Transcript Current Issues in Economics

Current Issues in Economics
G. T. Jedrzejczak, PhD
Lecture 1
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Current Issues in Economics
Introduction
About myself
• Master in Economics, PhD/habilitation in
management
• 1974-89 Faculty of Management UW
• 1989-91 Government: privatization, stock market
• 1992-94 private business
• 1994-2013 World Bank: Washington DC, Kiev,
Baku
• 2013 – free lance, IoBD, FoM UW
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Current Issues in Economics
Introduction
Business new challenges
• Global financial crisis triggered a number of
fundamental changes in the global economy
which have had profound impact on the business
activities.
• The course will address the impact of the secular
economic and social changes due to introduction
of the revolutionary technologies, changes in the
demography, and globalization.
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Current Issues in Economics
Introduction
Forces behind emerging new economy
• Global Financial Crisis was the trigger but not a cause
• Perfect storm of secular trends in politics, social,
demography, economy and technology:
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Political correctness
Social changes (leisure middle class)
Demography (ageing societies)
Globalization (chasing the lower costs of labor and the
public contribution)
– Technology (from container transport to program trading
via Internet)
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Economist’s toolbox
• Macroeconomics in the decades preceding the crisis - a
worldview in which economic fluctuations occurred
but were regular, and essentially self correcting.
• Small shocks had small effects and a shock twice as big
as another had twice the effect on economic activity assumption, called linearity,
• Economists did think of the economy as roughly linear,
constantly subject to different shocks, constantly
fluctuating, but naturally returning to its steady state
over time.
• Rational expectations
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Current Issues in Economics
Introduction
Topic’s Overview
• Knowledge and Social Capital as the production factors
• Labor demand perspectives in the time of robots
• Internet Economics
• New era of inequality
• Aging societies and pensions’ dilemma
• Austerity vs. stimulus debate in the time of the global
recession
• New Industrial Policy
• Global imbalances and secular stagnation
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Current Issues in Economics
Introduction
Knowledge and Social Capital as the production
factors
The main difference between a knowledge-based
economy and a traditional economy is in the way in
which knowledge is generated and introduced into
the production process.
Social capital – source of collective economic
benefits derived from the cooperation between
individuals and groups
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Current Issues in Economics
Introduction
Labor demand perspectives in the time of robots
• For decades, people have been predicting how
the rise of advanced computing and robotic
technologies will affect our lives, but expectations
differ:
– On one side, there are warnings that robots will
displace humans in the economy, destroying
livelihoods, especially for low-skill workers.
– Others look forward to the vast economic
opportunities that robots will present, claiming, for
example, that they will improve productivity or take
on undesirable jobs.
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Current Issues in Economics
Introduction
Internet Economics
• The Internet began as a way of linking different
computers over the phone network, but it now
connects billions of users worldwide from wherever
they happen to be via portable or fixed devices.
• People with no access to water, electricity or other
services may have access to the Internet from their
mobile phone.
• The Internet is a multi-billion dollar industry in its own
right, but it is also a vital infrastructure for much of the
world’s economy.
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Current Issues in Economics
Introduction
New era of inequality
• Globalization:
– Reduced inequality between developed and
developing countries by exporting jobs, but
– Symmetrically reduced jobs for lower middle class in
developed countries
• Do we witness return t the inequality of chances
in addition to the inequality of wealth?
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Current Issues in Economics
Introduction
Aging societies and pensions’ dilemma
• Demographic projections: longer lives and
lower fertility  older societies
• Impact on GDP growth and social
expenditures including pensions
• Should I be sorry for you?
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Current Issues in Economics
Introduction
Austerity vs. stimulus debate in the time of the global
recession
• Six years after the global crisis erupted, the world’s
mature economies – especially the Eurozone – find
themselves with shockingly fragile economies.
• Have the austerity programs adopted by several EZ
countries since 2011 been cutting too much and too
soon? Has austerity triggered a self-defeating ‘doom
loop’ whereby budget cuts and tax rises widen deficits
by throwing economies into tailspins?
• Is spending more by increasing public debt a solution?
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Current Issues in Economics
Introduction
New Industrial Policy
• It is essential to increase productivity in
manufacturing industry and associated services
to underpin the recovery of growth and jobs,
restore health and sustainability to the EU
economy and help sustain our social model (EC
2014)
• In the last decade the global business
environment has changed radically. EU industry
competes with China, Brazil, India and other
emerging economies also on high-value products.
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Current Issues in Economics
Introduction
Global imbalances and secular stagnation
The mid-2000s was a period of strong economic performance
throughout the world. Economic growth was strong; inflation
low; international trade and financial flows expanded; and the
emerging and developing world experienced widespread
progress and a notable absence of crises. This apparently
favorable equilibrium was underpinned, however, by three
trends that appeared increasingly unsustainable as time went
by:
• real estate values were rising at a high rate
• a number of countries were simultaneously running high
and rising current account deficits
• leverage had built up to extraordinary levels in many
sectors across the globe among consumers and financial
institutions
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Current Issues in Economics
Introduction
Five Nobel Prize winners indicate the biggest
problem facing the global economy of the future
• Global Warming
• A persistent lack of adequate demand
• Secular Stagnation
• Accommodating the growth of developing
economies and completing the convergence
• Inequality - The Economy Should Serve Society
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Current Issues in Economics
Introduction
Selection Objective
Develop sound understanding of the new trends in the
world economy with the consequences for the business
activities.
Why to bother you?
Willie Sutton answer when asked why he robbed banks
"because that's where the money is.“
OR
b/c there is no money to make in traditional production
and services any longer
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Current Issues in Economics
Introduction
Credit: PP of 5 slides sent to me, up to 3 people, on the following:
• “I must say I find television very educational. The minute somebody
turns it on, I go to the library and read a good book”. Groucho Marx
• “I think there is a world market for maybe five computers.” T.
Watson, president of IBM, 1943
• “640 kilobytes floppy disc ought to be enough for anyone.” Bill
Gates, 1981
• “Who would like to pay for a message sent to no one in particular?”
Advise to D. Sarnoff not to invest in radio
• “The Americans need phones but we do not, we have plenty of
messenger boys” Chief, British Post, 1878
• “It’ll be gone by June” Variety Magazine on Rock n’Roll, 1955
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