February 3, 2011
Stephen Sackur moderated a lively debate. Most of the panel agreed that it was the rising middle class of the emerging markets that would drive global growth. The panel was optimistic about the ability of Russia to grow through modernization. Russell Napier, however, argued that it is the return of the US consumer on the back of cheap money that will drive growth.
Joseph Stiglitz – we may have pulled back from the brink, but we are not out of the woods. Pre-crisis, the deficiency in aggregate demand was filled by a bubble; this problem has not been resolved. The US has lost its manufacturing base and replaced it with real estate. The fundamental problems of high leverage and excess amounts of real estate have not been solved. The government stimulus has now been removed, so growth will slow. The UK austerity is excessive and will lead to an economic slowdown. The growth of Asia is driving high commodity prices, which is making the position worse in the US and Europe. The position will be worse in Europe as deficits are higher. The price of carbon will rise, reducing returns for owners of hydrocarbons. If the US could improve its health care system, it would not run a deficit.
Sunil Godhwani – we live in a globalized era and developed markets are having a hard time living with this. 70% of global growth will come from emerging markets this year. Emerging markets will create 445 mln middle class consumers over the next five years. In India, consumption is now a key driver, and the middle class over the next decade will be larger than the US and Europe combined. The Indian savings rate is 35% but little finds its way into the stock market – that will change. Governance is getting better in India. Emerging markets will continue to drive growth.
German Gref – the drivers of global growth often change. Previously, consumption in the US was the key driver, helped by rising leverage. This driver is over. In the future, there will need to be technological change to drive growth in the West. Now consumption growth in the emerging markets will drive global growth. Russia has a tremendous opportunity to increase productivity through modernization – of infrastructure, education, government, technology, energy technology, and so on. The whole area of commodities can be better exploited in Russia, including agriculture. We can also increase the effectiveness of government and Russia can be one of the key drivers of growth in the future.
Snezhana Stoiljkovic – Russia is key to the rest of the region. WTO makes modernization all the more important. Machinery and agribusiness are areas where change can happen. Infrastructure improvement is key across the country and this will require financing and partnership from across the world. The government needs to improve the development of the financial services sector as a vital driver of this.
Alexei Kudrin – the crisis has been global, not local, and regulation and the response consequently need to be global. Risks include the fact that the US needs to cut its spending and deficit, and that Chinese growth may slow. Russia has a tremendous opportunity to modernize – privatization is a key way to stimulate this, as is competition. WTO entry will help competition. Infrastructure needs to improve, and this will take place over the next decade. Over the past decade, Russia’s GDP per capita has tripled, an almost unprecedented change. The average monthly wage has risen from $100 in the mid-1990s to $700 now. In the future, the use of hydrocarbon resources can drive the country to a new level.
Kotaro Tamura – growth is not always good; stability of society is more important. Japan is running out of money and its national debt is so high that the government must change. The Japanese balance sheet is five times larger than that of the US. However, Japan is changing and can drive growth. We are entering a knowledge-intensive world.
Russell Napier – US growth was built on a fallacy of money printing. Emerging market growth is the wrong kind of growth, as emerging markets do not have an independent monetary policy and are misallocating capital, which is the last leg of the global money printing bubble. Emerging markets will buy US companies. There will be a new consumer boom in the US, and this is where we should look for growth over the next few years. Demographics will bankrupt the developed markets and governments will have to renege on their social obligations – but not for some time.
Debate on risks. Is protectionism likely to return? Most on the panel felt that cooperation was likely, but from the floor, people were pessimistic.