Generational Dynamics Forum - New Site

We are seeing a crisis of the previous models and instruments of economic development. Social stratification is growing stronger both globally and in individual countries. We have spoken about this before as well. But this, in turn, is causing today a sharp polarisation of public views, provoking the growth of populism, right- and left-wing radicalism and other extremes, and the exacerbation of domestic political processes including in the leading countries.

All this is inevitably affecting the nature of international relations and is not making them more stable or predictable. International institutions are becoming weaker, regional conflicts are emerging one after another, and the system of global security is deteriorating.

Klaus has mentioned the conversation I had yesterday with the US President on extending the New START. This is, without a doubt, a step in the right direction. Nevertheless, the differences are leading to a downward spiral. As you are aware, the inability and unwillingness to find substantive solutions to problems like this in the 20th century led to the WWII catastrophe.

Of course, such a heated global conflict is impossible in principle, I hope. This is what I am pinning my hopes on, because this would be the end of humanity. However, as I have said, the situation could take an unexpected and uncontrollable turn – unless we do something to prevent this. There is a chance that we will face a formidable break-down in global development, which will be fraught with a war of all against all and attempts to deal with contradictions through the appointment of internal and external enemies and the destruction of not only traditional values such as the family, which we hold dear in Russia, but fundamental freedoms such as the right of choice and privacy.

What about the developed economies where average incomes are much higher? It may sound ironic, but stratification in the developed countries is even deeper. According to the World Bank, 3.6 million people subsisted on incomes of under $5.50 per day in the United States in 2000, but in 2016 this number grew to 5.6 million people.

Meanwhile, globalisation led to a significant increase in the revenue of large multinational, primarily US and European, companies.

By the way, in terms of individual income, the developed economies in Europe show the same trend as the United States.

But then again, in terms of corporate profits, who got hold of the revenue? The answer is clear: one percent of the population.

And what has happened in the lives of other people? In the past 30 years, in a number of developed countries, the real incomes of over half of the citizens have been stagnating, not growing. Meanwhile, the cost of education and healthcare services has gone up. Do you know by how much? Three times.

In other words, millions of people even in wealthy countries have stopped hoping for an increase of their incomes. In the meantime, they are faced with the problem of how to keep themselves and their parents healthy and how to provide their children with a decent education.

There is no call for a huge mass of people and their number keeps growing. Thus, according to the International Labour Organisation (ILO), in 2019, 21 percent or 267 million young people in the world did not study or work anywhere. Even among those who had jobs (these are interesting figures) 30 percent had an income below $3.2 per day in terms of purchasing power parity.

These imbalances in global socioeconomic development are a direct result of the policy pursued in the 1980s, which was often vulgar or dogmatic. This policy rested on the so-called Washington Consensus with its unwritten rules, when the priority was given to the economic growth based on a private debt in conditions of deregulation and low taxes on the wealthy and the corporations.

As I have already mentioned, the coronavirus pandemic has only exacerbated these problems. In the last year, the global economy sustained its biggest decline since WWII. By July, the labour market had lost almost 500 million jobs. Yes, half of them were restored by the end of the year but still almost 250 million jobs were lost. This is a big and very alarming figure. In the first nine months of the past year alone, the losses of earnings amounted to $3.5 trillion. This figure is going up and, hence, social tension is on the rise.

At the same time, post-crisis recovery is not simple at all. If some 20 or 30 years ago, we would have solved the problem through stimulating macroeconomic policies (incidentally, this is still being done), today such mechanisms have reached their limits and are no longer effective. This resource has outlived its usefulness. This is not an unsubstantiated personal conclusion.

According to the IMF, the aggregate sovereign and private debt level has approached 200 percent of global GDP, and has even exceeded 300 percent of national GDP in some countries. At the same time, interest rates in developed market economies are kept at almost zero and are at a historic low in emerging market economies.

Taken together, this makes economic stimulation with traditional methods, through an increase in private loans virtually impossible. The so-called quantitative easing is only increasing the bubble of the value of financial assets and deepening the social divide. The widening gap between the real and virtual economies (incidentally, representatives of the real economy sector from many countries have told me about this on numerous occasions, and I believe that the business representatives attending this meeting will agree with me) presents a very real threat and is fraught with serious and unpredictable shocks.

