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PALANISAMY NAGARAJAN: Major financial crisis looms

UPEI economist Dr. Palanisamy Nagarajan warns that a global financial crisis is looming.
(Submitted photo)
UPEI economist Dr. Palanisamy Nagarajan warns that a global financial crisis is looming. (Submitted photo)

Achieving sustainable goals by 2030 a mirage in view of economic woes facing world

A careful review of some recent reports on the state of the world does not offer us comforting outlooks as to what lies ahead in an infinitely complex globe in the midst profound changes in all aspects human activity.

The global economy remains mired in a prolonged economic slowdown, characterized by dwindling world trade, weak investment, flagging productivity growth and mounting debt levels, says the World Economic Situation and Prospects 2017 report. Increasing geopolitical tensions, conflicts and risks continue to weigh on global economic outlooks.

The International Monetary Fund (IMF), in its October 2017 Global Financial Stability Report, points to the fact that "dangers in the form of rising financial vulnerabilities are starting to loom." In the G-20 group of countries, which account for about 85 percent of the world economy, the combined borrowing of the governments, households, and firms is increasing, and now the total debt exceeds $135 trillion, which is equivalent to about 235 percent of their combined GDP.

Likewise, in the past week, outgoing German Finance Minister Wolfgang Schauble, who is set to become the speaker of German Bundestag, warned that spiraling global public and private debt, as well as the growth of liquidity, has the potential to throw the world into another major financial crisis.

"Persistent low-growth in the decade since the global financial crisis has put a spotlight on the problem inequality. It has also exposed long-running weaknesses in our ability to adapt to technological change and global integration," IMF managing director Christine Lagarde said in a speech at Harvard University this month.

Worldwide over 200 million workers are currently unemployed. An increasing decent work deficit is a serious concern. In the emerging and developing countries, approximately 780 million workers live in moderate or extreme poverty, according to the ILO's World Employment Social Outlook 2017 report.

Furthermore, worldwide more than 1.4 billion workers are in vulnerable employment, with an increasing uncertainty of job security and lack of access to social protection.

Comprehending the fact is difficult that in our global economy, with an astronomical $74.20 trillion Gross Global Product, where enough food is available to feed every person on this planet Earth, an alarming number of people continues to suffer from hunger and malnutrition.

World hunger increased in 2016 and now affects 815 million people, about 11 percent of the world’s population, according to the State of Food Security and Nutrition in the World 2017 report released by FAO last month. In fact, of the 815 million people chronically food insecure and undernourished, 489 million live in countries affected by violent conflicts and climate-related shocks.

In a foreword to this report observes: "The failure to reduce hunger is closely associated with the increase in conflict and violence in several parts of the world."

Decidedly, daunting unresolved global challenges that lie ahead are many, but they are all interconnected problems. Evidently, they transcend national borders. The issues range from global economic and financial instability in an era of increasing globalization, regional conflicts, terrorism, climate change, food security, and biosphere sustainability threats.

Concerted global strategies are crucial to deal with complex transnational problems, which are changing in intensity and extensity more than ever, with disquieting consequences for the fate of human civilization.

“Transforming Our World: the 2030 Agenda for Sustainable Development,” comprising 17 visionary goals, with a fundamental thrust to free the human race from the tyranny of poverty and heal and secure our planet Earth, by the year 2030, was adopted by all the member states of the United Nations in September 2015, which came into force on January 2016.

Reviewing what is going on in the corridors power at all levels of governments worldwide, one could infer that achieving those sustainable goals by 2030, without a fundamental shift in economic growth paradigm, would turn out to be mirage.

It is high time to differentiate between ‘good economic growth’ and ‘bad economic growth’ in economics. We need to develop effective policy medicine to attack the malignant economic growth before it is too late.

- Palanisamy Nagarajan is Emeritus Professor of Economics and Island Studies Teaching Fellow, University of Prince Edward Island

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