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The Economy of Tomorrow

ECONOMY OF TOMORROW. The Economy of Tomorrow . Why is a new development path necessary? New economic, ecological, social challenges The end of successful development models

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The Economy of Tomorrow

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  1. ECONOMY OF TOMORROW The Economy of Tomorrow Why is a new development path necessary? New economic, ecological, social challenges The end of successful development models Howcould a sustainabledevelopmentmodellooklike? The EoTmodelforsocially just, sustainableandgreendynamicgrowth Howtocreatethepolitical will for a shiftonto a newdevelopmentpath? Weak progressive actors/ flawedgovernanceBuildingpoliticalleverageforthestruggleagainstthestatus quo Contact: Marc Saxer, marc@fes-thailand.org

  2. ECONOMY OF TOMORROW The Economy of Tomorrow New Challenges Contact: Marc Saxer, marc@fes-thailand.org

  3. ECONOMY OF TOMORROW CHALLENGES: The Great Crisis of the West Euro Crisis/ Sovereigndebtcisis Crisisof casinocapitalism Crisis of shareholder capitalism Failure of neoliberalism Flawed neoclassical theory of efficient markets Limits to extractive growth The crisis of the nation state Crisis of representative democracy Metaphysical Black Hole Contact: Marc Saxer, marc@fes-thailand.org

  4. ECONOMY OF TOMORROW Private debt Moderate Inflation Virtual growthandcrises in the West (Example US) State debt Quantitative easing • Mass • unemployment Subprime/ financial crisis • Runaway • inflation • Public • debt • crisis • Over - • leveraging • Lack of • consumption • demand Fed raises interest rates to squeeze out Inflation Nixon abandons Gold Standard/ End of Bretton Woods Fed buys foreign debt Clinton cuts deficit spending 1993 1973 2001 2008 1981 Contact: Marc Saxer, marc@fes-thailand.org

  5. ECONOMY OF TOMORROW The perpetualcrises of virtualcapitalism Problem Problem Injection of virtual resources Quick fix Contact: Marc Saxer, marc@fes-thailand.org

  6. Misallocationof Capital Weak RiskManagement Wrong Incentive Structures Pro-Cyclical Policies Income Inequality GLOBAL CHALLENGE: Financial capitalismisunstable Excessive Leverage Lack of Investment in Productivityand Innovation Large Currency Reserves Lack of Income-Driven Consumption (Financial)Market Liberalization Downsizing the State Supply Side Economics NEO- LIBERAL IDEOLOGY Instability of Financial Capitalism LACK OF AGGREGATE DEMAND Policy responses MarketConcentration Debt Driven Consumption Regulation Blocked Export DrivenDemand SpeculativeBubbles Cuts in Public Goods Imbalances Policy responses Austerity Instability CRISES

  7. ECONOMY OF TOMORROW All modern institutions– state, marketanddemocracy– arebased on theEnlightenment Ideal of Rational Man “The emergence of Man from his self-imposed chains” “Rationality allows progress to a better future” Efficient Markets State Bureaucracy Rational Being Representative Democracy Technocracy autonomous decision-maker Good Governance Homo economicus Incrementaloptimization maximisesinterest Wellinformedvoter Common Good universally informed Planning, Future scenarios rational choice Social contract Scientific Progress Metaphysical Roots of modern Institutions are flawed Contact: Marc Saxer, marc@fes-thailand.org

  8. ECONOMY OF TOMORROW The situation in Asiais different, but challengesareconverging WEST converging trajectories ASIA Contact: Marc Saxer, marc@fes-thailand.org

  9. ECONOMY OF TOMORROW Additional CHALLENGES fordeveloping/ emergingeconomies Japan, Korea, Singapore, Korea, Hong Kong India Thailand Malaysia Indonesia Vietnam Bangladesh Pakistan Post-Industrial Economy • Movingupthevaluechain • high-techindustries • Services Industrialization • Extractive Growth : • Exploitation of naturalresources • Exploitation of labor (rural => urban productivity) Contact: Marc Saxer, marc@fes-thailand.org

  10. ECONOMY OF TOMORROW The East Asian developmentmodel of thepastdecades Industrialization Export Low Wage Contact: Marc Saxer, marc@fes-thailand.org

  11. ECONOMY OF TOMORROW The end of the East Asian developmentpath Finite Resources/ Energy security Third Industrial Revolution/ New global division of labor Climate Change/ Natural Disasters Industrialization Japanese Tsunami Income Disparity = Social Divide and Political Conflict Export Low Wage China’s Bubbles Vulnerability to external shocks Looming Global Recession = Lack of external demand Financial Crisis Middle IncomeTrap = Need to boost productivity Influx of “hot money”/ Currency volatility AEC: Low Wage competition Contact: Marc Saxer, marc@fes-thailand.org