Hopes that it will be possible to reboot the old growth model are connected with rapid technological development. Indeed, during the past 20 years we have created a foundation for the so-called Fourth Industrial Revolution based on the wide use of AI and automation and robotics. The coronavirus pandemic has greatly accelerated such projects and their implementation.

However, this process is leading to new structural changes, I am thinking in particular of the labour market. This means that very many people could lose their jobs unless the state takes effective measures to prevent this. Most of these people are from the so-called middle class, which is the basis of any modern society.

In this context, I would like to mention the second fundamental challenge of the forthcoming decade – the socio-political one. The rise of economic problems and inequality is splitting society, triggering social, racial and ethnic intolerance. Indicatively, these tensions are bursting out even in the countries with seemingly civil and democratic institutions that are designed to alleviate and stop such phenomena and excesses.

The systemic socioeconomic problems are evoking such social discontent that they require special attention and real solutions. The dangerous illusion that they may be ignored or pushed into the corner is fraught with serious consequences.

In this case, society will still be divided politically and socially. This is bound to happen because people are dissatisfied not by some abstract issues but by real problems that concern everyone regardless of the political views that people have or think they have. Meanwhile, real problems evoke discontent.

I would like to emphasise one more important point. Modern technological giants, especially digital companies, have started playing an increasing role in the life of society. Much is being said about this now, especially regarding the events that took place during the election campaign in the US. They are not just some economic giants. In some areas, they are de facto competing with states. Their audiences consist of billions of users that pass a considerable part of their lives in these eco systems.

In the opinion of these companies, their monopoly is optimal for organising technological and business processes. Maybe so but society is wondering whether such monopolism meets public interests. Where is the border between successful global business, in-demand services and big data consolidation and the attempts to manage society at one’s own discretion and in a tough manner, replace legal democratic institutions and essentially usurp or restrict the natural right of people to decide for themselves how to live, what to choose and what position to express freely? We have just seen all of these phenomena in the US and everyone understands what I am talking about now. I am confident that the overwhelming majority of people share this position, including the participants in the current event.

And finally, the third challenge, or rather, a clear threat that we may well run into in the coming decade is the further exacerbation of many international problems. After all, unresolved and mounting internal socioeconomic problems may push people to look for someone to blame for all their troubles and to redirect their irritation and discontent. We can already see this. We feel that the degree of foreign policy propaganda rhetoric is growing.

We can expect the nature of practical actions to also become more aggressive, including pressure on the countries that do not agree with a role of obedient controlled satellites, use of trade barriers, illegitimate sanctions and restrictions in the financial, technological and cyber spheres.

Such a game with no rules critically increases the risk of unilateral use of military force. The use of force under a far-fetched pretext is what this danger is all about. This multiplies the likelihood of new hot spots flaring up on our planet. This concerns us.

Colleagues, despite this tangle of differences and challenges, we certainly should keep a positive outlook on the future and remain committed to a constructive agenda. It would be naive to come up with universal miraculous recipes for resolving the above problems. But we certainly need to try to work out common approaches, bring our positions as close as possible and identify sources that generate global tensions.

Once again, I want to emphasise my thesis that accumulated socioeconomic problems are the fundamental reason for unstable global growth.

So, the key question today is how to build a programme of actions in order to not only quickly restore the global and national economies affected by the pandemic, but to ensure that this recovery is sustainable in the long run, relies on a high-quality structure and helps overcome the burden of social imbalances. Clearly, with the above restrictions and macroeconomic policy in mind, economic growth will largely rely on fiscal incentives with state budgets and central banks playing the key role.

Actually, we can see these kinds of trends in the developed countries and also in some developing economies as well. An increasing role of the state in the socioeconomic sphere at the national level obviously implies greater responsibility and close interstate interaction when it comes to issues on the global agenda.

Calls for inclusive growth and for creating decent standards of living for everyone are regularly made at various international forums. This is how it should be, and this is an absolutely correct view of our joint efforts.

It is clear that the world cannot continue creating an economy that will only benefit a million people, or even the golden billion. This is a destructive precept. This model is unbalanced by default. The recent developments, including migration crises, have reaffirmed this once again.

We must now proceed from stating facts to action...

John wrote:

aeden wrote:shorts will be tempted to get face ripped off with mmt.

Oh, OK, now it's clear.