Global economy in 2012: Are there ways to evade impending recession?

The OECD - advisor to the member governments on economic policy - very judiciously opined that growth had been undermined by poor policies and much of the current weakness is due to a generalised loss of confidence in the ability of policymakers to put in place appropriate responses. The G-20 should "act decisively to restore confidence" and "the outlook will likely be better than anticipated if comprehensive action is taken" and central banks in developed nations should keep interest rates on hold or cut them "where possible." The OECD gave its first forecasts for 2013, saying the G-20 economies would expand 4.6 per cent that year; while the US would grow 2.5 per cent in 2013 and the euro-zone 1.5 per cent, while Japan would expand 1.5 per cent and China 9.5 per cent. The OECD rightly urged Group of 20 (G-20) governments and central banks to "act decisively" to restore confidence as it lowered its growth forecasts for the US and the euro zone. At this juncture, the OECD's observations should receive due attention - euro-zone leaders to put their plan into action "promptly and forcefully ...the outlook for growth would be "gloomier." if they failed to follow through...the agreement "has to be not only adopted but implemented." The European Central Bank (ECB) should also bolster the region's economy by cutting interest rates (the ECB lifted its benchmark rate couple of months ago to 1.5 per cent). "They may be concerned about future inflationary pressures but the problem today is about growth..The ECB had "a little bit of room" to cut "and they should use that room." It is clear that heightened uncertainty from Europe would further undermine investor confidence and damage growth. Time is fast running out - it is extremely urgent to close the gaping wound that is the euro-zone debt crisis, as any failure to strike a comprehensive deal would sap more strength from the global economy. In fact the current global economic problems are related strongly to structural imbalances - the result of long-term growth. While the short-term responses to economic fluctuations, help solve the problem for a long time, and may deepen the structural imbalance of contradictions, because of the macroeconomic policy in response to short-term fluctuations and long-term growth is difficult to achieve consistent results, thus focus on long-term growth and ironing in the economic cycle, it remains a stern reality that the decision makers need ultimately to strike a balance. It is a fact that learning the lessons from international financial crisis international politicians and academics have been exploring ways to make the economic recovery as soon as possible. Compared to bygone days, now more than ever, people are more concerned about sustainable development issues. More attention to the real state of the economy, the low-carbon economy, should replace the tall claims and words exchanged. It is high time that we do away with the electoral politics features and concentrate on mitigating short-term problems so as to tackle long-term disasters. Finally, the biggest challenge that looms large - poverty and inequality. Creating a well-fed world will be even more challenging especially in the face of climate change, growing competition for resources, including land and water, increasing inequality within most countries and continued high levels of public spending on research and development that focus on perfecting weapons of destruction rather than facilitating the creation and maintenance of resilient food systems as part of securing long-term human security. FAO rightly observed: "An aspect of the consequences in terms of food security, specifically, of the impacts of global warming includes but is not limited to the following: changes in the growing seasons' length as well as the timing and amount of precipitation; changes in the snowfall season, the runoff season, the rainy season, the timing of flood recession farming, the hunting season, the fishing season, the water season; changes in the timing of outbreaks and increases in vector-borne diseases; rice farming following the replacement of saline water intrusion in rivers by freshwater after onset of rains (e.g. Mekong River); extended seasonal food crisis because of long-lasting drought conditions (e.g. "Monga" in Bangladesh), and so forth. Speculation about the foreseeable impacts of changes in seasonality is virtually boundless" (FAO, 2009). It is really a big concern as to how quickly climate change will affect food and farming. Already many countries and regions seem to be experiencing far greater variability in weather patterns and more extremes - floods, droughts, storms, heat waves and cold spells - which together with changes in growing seasons affect food production. The positive development is that mitigation and adaptation process has slowly been gaining ground. Professor Brown has rightly opined: 'Effective water management is central to maintaining food supplies. Yet many current methods of producing food are using unsustainable freshwater sources, such as fossil aquifers in the Arabian Peninsula, or sources threatened by climate change, such as glacial melt waters. Others use rivers that cross borders, where disputes may arise over dams and abstraction rates. The potential for conflict arising from disputes about water is growing; this adds to the complexity of tackling future food production.' There is, obvious enough, no easy solution to all these but a fast and consistent approach when accepted and implemented (discarding the slow and steady one - change management backed by an attitudinal change of course) has the ability to show a better result before the brothers and sisters of globe's 193 economies. The upshot: it is high time to reassess the global adjustment process and the ongoing challenges for policymaking, with a special focus on the asymmetries and their implications for economic policy, duly scanning the uneven recovery faced by developed and emerging economies. Special emphasis is to be attached to the situation of China, EU and the US, especially in terms of the implications of their adjustments to the global economic tensions, while making attempts to counter the challenges that the emerging economies face, in terms of exchange rate appreciations, capital inflows and inflation pressures and their implications for economic policy management. Policymakers in emerging economies should secure a strong and sustainable growth, and containing inflationary pressures is a key factor on this score. Especially, the roles and responsibilities of the developing economies are no less. It is a fact that in the wake of the global financial and economic crises, much attention has been focused on large developing economies, particularly the BRICS, and their role in the new economic landscape. The emergence of the BRICS undoubtedly crystallised the notion that there was a group of up-and-coming economies towards which global attention was shifting. It can reasonably be expected that large emerging economies will play a more important role on the world political stage as well - mainly focusing on the current state of their engagement in the international system, and their representation in the global financial architecture. As such, a critical look at the roles and responsibilities of new actors is particularly important in the current business, political, economic, legal and sociological environment as emerging powers can also reap the benefits of unprecedented opportunity to increase their level of engagement in both economic and political spheres as well as to play leadership roles in systemically important initiatives and thereby coming forward to ease the global complexities. All have to seek a co-ordinated response to the cooling global economy and Europe's spreading sovereign debt crisis. The conclusion: recession is certain to revisit. An economic crisis has a disproportionate impact on firms that trade with the country or zone and this triggers reallocation. The immediate task is to protect the global economy especially in these days of rapidly rising globalisation trends. Modern economists strongly believe, of course based on empirical verifications (management is s an art and science too) that paying attention to the forces that impact reallocation may actually help to predict future recessions and upscale economy. Practically speaking, it is the technology harnessed today and the survival post 1929-1930 that has made it possible to observe and make available solutions if and when such an unfortunate slow-down affects an economy. No doubt, the advent of the internet connectivity and the use of wireless technology to redefine communication and information and similar sources of favourable reallocation, do possess the inherent power to prevent an economic recession. As the relative strength of the determining forces set the future course of the cyclical fluctuations, the same, in turn, helps to evade the impending economic recession. In fact, the causes for economic recession are many, but the solutions available today are just as much. It is in a deeper understanding of the implications that we stand to keep the situation at bay. Better not to let it happen! Improve everyone's profitability in the green way! It's a question of whether economies like India (the ninth-biggest economy), China, Bangladesh, Vietnam, South Africa, Brazil, Russia, Greece, Portugal, Italy, Spain, the UK, the US as well as France, Germany in particular move forward or otherwise! Dr Mukhopadhyay, a noted Management Economist, is attached to the Department of Business Administration, Gauhati University, Guwahati, India. He can be reached at email: m.bibhas@gmail .com