The Global Economy

Post-conflict economies and many low-income countries, such as Bangladesh, Haiti and Rwanda, offer prospects for high returns. But inward investment flows beyond oil and mining have remained scarce and have taken a substantial hit as a result of the global crisis.

The global financial crisis has revealed how systemic risk in the banking system can lead to huge economic downturns. Many of the problems leading to the crisis have been discussed and many suspects have been identified (including investment banks, central banks, rating agencies, regulators and the economics profession).

Many people in the developed world are not participating in the growth of the world economy. In some countries, unemployment remains high, whereas others suffer from the problems of the working poor. What are the most effective policies for creating employment – particularly in well-paid, satisfying jobs – in OECD countries?

Informality of employment is a way of life throughout the developing world. In poor Sub-Saharan African countries, the informal sector employs the vast majority of the nonagricultural labour force. Informal jobs continue to account for a high share of employment in the middle-income Latin American countries, The global economic crisis is likely to cause a further surge of informal employment because of job losses in the formal sector.

Poverty reduction has become the central objective of development policy, as reflected in the United Nations’ Millennium Development Goals (MDGs). While economic growth is seen as an important ingredient in achieving sustainable poverty reduction, the emerging consensus is that growth has to be pro-poor to reach such ambitious targets as the MDGs.

Entire countries as well as certain socio-economic groups within countries have been excluded from the benefi ts of globalization. The rise of “modern” economic activities typically benefi ts a limited number of people, thereby producing considerable inequality. This pattern may not prove sustainable if it does not become more inclusive.

The world is full of unexploited knowledge and brilliant ideas that are never realized. Innovators often fail to take note of external innovations and sometimes they are not even aware of the market for internal ideas. “Open innovation”—that is, using external knowledge and sharing internal knowledge with external players—is a promising step towards reducing this fundamental mismatch between the global supply and demand for knowledge.

The Great Recession of 2008–09 has cast doubt on the broad consensus among economists and policy-makers that inflation targeting by central banks leads to desirable macroeconomic outcomes. Indeed, many analysts suggest that the loose monetary policy stance of the US Federal Reserve was one of the main causes of the financial crisis and the economic downturn that followed.

 The global financial crisis has dramatically worsened the state of public finances in the majority of developed economies. Many are on unsustainable fiscal trajectories and there is broad agreement that very substantial consolidation efforts are needed to re-establish stability. But there is much debate about the extent and timing of the consolidation process.

Global competition and the global financial crisis have put additional pressures on education programs around the world—what they should deliver, how they should be delivered and how they should be financed in terms of the relative contributions of the public and private sectors.

The new wave of globalization – in which outsourcing and offshoring include not only unskilled and manufacturing jobs, but also skilled and service sector jobs – makes new demands on education and training systems around the world. Globalization is no longer just about trade in things that can be put in a box, but also about trade in everything that can be digitalized.

In the years preceding the global financial crisis, financial markets were held on a long leash—or in some cases let off the leash altogether—by national public authorities. In the aftermath of the financial crisis, triggered by the US housing bubble, the authorities have started to tighten the leash by implementing numerous regulations ranging from stricter collateral requirements to “macroprudential monitoring”. Further regulations are yet to come.

Recent changes in how different stages of the production chain are dispersed across the globe have led to the notion of a new global division of labor. This will have far-reaching consequences for the skills required from the workforce, their jobs, and the economy as whole in both developed and developing countries.

According to the Food and Agriculture Organization, rural women are responsible for half of the world’s food production. They produce 60–80 percent of the food in most developing countries. They are also the main producers of the world’s staple crops—rice,  heat and maize—which provide up to 90 percent of the rural poor’s food intake.