It has not been a good start to the year for financial markets, the real global economies, and the political leadership of most countries.
Most economic growth forecasts made a few weeks ago are being revised as the general consensus is that the global economy is hanging in the balance.
The IMF reduced its growth forecast for many major economies, even if it remains relatively optimistic about growth in 2016 and 2017.
Financial markets took a major tumbling as the dramatic fall in the price of oil signalled serious underlying problems in major economies especially that of China.
Maurice Obstetfeld, the IMF chief economist, like many other analysts believes that financial markets are ‘overreacting’ but acknowledges that ‘there was a difficult adjustment ahead in emerging markets’.
The upside effects of globalisation seem to have fizzled out. Emerging economies like those of China, Brazil and India that supplied advanced economies in the west with cheap goods and services are struggling to hit their ambitious targets for growth.
In Europe weak political leadership is undermining the very existence of the EU.
Rigid objectives to sanitise public finances have resulted in better key performance indicators in this area but also stubbornly high unemployment, anaemic economic growth and serious under-investment in the productive infrastructure that is vitally necessary to support new growth.
In 2016 the EU faces major socio-economic challenges that only strong political leadership can manage.
The refugee problem is arguably the most challenging issue. When Malta faced a major crisis of uncontrollable and irregular migration from North Africa, the EU leaders were not at all supportive. ‘Burden sharing’ was taboo and Malta was left to find its own solutions.
Now that the problem has shifted to the EU’s eastern border, Germany, Hungary, Greece and other border member states are clamouring for burden sharing by establishing quotas.
The UK will not have anything to do with this strategy as it struggles to reach some form of consensus among British people on whether staying in the EU is the better option to speed up economic growth, tackle unemployment and speed up the return of the ‘feel good factor’ among ordinary people.
Big empires never vanish overnight but they can start crumbling from the inside
The significance of a possible beginning of Brexit in 2016 or 2017 goes far beyond the shores of the UK.
No one can really predict with any degree of certainty what is likely to happen if the UK were to leave the EU.
Some political analysts see such an event as the beginning of the dismantling of the EU as we know it today.
Big empires never vanish overnight but they can start crumbling from the inside until what remains is a face of political unity that is no more than an illusion of those who fail to understand the destructive dynamics of weak leadership.
The prospects of seeing some dramatic improvement in the quality of political leadership in Europe and the US in 2016 are remote. The US will be holding its presidential elections in November and the possibility of seeing a far right candidate like Donald Trump having a reasonably good chance of becoming president should send shivers down the spine of business and political leaders worldwide. But that is what democracy is about.
In the EU the scarcity of competence in the political class has spawned fringe political parties of the right and the left that are increasingly gaining support from disillusioned voters.
Weak governments that do not command sound parliamentary support do not encourage investment and, much less, structural economic reforms to promote strong economic growth.
The recently held World Economic Forum that met in Davos discussed the possible impact of rapidly advancing technology.
This is not an immediate concern for most countries but it is possibly the most important change that is silently threatening to cause even more pain to those countries who fail to understand the implications of this socio-economic phenomenon.
Richard Baldwin, professor of international economics at the Graduate Institute, Geneva, is quoted as saying in Davos: “The most likely improvements in cost and productivity would come from cheap, educated developing nations workers that can seem to be sitting right next to you in London and New York while actually being in their own nation.”
High standards of educational excellence are the secret to economic prosperity in the next two decades. Are we anywhere near to embedding this requirement in our educational system?
Most EU countries are struggling to adapt sufficiently quickly to rapidly advancing technologies.
johncassarwhite@yahoo.com