The Road Ahead: Will the West Stabilize and Grow Again? E-mail
MICHAEL SPENCE | OP-EDS
Sunday, 14 August 2011 21:57

Coming home from my Italian vacation this year was an abrupt transition. From the calm waters of southern Sardinia, I was plunged into the global economy’s stormy seas. Financial markets were plummeting, driven by pessimistic growth forecasts in Europe and America. Investors were fleeing for safety pretty much everywhere. Systemic risk—the statistical likelihood of outright economic collapse—was rising. Yields on Italian and Spanish sovereign debt were climbing into the danger zone, threatening to fly out of control. America was on the verge of a technical default on its sovereign debt.

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Stagnant and Paralyzed E-mail
MICHAEL SPENCE | OP-EDS
Monday, 08 August 2011 06:23

The recent dramatic declines in equity markets worldwide are a response to the interaction of two factors: economic fundamentals and policy responses – or, rather, the lack of policy responses.

First, the fundamentals. Economic growth rates in the United States and Europe are low – and well below even recent expectations. Slow growth has hit equity valuations hard, and both economies are at risk of a major downturn.

A slowdown in one is bound to produce a slowdown in the other – and in the major emerging economies, which, until now, could sustain high growth in the face of sluggish performance in the advanced economies. Emerging countries’ resilience will not extend to double-dip recessions in America and Europe: they cannot offset sharp falls in advanced-country demand by themselves, notwithstanding their healthy public-sector balance sheets.

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Adapt or Die E-mail
MICHAEL SPENCE | OP-EDS
Thursday, 14 July 2011 15:26

In rapidly growing emerging markets, a combination of internal economic forces, supportive policies, and the shifting nature of the global economy drive high-speed and far-reaching change. The transformation of economic structures occurs so quickly that it is virtually impossible not to notice – though the complexity of the change is, at times, bewildering.

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Why the Old Jobs Aren't Coming Back E-mail
MICHAEL SPENCE | OP-EDS
Friday, 24 June 2011 11:34

The Wall Street JournalA stimulus package that temporarily restores demand isn't the answer.

Many have expressed shock at the recent U.S. employment data. But 9.1% unemployment shouldn't be a surprise. To address the jobs challenge, we must stop pretending that this is only a difficult cyclical recovery. The root of the problem is structural. During the two decades before the crisis of 2008-09, the U.S. economy added 27 million jobs, primarily in government, health care, construction, retail and hospitality. This employment growth was almost all in the "nontradable" side of the economy—sectors generating goods and services that must be consumed where they are produced. But several factors will depress these sectors. Government budget woes, a likely leveling-out of the dramatic growth in health-care consumption, and a permanent reduction in domestic consumption as asset prices reset downward and debt-financed purchases are reduced, will all have effects in the short-to-medium term.

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A Post-Crisis World of Risk E-mail
MICHAEL SPENCE | OP-EDS
Wednesday, 15 June 2011 11:59

The global economy’s most striking feature nowadays is the magnitude and interconnectedness of the macro risks that it faces. The post-crisis period has produced a multi-speed world, as the major advanced economies – with the notable exception of Germany – struggle with low growth and high unemployment, while the main emerging-market economies (Brazil, China, India, Indonesia, and Russia) have restored growth to pre-crisis levels.

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