Agenda: World Economic Roundtable

World Economic Roundtable:  Remapping the Global Economy

The American Strategy/Economic Growth Program of the New America Foundation, in partnership with the World Policy Institute, is launching in 2011 a World Economic Roundtable aimed at remapping the world economy after the Great Recession.  The Roundtable will involve some of the best thinkers from both the policy-making and investment worlds, who will meet will meet 8 to 10 times over the course of the year to think through some of the most challenging questions facing the global economy.  Among the major dimensions of the world economic map the Roundtable will explore are the following:

The World Growth Map:  Is China a Drag on or an Engine of Growth?

China’s strong economic performance through the financial crisis has arguably become one of the primary drivers of world economic growth in the post-Great Recession period.  High levels of domestic investment have created demand for energy, industrial metals, and capital goods.  But state-directed investment has also led to excess capacity in many industries and the export of deflation in many manufactured products.  Who has benefited and who has lost from China’s pattern of economic growth?  What net effect has it had on the world economy?  And is China’s growth sustainable?

David Beim, Professor, Finance and Economics, Columbia Business School

Peter Marber, Global Head of Emerging Markets Fixed Income and Currencies, HSBC Global Asset Management

Joseph Gagnon, Senior Fellow, Peterson Institute for International Economics

The Global Energy Map

Despite the concern of climate change and explicit industrial policies to promote renewable energy, the consumption of fossil fuels continues to grow and the world economy remains heavily dependent on oil, gas, and coal.  Meanwhile, the competition over these resources continues to increase, as does the competition over the clean energy industry.  China’s targeting of both the solar and wind has put into question the viability of the fledgling renewable industry in the United States and even the more established industry in Europe.  What energy sources will grow as a share of global energy consumption over the next decade or two?  Who will control these resources and who will need them in the future?  

Fareed Mohamedi, Partner, PFC Energy

The World Debt Map

The world map of debt and debt-servicing obligations has changed dramatically over the past two decades, and may change more in the coming years.  The financial crisis has left the United States and the Euro-zone economies with a huge private and public sector debt overhang.  By contrast, many emerging and newly industrialized economies have relatively low debt burdens and have built up large foreign exchange reserves.  How will this new debt map affect economic growth?  Who holds the debt and what threat does it pose to the banking systems of different economies? Will emerging economies be able to lever up in order to help Europe and the United States successfully delever?

A Changing Pattern of Savings, Consumption, and Investment?  Will the New Global Middle Class Be Better Consumers or Better Savers?

In order for the global economy to rebalance, savings and investment should increase in the United States and other deficit economies, and consumption increase in China and other surplus economies, such as Germany and Japan.  Over the next decade, consumption as a percentage of GDP is predicted to increase in Germany and Japan as an aging population retires and in China and other large emerging economies as the middle classes in those economies expand, leading to a shortage of savings and capital.  But is this necessarily the case?  Will the growing global middle class in China, India, Brazil and other newly developed economies be better consumers or better savings? And might other trends produce a different map of savings and consumption?

The World Currency Map:  One, Two or Three Reserve Currencies?  And Who Will Control the World’s Capital?

Using Stephen Jen’s analytical scheme, the world economy currently consists of two major reserve currency areas:  the euro-zone, involving those economies who use the euro or who peg their currency to the euro, and the dollar zone, which is made up of the United States, the Asian export economies and the petro-dollar economies who recycle their surpluses back into dollars.  Both zones are under stress from the imbalances within the zones, and there is a question of whether the euro-zone will survive in its current form.  There is also the question of whether an extended period of quantative easing will undermine world confidence in the dollar.  Meanwhile, China has taken some baby steps toward the internationalization of the yuan, and some investors are seeking refuge from the dollar and other major fiat currencies by expanding their holdings of gold and silver.  How will the world’s currency system evolve given the stresses within the euro and dollar zones, and the increasing weight of China, India, and other newly developed economies?  And within this system, who will be the main intermediaries of international capital flows?  Wall Street banks?  State-directed banks? Sovereign wealth funds?

The World Economy’s Ideological Map

At the height of the globalization euphoria in the 1990s, it was commonly assumed that all major economies would eventually converge toward a common model of capitalism in a rules-based world economy.   But with the collapse of the Washington Consensus, we have instead seen a multiplication of models with a decided trend toward the growth of state capitalism and neo-mercantilism.  Is there emerging a new ideological divide in the world economy between liberal economies and state capitalist ones that will affect the organization and functioning of the world economy?  What does it mean that state capitalist and neo-mercantilist economies now constitute more than half of the world’s GDP? 

The World’s Innovation and Productivity Map

With the development of Brazil, China and India, and the nurturing of scientific and engineering talent in these countries, the number of potential centers of innovation in the world economy is increasing.  Will this expand the world’s capacity for innovation and technological advancement or will much of this innovation be closed off or captured by a few state companies?  Will the United States be able to maintain its leadership in many areas of innovation?  Or will the center of innovation move to Asia along with production?  What sectors of the economy are likely to see major innovation and new technological breakthroughs in the coming decade?  And how will this affect the prospects for economic growth?

The Global Manufacturing Map

A combination of the global supply chain strategies of multinational corporations and the industrial strategies of China and other Asian economies has resulted in the relocation of significant parts of world manufacturing over the past decade.  This relocation has enormous implications for employment, corporate profitability, and energy use.  China’s strategy of indigenous innovation whereby it seeks to move up the industrial ladder promises yet more changes in the global distribution of production and even design.  Meanwhile rising costs in China may force the next leg in the outsourcing of global production.  Or it may lead to yet more overcapacity further squeezing the returns to investment in manufacturing.   Where will manufacturing in the future be located? And how will the rules govern trade in manufacturing involve to reflect the desire of developed regions to hang on to if not revive their manufacturing base?

The World Employment and Human Capital Map

Within the matter of a decade, the entry of China, India, and the former Soviet Union more than doubled the global labor force, putting downward pressure on wages and lowering the cost of labor.  The spread of the information technology productivity revolution further weakened the power of labor relative to that of capital.  The world economy is still absorbing this double positive supply-side shock and has made jobs and employment one of the major political and economic issues in many countries.  How will the excess pool of labor be absorbed into the world economy in the coming years, and where will the jobs of the future be located.

The Next Frontier: Who are the next BRICs or Growth Economies?

The continued expansion of the world economy depends in part on the emergence of the next frontiers of economic growth beyond the BRICs or the growth economies.  Goldman Sachs has identified the N 11—or the next 11 developing countries.  How ready are these economies to be near the point of a real takeoff in economic growth and development?  Are there other economies in Africa, Asia, Latin America, and Eastern Europe that are ready for economic growth and what will drive this growth?  And how will it affect both the BRICs and the developed economies in Europe and North America?