China and the end of extrapolation
George Magnus, 31 January 2013
In 2013, China is at an important crossroads in its economic development. This column argues that we cannot continue to extrapolate from China’s recent economic record. If growth is to remain high and stable, choosing the right course will require nothing less than a significant change in China’s economic model, brought about by what might be the most important political reforms since the 1980s. Whether or not its growth performance tips it into the middle-income trap depends on engaging with and implementing widespread reforms that may be incompatible with the primacy of the Communist Party.
That the Chinese economy is slowing down as it quickly matures should come as no surprise. The global economic conditions of the two decades leading up to the financial crisis were exceptional; things are far more sober now.
Many of China’s development achievements are unrepeatable. Only once can you:
Tags: China, Communist Party, growth, middle-income trap
Investing in UK prosperity: skills, infrastructure and innovation
Tim Besley, John Van Reenen, 31 January 2013
The latest GDP figures confirm that the UK economy has been more or less flat-lining since the financial crisis began. This column presents the LSE Growth Commission’s integrated recommendations for reigniting UK growth, arguing that an inability to achieve sustainable growth is rooted in longer-term problems arising from a failure to invest, notably in skills, infrastructure and innovation. The UK must engage evidence-based policy, in both word and deed, if it is to overcome international competition and myriad global changes.
At the beginning of 2013, the outlook for the UK economy looks bleak even for a British winter. Output has been depressed for a longer period than it was even in the Great Depression, with GDP still below the peak level of early 2008.
Topics: Europe's nations and regions, Global crisis
Tags: growth, UK
Growth and political change: Transition duration is critical
Caroline Freund, Melise Jaud, 24 January 2013
The Arab world is undergoing a major political transition. The final outcomes of the changes are far from certain. Nevertheless, there have been and will continue to be economic consequences from the moves towards democracy. This column looks at 90 attempts at transition and finds that countries with rapid transitions, irrespective of whether they are successful or failed, experience swift recoveries and a long-run growth dividend of about one percentage point relative to pre-transition growth levels.
The Arab world is undergoing a major political transition. The final outcomes of the changes are far from certain in nations where they have occurred. The geographical spread of the changes is also far from clear at this point. Nevertheless, there have been and will continue to be economic consequences from the moves towards democracy (see Besley and Kudamatsu 2007).
Topics: Development, Politics and economics
Tags: democracy, growth, political change, transition
What economic model is Egypt going to adopt?
Mohsin Khan, 8 November 2012
Since the Arab Spring, Egypt has seen some political transformation. But what of its economic policy? This column debates whether Egypt, under its newly elected president, will pursue both badly needed short- and long-term economic reform, or succumb to myopic populism.
The dramatic political developments since the Arab Spring have generated uncertainty and subsequent debate over the future of economic policies and economic reforms in the Arab world. This column asks:
Topics: Development, Global crisis, Politics and economics
Tags: Africa, development, Egypt, growth, Middle East
Returning to growth in the UK: Policy lessons from history
Nicholas Crafts, 25 October 2012
A return to growth is urgently needed in the UK. Recovery from severe recessions was achieved in the 1930s and the 1980s in the presence of fiscal consolidation. This column examines the lessons from those experiences for today’s policymakers.
Returning to growth after the crisis is proving elusive for the UK economy. Compared with the aftermath of the similarly severe recessions of 1930-1932 and 1979-1981, in mid-2012 the UK was well below the levels reached at the equivalent points, 1934 Q2 and 1983 Q3 (Figure 1).
Topics: Economic history, Macroeconomic policy
Tags: 1930s, growth, UK recessions
Germs, Social Networks and Growth
Alessandra Fogli, Laura Veldkamp, 21 October 2012
Does the pattern of social connections between individuals matter for macroeconomic outcomes? This paper uses network analysis tools to explore how different social structures affect technology diffusion and thereby a country’s rate of technological progress.
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Tags: development, disease, economic networks, growth, pathogens, social networks, technology diffusion
Vietnam’s economic development: Policies, challenges and prospects for the future
Sarah Chan, 24 October 2012
Vietnam’s recent economic performance has been marred by large swings in economic and financial conditions. This column argues that the inability to respond quickly to changing conditions, the pro-growth bias of the State Bank of Vietnam, as well as a 'stop and go' policy style partly explain this. It adds that inefficient state-owned enterprises and weaknesses in the banking system need to be addressed expeditiously.
Facing cyclical and structural challenges that are arguably as significant as any moment since the 1997 Asian financial crisis, Vietnam’s real GDP growth has markedly decelerated in recent times. From an annualised performance of 6.8% in 2010, it fell to 5.9% in 2011 falling further to 4.4% in the beginning of 2012.
Topics: Development, Macroeconomic policy
Tags: growth, monetary policy, Vietnam
Trade facilitation matters!
Gary Clyde Hufbauer, Martin Vieiro, John S.Wilson, 14 September 2012
Economists celebrate trade not only because they love watching ships cross the Pacific and cargo planes land at Paris Charles-de-Gaulle but also because increased trade demonstrably raises income and improves living standards. This column argues that a powerful way to boost trade is by focusing on trade facilitation, i.e. improving both hard infrastructure like ports and railways, and soft infrastructure such as shipping logistics.
Once upon a time, most economists thought that tariffs, quotas and exchange controls were the alphas and omegas of trade policy. Hence their consensus recommendations: slash tariffs, eliminate quotas, float the exchange rate and commerce would blossom. Not quite so!
Topics: International trade
Tags: growth, openness, trade facilitation
Is US economic growth over? Faltering innovation confronts the six
Robert J. Gordon, 11 September 2012
Global growth is slowing – especially in advanced-technology economies. This column argues that regardless of cyclical trends, long-term economic growth may grind to a halt. Two and a half centuries of rising per-capita incomes could well turn out to be a unique episode in human history.
It is time to raise basic questions about the process of economic growth, especially the assumption – nearly universal since Solow’s seminal contributions of the 1950s (Solow 1956) – that economic growth is a continuous process that will persist forever.
Topics: Productivity and Innovation
Tags: growth, technology, US