  12. ECONOMY OF TOMORROW Extractive growth: Infinitve growth in a finite world? ecological limits economic limits fiscal fiscal limits political limits social limits Contact: Marc Saxer, marc@fes-thailand.org

  13. ECONOMY OF TOMORROW The Economy of Tomorrow Economic Solutions Contact: Marc Saxer, marc@fes-thailand.org

  14. ECONOMY OF TOMORROW The Economy of Tomorrow Development Model Macro- Public Long-term RestructuringEconomic Goods Strategies Guidance Balanced Stable Accounts Financial Markets Productivity Innovation Steady Demand Dynamic Supply INCLUSIVENESS STABILITY Consumer Government Investment Net Spending Spending Exports Human Resource Technological Capital Efficiency Innovation BALANCE Inclusive Income Institutions Equality Competitiveness DYNAMISM Contact: Marc Saxer, marc@fes-thailand.org

  15. ECONOMY OF TOMORROW The Economy of Tomorrow Growth Drivers Innovation Stability and Balance Inclusiveness Contact: Marc Saxer, marc@fes-thailand.org

  16. ECONOMY OF TOMORROW Whatstrategicaimsforthestate/ private sector? Resource efficiency Green Innovation Investment in Renewable Energies Green Dynamic Growth Productivity Stable financial markets Sustainable Growth Socially Just Growth Fiscal sustainability Stablenaturalenvironment Use of all talent Fair Income Global trade balances Stable social environment Contact: Marc Saxer, marc@fes-thailand.org

  17. ECONOMY OF TOMORROW The Economy of Tomorrow Political Solutions Contact: Marc Saxer, marc@fes-thailand.org

  18. ECONOMY OF TOMORROW Ifweknowwhatshouldbedone… … whyisitthen not beinghappening? „Populism“ debateshowsthatitisimpossibletotalkabouteconomicdevelopmentwithoutpolitics. “Change” is not the automatic result of facts and figures. „Change“ canonlybetheoutcome of a politicalstruggle. Contact: Marc Saxer, marc@fes-thailand.org

  19. ECONOMY OF TOMORROW Shiftingthedevelopmentpathcanonlybetheresult of a politicalstruggle Contact: Marc Saxer, marc@fes-thailand.org

  20. ECONOMY OF TOMORROW EoT Strategy: Compass, Coalition, Communication Contact: Marc Saxer, marc@fes-thailand.org

  21. ECONOMY OF TOMORROW Economic problems are not primarily economic, but political problems The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. John Maynard Keynes, The General Theory of Employment, Interest and Money (1935) Contact: Marc Saxer, marc@fes-thailand.org

  22. ECONOMY OF TOMORROW Politics is less about solutions but about the definition of the problem Definition of the problem … determines the political outcome Discourse 1 Policy Sovereign Debt at the periphery exploded because of bailouts and devaluation at the center Regulate (financial) markets Facts • Financial Crisis • Bank Bailouts • Recession • Collapsing Tax Revenue Discourse 2 Sovereign Debt exploded due to oversized social welfare costs and state mismanagement slash (welfare) state Contact: Marc Saxer, marc@fes-thailand.org

  23. ECONOMY OF TOMORROW STRATEGY: Channelingthepoliticalprocess Contact: Marc Saxer, marc@fes-thailand.org

  24. ECONOMY OF TOMORROW EoTservesas a compassandbenchmark GROWTH ENGINES GROWTH COMPASS STRATEGIC AIMS To Produce NORMATIVE VISION GOVERNANCE TOOLS To drive To Fire Up To Achieve • Income Equality • Inclusive Institutions • Public Goods • (Education, Health, • Social Security) ¨Collective Bargaining ¨ Minimum Wages/Wage Policy ¨ Short Term Employment ¨ Vocational Training ¨ Lifelong Learning Programs ¨ Decent Work ¨Fair Income For All(consumption demand) ¨ Include all Talent (innovation & labor productivity) Socially Just Growth Sustainable Growth ¨Financial Market Regulation ¨ International Monetary Regime ¨ Capital Controls ¨ Administrative Capacity (Oversight and Control) ¨ Curbing of speculation ¨ Anti-cyclical macro-economic guidance ¨Stable financial markets (capital productivity) ¨Balanced Trade (balanced current accounts) ¨Balanced Budgets (fiscal sustainability) ¨Stable natural and social environment Good Society with Full Capabilities for All ¨ Setting Incentives for Productivity and Innovation ¨ Long-term investment & management strategies ¨ De-Coupling ¨ Market introduction schemes ¨ Standard Setting ¨ Emission Trading ¨ R&D in (green) technologies ¨ (Green) Innovation ¨ “Greening the Old Economy” (resource efficiency) Green Dynamic Growth Contact: Marc Saxer, marc@fes-thailand.org

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