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Global growth is quickly plunging to levels not seen since the financial crisis as the risk of long-term stagnation has developed, according to the OECD’s latest Economic Outlook.
The world economy is expected to grow at a decade-low of 2.9% this year and remain in a subdued range of 2.9% to 3% through 2021. Global GDP has quickly decelerated from peaking at 3.5% in 2018.
The Paris-based policy forum warned that several years of escalating trade disputes between the US and China have resulted in a synchronized global downturn that has pushed down global growth to alarming levels, not seen since the last financial crisis.
“The alarm bells are ringing loud and clear. Unless governments take decisive action to help boost investment, adapt their economies to the challenges of our time and build an open, fair and rules-based trading system, we are heading for a long-term future of low growth and declining living standards, “OECD Secretary-General Angel Gurría recently said.
OECD warns that China, the driver of global growth the bailed everyone out during the last financial crisis, might not be able to stimulate the global economy this time around as trade tensions soar and a rebalancing of the Chinese economy continues.
China will accept sub 6% GDP in 2020, as it’s likely Beijing will not turn on its massive credit spigots anytime soon.
China’s credit growth slowed more than expected in October to the weakest pace since at least 2017 as a continued collapse in shadow banking, weak corporate demand for credit, and seasonal effects all suggest that a rebound in the domestic and global economy aren’t likely in the near term.
In one of the most downbeat forecasts on the global economy that we’ve seen so far this year, the Paris-based organization of wealthy nations known as the OECD – the Organization for Economic Cooperation and Development – warned that the global economy is heading toward a recession, and that governments aren’t doing enough in terms of fiscal stimulus to try and boost the economy.
“Escalating trade policy tensions are taking an increasing toll on confidence and investment, adding to policy uncertainty, weighing on risk sentiment in financial markets, and endangering future growth prospects,” the OECD said.
The advocacy for fiscal stimulus follows reports that Germany is considering a “shadow budget” to bolster public investment as Europe’s economy slides.
“Our fear is that we are entering an era where growth is stuck at a very low level,” said OECD Chief Economist Laurence Boone said. “Governments should absolutely take advantage of low rates to invest in the future now so that this sluggish growth doesn’t become the new normal.”
After cutting all of its forecasts from four months ago, the OECD now sees global growth slipping below 3% to 2.9%.
Of course, this pattern of cutting GDP forecasts is nothing new.
The OECD became the latest to warn about the global economy, after the Fed, the ECB and the PBOC have all eased policy to try and bolster growth in recent weeks. But the OECD is convinced that without government stimulus, the global economy is headed for a protracted downturn.
Manufacturing has born the brunt of the economic slowdown thanks to the tit-for-tat trade war between the US and China, while the services sector has proved unusually resilient so far. But the OECD warned that “persistent weakness” in industry will ultimately weigh on the labor market, dragging down household incomes and spending.
Superbugs, those pesky bacteria that have evolved to become resistant to antibiotics, are on the rise and pose a very real threat to humanity. Antimicrobial resistance is a large and growing problem, with the potential for enormous health and economic consequences for the United States and the rest of the world.
According to CNBC, the media outlet which reported on a new OECD (Organization for Economic Cooperation and Development) report, released Wednesday, superbug infections could cost the lives of about 2.4 million people in North America, Europe, and Australia over the next 30 years unless more is done to stem antibiotic resistance, which is already high across the globe.
Resistance is also projected to grow even more rapidly in low- and middle-income countries. In Brazil, Indonesia, and Russia, for example, between 40 percent and 60 percent of infections are already resistant, compared to an average of 17 percent in OECD countries. In these countries, the growth of antimicrobial resistance rates is forecast to be 4 to 7 times higher than in OECD countries between now and 2050.
About 29,500 persons die each year on average in the United States from infections related to eight drug-resistant bacteria. By 2050, that number is expected to rise sharply. It is estimated that antimicrobial resistance will kill about 1 million people in the United States, in just over 30 years.
The economic toll of this superbug crisis is huge: In the United States alone the health-care costs dealing with antimicrobial resistance could reach $65 billion by 2050, according to the OECD report. That is more than the flu, HIV, and tuberculosis. If projections are correct, resistance to backup antibiotics will be 70 percent higher in 2030 compared to 2005 in OECD countries. In the same period, resistance to third-line treatments will double across EU countries. –CNBC
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Even the OECD says inequality is bad. But making it go away is much tougher
It almost feels like an old story. Ever since the economy crashed in 2008 a growing chorus of voices has warned that inequality was wiping out the middle class and damaging society.
This week the Organization for Economic Co-operation and Development, the rich countries` think-tank, made headlines for declaring that growing inequality is not only bad for social cohesion, but is actually cutting points off economic growth.
- Precarious jobs holding back young workers, OECD finds
- Canadian cities unlikely to mimic L.A. on minimum wage
If we all agree, why is it such an intractable problem? The story is complex, but here are just a few reasons why inequality is so hard to fix.
1. Equality where?
While inequality within rich countries has been getting worse, many point out that global inequality has been shrinking.
Countries like the U.S. and Canada used to consume a majority of the world’s wealth. As the rich and middle class in places like China and India get a bigger piece of the action, some argue that morally, increasing global equality outweighs a relative decline in wealth by some people in the rich world.
2. Free trade and globalization
The push to create open trade between countries means that the low- and unskilled workers of rich countries are increasingly competing directly with workers in China, Bangladesh, Vietnam and India. Even within North America, industrial jobs often move to where wages are lowest, meaning middle class industrial jobs disappear.
Even in developing countries, manufacturers are replacing jobs withrobots and automation. Here in North America, computerized processes are already taking jobs done by factory workers, clerical workers and even professionals as clever software learns to search legal titles and write simple news stories.
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Last week, we noted that Democratic lawmakers in the US are pushing for what they call “$12 by ’20” which, as the name implies, is an effort to raise the minimum wage to $12/hour over the course of the next five years. Republicans argue that if Democrats got their wish and the pay floor were increased by nearly 70%, it would do more harm than good for low-income Americans as the number of jobs that would be lost as a result of employers cutting back in the face of dramatically higher labor costs would offset the benefit that accrues to the workers who are lucky enough to keep their jobs.
Regardless of who is right or wrong when it comes to projecting what would happen to low-wage jobs in the face of a steep hike in the minimum wage, one thing is certain: many working families depend on government assistance to make ends meet, suggesting it’s tough to persist on minimum wage in today’s economy and indeed, a new study by the OECD shows that in 21 out of the 26 member countries that have a minimum wage, working 40 hours per week at the pay floor would not be sufficient to keep one’s family out of poverty.
Here’s more from Bloomberg:
A global ranking out Wednesday by the Paris-based Organization for Economic Cooperation and Development painted a grim picture of the situation in member countries straddling continents. The 34-member organization found that a legal minimum wage existed in 26 countries and crunched the numbers to see how they compared.Forget taking a siesta in Spain. There, you’d have to work more than 72 hours a week to escape the trappings of poverty. Turns out that is the norm, not the exception. In the 21 countries highlighted with blue bars in the chart below, a full 40-hour work week still won’t lift families out of relative poverty. This list includes France, home to the 35-hour work week, which almost met the threshold. Minimum wage workers there who are supporting a spouse and two children need to work 40.2 hours to get their families out of poverty. (The poverty line is defined as 50 percent of the median wage in any nation.)