Western economies must adopt industrial strategies, boost R&D and exploit new tech to prosper – Americans realise this better than Europeans
Graham Watson's insight:
Larry Elliott shares his views on the recovery of developed economies in the aftermath of COVID, and makes a case for the US being the first major economy to genuinely recover.
He argues, unsurprisingly, that the US approach of using active interventionist policy has borne fruit, although you might argue that this isn't an orthodox American approach, although the New Deal would suggest otherwise.
He also suggests that whilst we might see the current issues as short-term, the reality is that growth has been subdued for the last 15 years in the aftermath of the financial crisis.
The move comes after the country's prime minister called on firms to increase wages as prices rise.
Graham Watson's insight:
A remarkable pay increase of 40% has been offered to workers in Japan by retailer Uniqlo after the Japanese Prime Minister called for wage increases to counter the cost of living crisis.
The Japanese economy is a bit of an enigma, they ate nearing 30 years of stagnation, with low growth and flat wages, and a series of failed policy initiatives.
The current fear is that if wage growth lags behind inflation, then stagflation is the consequence, and that's something the government are keen to avoid.
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New ECB boss says plan to put €20bn a month into financial system may not push growth
Graham Watson's insight:
The stagnation of the Eurozone continues - not apace, but just continues - and the new head of the ECB, Christine Lagarde, has announced a wide-ranging review of ECB strategy and the restarting of QE in the mean time.
What are the implications of this for Eurozone growth and inflation. If past evidence is anything to go by, not much.
Data released last month indicated the country's economy had shrunk for a second quarter in a row.
Graham Watson's insight:
It seems that Japan has avoided a recession with a revision of the data for the last three months of 2023 suggesting that the economy grew by 0.4%. It's hardly grounds for celebration: the Japanese economy has stagnated for the best part of thirty years.
Key data this week will offer a hint as to whether the eurozone’s powerhouse can shake off recent stagnation
Graham Watson's insight:
Has the German economy stalled into a prolonged recession. Certainly, this Observer piece looks at the economy's recent stagnation and notes that struggles to bring down inflation has seen it characterised by one commentator as "“stuck in the twilight zone between stagnation and recession”.
If true, it has adverse implications for the wider Eurozone, with Germany being the economic powerhouse of continental Europe.
Will leader Fumio Kishida's plans to share the wealth materialise?
Graham Watson's insight:
This lovely BBC article looks at how the election of a new Prime Minister, Fumio Kishida, on the Japanese economy, noting that his commitment to a 'new capitalism' based on greater equality has had an adverse effect on share prices among other things.
The truth is that he's inheriting a difficult job: having been the poster boy economy for the 1970s and 1980s, the Japanese economy has stagnated over that last three decades and even seemingly bold initiatives like Abenomics have done little to change that, and there's also rising levels of discontent too.
The state of the global economy is particularly worrying because the usual explanations do not apply
Graham Watson's insight:
Larry Elliott writes a fantastic piece about the current state of the global economy and concludes that many of the traditional ways of stimulating the economy are not available to us, and advocates limited use of so-called 'helicopter money' to boost growth.
It's a fascinating piece because it looks at potential causes of the current stagnation of the global economy, including a reference to Kondratiev cycles, that take a very long-term view of the nature of growth. But, in addition, it also makes it clear that monetary solutions, such as lower interest rates, are scarcely credible in the current policy environment.
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Larry Elliott on the state of the global economy: more headwinds than tailwinds is his synopsis of the current state of play. He may well be right.