SESSION THREE: SESSION THREE: Brave New WorldBrave New World

Questioning Anglo-Saxon modelQuestioning Anglo-Saxon model

Dominant, deregulated FINANCIAL MARKETS:

- Key promise securitisation – reduced risk - proved false

- Economy actually MORE vulnerable to financial disruption

Questioning Anglo-Saxon modelQuestioning Anglo-Saxon model

Debt-driven CONSUMER SPENDING as primary engine of growth:

- Since WWII, US shifted from production to consumption

- More profitable to finance goods than produce them

Questioning Anglo-Saxon modelQuestioning Anglo-Saxon model

The investment gap:

- Focus on present / consumption rather than future / investment

- Private sector spends less on research & investment than economically ideal

- After Great Depression, state investment provided crucial growth boost via: - GI Bill

- Interstate System- Defence Department

The future of capitalismThe future of capitalism

“The rich need a dose of capitalism. Capitalism punishes those who invest in companies that fail.”

– The Guardian, 24 March 2009

Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and

more expensive credits, until debt becomes unbearable.

The unpaid debt will lead to the bankruptcy of banks, which will have to be nationalized, and the

State will have to take the road which will eventually lead to Communism.

Karl Marx, 1867

Economic lesson from NorwayEconomic lesson from Norway

“As a socialist, I have always said that the market can’t regulate itself. But even I was surprised how strong the failure was.”

- Kristin Halvorsen, finance minister, Norway

New role for governmentNew role for government

OBAMA: overhaul Washington’s approach to education, health

care, science and infrastructure all in effort to “lay new foundation

for growth”

New role for governmentNew role for government

GREATER ROLE GOVERNMENT:

- more palatable since global crisis- government still able raise capital at

reasonable rates

GOVERNMENT CAN STIMULATE or TRANSFORM an economy

- Obama stimulus package attempts both (SA too):

- jump start job creation

- down payment on solving bigger problems

(education, health, energy, science & infrastructure)

Two goals often conflicting (at least short-term)

New growth sector: energyNew growth sector: energy

21%

2% 0.2%

-13% -14%

-20%

-32% -33%-40%

-30%

-20%

-10%

0%

10%

20%

30%

USA UK Japan Italy France Germany Sweden Denmark

Oil consumption since 1980:

New growth sector: energyNew growth sector: energy

New growth sector: educationNew growth sector: education

- Goldin & Katz: The face between education and technology

- 20th century: US century because investment in education

- Education increases economic pie and distributes more equitably

New state role: formidable agendaNew state role: formidable agenda

OBAMA:- attempt resolve financial crisis & recession- face fierce opposition as tries restructure economy

FDR: - Social Security, Interstate System & GI Bill- lay foundation for sustained period of robust grow

SA developmental stateSA developmental state

The role of the developmental state is “sharing risk, co-financing investment and jointly engaging with the banking

sector in constructing a vibrant growing economy”.

US labour market reflects changeUS labour market reflects change

“These jobs aren’t coming back … Firms are making strategic decisions that they don’t want to be in their businesses.”

– John E Silvia, chief economist, Wachovia

US labour market reflects changeUS labour market reflects change

SEVERE JOB LOSSES: NEW JOB OPPORTUNITIES:

- auto manufacturers - education and health

- financial services - environment and energy

- retailers - government and public service

- manufacturers - science and technology

US labour market reflects changeUS labour market reflects change

UNDERPEFORMERSUNDERPEFORMERS GROWTH SECTORSGROWTH SECTORS

Brave new world: growth sectorsBrave new world: growth sectors

- Retailers: luxury goods- Retailers: luxury goods

- Auto manufacturers- Auto manufacturers

- Financial services- Financial services

- Manufacturers: consumer - Manufacturers: consumer goodsgoods

- Residential construction - Residential construction and related industriesand related industries

- Basic consumer goods- Basic consumer goods

- Alternative energy: related - Alternative energy: related technology and technology and manufacturingmanufacturing

- Infrastructure and related - Infrastructure and related industriesindustries

US and CHINA: trading places?US and CHINA: trading places?

CHINA: infrastructure boomCHINA: infrastructure boom

CHINA: a global green leaderCHINA: a global green leader

“Save energy, cut emissions” - Energy efficiency

- Reduce pollution

- Tackle global warming

CHINA: the emerging superpowerCHINA: the emerging superpower

- China more assertive on world stage

- Using dollar reserves to secure resources

- Pressuring for reform of IMF and World Bank

GREEN: the future growth sectorGREEN: the future growth sector

FUTURE GREEN ISSUES:

- Energy technology, the next revolution

- Natural capital

- Sustainable development

GREEN: energy technologyGREEN: energy technology

MASDAR CITY: World’s first zero waste,

zero emissions city

GREEN: concept of natural capitalGREEN: concept of natural capital

“Until we learn to pay a realistic price for all the benefits and

services we derive from nature, we will never get ourselves on to a

truly sustainable path.”

GREEN: sustainable developmentGREEN: sustainable development

KEY ISSUES:• Biodiversity• Water• Energy• Food• Pollution• Climate change

“I don’t care whether you’re driving a hybrid or an SUV. If you’re headed for a cliff, you have to change direction. That’s what the American people called for in November, and that’s what we intend to deliver.”

- Barack Obama