So wrote the great economic iconoclast John Maynard Keynes in an essay titled “The Great Slump of 1930,” published in December of that year. Thirteen months had passed since the crash of 1929; the world was living, in Keynes’s words, in “the shadow of one of the greatest economic catastrophes of modern history.” – quotation from “Lords of Finance” –
The present scenario is about emerging economies. The combined output of emerging-market economies now accounts for more than half of world GDP and energy consumption. The emerging countries also hold 70% of the world’s foreign-exchange reserves. As a result, rich countries no longer dominate either the global economy or the global economic-policy agenda. Emerging countries’ global integration, demand for resources, and huge capital inflows now determine rich countries’ economic performance – their inflation rates, employment levels, borrowing costs, and wages and profits.
Faster growth that lifts the living standards of hundreds of millions of people in poor countries boosts global demand and reins in inflation., Both should be a cause for celebration. Instead, many in the rich world are protesting as output and jobs shift to low-wage economies in Asia, Latin America, and Africa. And many in the developing world complain that rich countries’ trade barriers, agricultural subsidies, and monetary policies are blocking their progress.
Clearly, then, the shift in the balance of global economic power will give rise to a radical re-thinking of economic policy in both rich and emerging countries.
source Prof : Jeffrey Frankel