been on the rise. Singapore is challenging Switzerland for the world’s wealth management business, while Hong Kong, which led the world in IPOs several years back, has been an upcoming centre as an equity hub for Asia’s growing resources companies.
Heavy Task Ahead
The declining share of manufacturing jobs in overall employment has been a concern for policymakers and the broader public alike in both advanced economies and some developing economies. IMF is prompt enough to caution that though manufacturing plays a unique role as a catalyst for productivity growth and income convergence and a source of well-paid jobs for less-skilled workers, yet in many countries, manufacturing appears to have faded as a source of jobs. Its share in employment in advanced economies has been declining for nearly five decades.
Accordingly, in developing economies, manufacturing employment has been more stable, but among more recent developers it seems to be peaking at a relatively low share of total employment and at levels of national income below those in market economies that emerged earlier. The share of jobs in the service sector has risen almost everywhere, replacing jobs in either manufacturing (mostly in advanced economies) or agriculture (in developing economies).
While the displacement of workers from manufacturing to services in advanced economies has coincided with a rise in labour income inequality, this increase was mainly driven by larger disparities in earnings across all sectors.
New policies are required to foster decent jobs for youth in an era of rapid technical change. The ILO estimates that 67 million young women and men are unemployed globally, and around 145 million young workers in emerging and developing countries live in extreme or moderate poverty. ILO says that there were more than 700 million workers living in poverty in emerging and developing countries that were unable to lift themselves above the USD 3.10 per person daily threshold in 2017. The rate of progress has slowed, and many developing countries are failing to keep pace with the growing labour force.
Though the rebound in economic growth has strengthened job creation and the global unemployment rate is expected to fall slightly during 2017-19 (after a three-year rise), yet the labour market recovery is uneven across country groupings, with continued rises in the number of people unemployed in developing and emerging economies. New automation and digital technologies pose further challenges. The opportunities they present will demand innovative policy solutions.
IMF opines rightly that new evidence has been there on the role of manufacturing in the dynamics of output per worker and in the level and distribution of labour earnings – a shift in employment from manufacturing to services need not hinder economy-wide productivity growth and the prospects for developing economies to gain ground toward advanced-economy income levels.
The IMF has urged policymakers to raise productivity towards supporting their goal of equitable growth, as the declining share of manufacturing jobs in overall employment has been a concern for policymakers and the broader public alike in both advanced economies and some developing economies.
Why not to hope that policymakers ensure that workers in advanced, emerging and developing countries all benefit from a global trading system that produces fair outcomes?