Category Archives: Op-eds

Worrisome risks lurk beneath solid global growth

By Elliott Harris

On the surface, the world economy remains on a steady trajectory moving into 2019. Headline

Elliot Harris, UN Chief Economist and Under Secretary General for Economic Development

Elliot Harris, UN Chief Economist and Under Secretary General for Economic Development

figures suggest that – while global growth has likely peaked – activity around the world will continue to expand at a solid pace. Several developed economies are operating close to their full potential with unemployment rates at historical lows.

Yet, headlines do not tell the whole story. Beneath the surface, a much more worrisome picture of the world economy emerges. The newly-released World Economic Situation and Prospects 2019illustrates how a combination of rising economic, social and environmental challenges hampers progress towards the United Nations Sustainable Development Goals. There are several risk factors that could disrupt activity and inflict significant damage on longer-term development prospects. Over the past year, trade policy disputes have escalated, and financial vulnerabilities have increased as global liquidity tightens, casting a shadow over the outlook for 2019 and beyond.

Should such a downturn materialize, prospects are grim. Global private and public debt is at a record high, well above the level seen in the run-up to the global financial crisis. Interest rates remain very low in most developed economies, while central bank balance sheets are still bloated. With limited monetary and fiscal space, policymakers around the globe will struggle to react effectively to an economic downturn. And, given waning support for multilateral approaches, concerted actions – like those implemented in response to the 2008/09 crisis – may prove difficult to arrange.

Even if global growth remains robust, its benefits do not reach the places they are needed most. Incomes will stagnate or grow only marginally in 2019 in parts of Africa, Western Asia, and Latin America and the Caribbean. Many commodity exporters are still grappling with the effects of the commodity price collapse of 2014-16. The challenges are most acute in Africa, where per capita growth has averaged only 0.3 per cent over the past five years. Given a rapidly growing population, the fight against poverty will require much faster economic growth and dramatic reductions in income inequality.

And, perhaps most importantly, the critical transition towards environmental sustainability is not happening fast enough. The nature of current growth is not compatible with holding the increase in the global average temperature to well below 2°C above pre-industrial levels. In fact, the impacts of climate change are becoming more widespread and severe. The frequency and intensity of extreme weather events is increasing.Floods, coastal storm surges, droughts and heat waves are damaging vital infrastructure and causing large-scale displacements. The human and economic costs of such disasters fall overwhelmingly on low-income countries.

Many of the challenges before us are global in nature and require collective and cooperative policy action. Withdrawal into nationalism and unilateral action will only pose further setbacks for the global community, and especially for those already in danger of being left behind. Instead, policymakers need to work together to address the weaknesses of the current system and strengthen the multilateral framework.

The author is UN Chief Economist and and Assistant Secretary-General for Economic Development

Ending poverty is possible, but it means facing up to inequality: within and between countries

Op-ed by Liu Zhenmin, Under-Secretary-General for Economic and Social Affairs, United Nations

World leaders have committed to ending poverty everywhere for all people by 2030. Achieving this aim means facing up to the need for dramatic declines in inequalities – in income, in opportunity, in exposure to risk, across gender, between countries and within countries – over the next decade.

Inequality is a well-recognized barrier to poverty eradication, as well as many other

Mr. Liu become the UN Under-Secretary-General for Economic and Social Affairs

Mr. Liu, UN Under-Secretary-General for Economic and Social Affairs

development challenges. It features in multiple dimensions across the 2030 Agenda for Sustainable Development—the universally adopted plan to promote prosperity and social well-being while protecting the environment. According to many metrics, income inequality among countries has declined somewhat in recent decades, driven primarily by strong growth in East Asian and South Asian economies.  But there are many countries—particularly in parts of Africa, Western Asia and Latin America and the Caribbean—where income levels have continued to fall further behind, exacerbating income inequalities between countries.

The latest United Nation’s analysis in the World Economic Situation and Prospects 2019indicates that per capita income levels essentially stagnated or declined in a total of 47 developing and transition economies last year. Most of these countries have been consistently falling behind for several decades. This poses an enormous challenge as countries strive to reduce poverty, develop essential infrastructure, create jobs and support economic diversification. Most of the lagging countries are highly dependent on commodities, stressing the importance of both diversification and effective management of natural resource wealth to tap into their development potential. Several countries have also suffered long-standing armed conflict or civil unrest and political instability.

If this trend continues, eradicating poverty and creating decent jobs for all will become increasingly out of reach. Weak economic performance is also linked to insufficient investment in quality education, health services, social protection, programs for marginalized groups and mitigation and adaptation to climate change.

Faster GDP growth alone will not necessarily lead to broad-based improvements in living standards. Deep inequalities also persist in the distribution of income within countries, acting as a major barrier to development progress.  High inequality within countries is associated with social exclusion and fragmentation; weaker institution-building and governance; and increased risk of violence and internal conflict.

Fundamental transformations are needed going forward, to narrow the income gaps between and within countries. According to UN estimates, without significant changes in behaviour, more than 7 percent of the global population may remain in poverty by the year 2030, including about 30 per cent of the populations in Africa and the least developed countries (LDCs).

In Africa, where the population is expanding at a rate of more than 2 per cent per year, reducing the level of extreme poverty to below 5 per cent by 2030 will require a combination of double digit GDP growth and dramatic declines in inequality; well-outside the realms of historical precedence.

Integrated and cross-cutting policy measures that both raise prospects for economic growth and reduce income inequalities are essential to shift the world towards a more sustainable and inclusive path. This includes investing in education, health care, resilience to climate change, and financial and digital inclusion, to support economic growth and job creation in the short-term, while promoting sustainable development in the long term.

Macroeconomic stability and a strong development-oriented policy framework, including a well-functioning and robust financial system, are key elements for successfully tackling inequality. Well-designed fiscal policies can help smooth the business cycle, provide public goods, correct market failures and directly influence the income distribution. Broadening access to quality education is also crucial, coupled with employment policies, such as raising minimum wages and expanding social protection. Prioritizing rural infrastructure development, through public investment in transport, agriculture and energy, can also support poverty alleviation and narrow inequalities within countries.

While there is no one-size-fits-all policy prescription that guarantees delivery of a more equal and prosperous society, one overarching message is clear: calls to eradicate poverty are meaningless without concerted and committed policy action to reduce inequality.

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Mr. Liu become the Under-Secretary-General for Economic and Social Affairs in July 2017. Prior to his appointment, he was the Vice-Minister for Foreign Affairs of China since 2013. Mr. Liu brings to the position more than 30 years of experience in the diplomatic service, with a strong focus on the promotion of bilateral, regional and global issues. He was deeply involved for 10 years in climate change negotiations, including the conclusion of the Kyoto Protocol and the Paris Agreement.