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The world seems like a much more uncertain place today than it was before the financial crisis. The International Monetary Fund reckons that macroeconomic risk is running at twice the level it was before the failure of Lehman in 2008. The backwash from the crisis, debt-laden governments, low productivity and risk averse businesses and banks, has spelt weaker growth.
Uncertainty has also been fueled by shocks such as political surprises and natural or man-made disasters. In the last few years markets have had to contend with a stream of worries, from conflict in Eastern Ukraine and the Middle East, to Brexit, the Gulf of Mexico oil spill and Donald Trump’s surprise victory.
But what lasting effect do such external shocks have on markets and economies?
With the holiday season almost upon us we are launching our summer reading list. The Economics Team read dozens of articles to come up with our top six picks for summer reading. All are available free and on-line. You can save these articles on your iPhone or iPad's reading list by opening the links on Safari and tapping on the share arrow next to the address bar. To print these articles please use the print icons, where available, on the webpages to ensure the whole article comes out. The Monday Briefing will continue to run throughout the summer.
Last week I spoke at a debate on the effects of technology in the workplace. The event got me thinking about this vast, complex subject. Here’s a two-minute summary of my musings.
It seems to me that innovation will remain the key driver of growth and human welfare. Rising prosperity and insatiable human demand seem likely to create new industries and jobs to replace those destroyed by technology. In short, robots won’t steal all the jobs. This has been the pattern of the last 200 years and I think it will persistent.
Western politics has developed a more nationalist character in recent years. In Europe populist parties claim to champion national interest against globalisation while in the US Bernie Sanders and Donald Trump have broken with the free trade consensus that has lasted since 1945.
Perhaps the most fundamental task facing economists is to measure the change in human welfare over time.
To get to a measure of spending power you need to measure incomes and prices over time. Incomes are relatively straightforward, prices less so. To gauge the changing standard of living you need to measure thousands of prices in constantly changing representative basket of goods and services.
Societies become richer by producing more goods and services from a fixed amount of labour and other inputs. The history of human material progress is the history of ever greater efficiency in production.
Since the financial crisis that process seems to have broken down. Productivity growth has slowed and, for many, wages have stagnated. Across the Western world policymakers and politicians are searching for ways of raising productivity growth.
The global recovery is entering its eighth year – sufficiently long for some commentators to suggest that we are due for another recession. That seems premature. 2017 looks likely to be another year of growth for the global economy, and at a rather faster rate than in 2016.
But this is not likely to be the year in which growth finally breaks through, returning to the heady rates seen in the decade before the financial crisis. In other words, activity is likely to remain close to the lower, so-called New Normal levels seen since 2009.
For the last Monday Briefing of 2016 we have pulled together our favourite funny news stories from the Briefing through the year. As ever credit goes to my colleague, Alex Cole, who tracks down each week’s news stories and is the indefatigable inventor of the play on words that concludes each week’s Briefing. The Monday Briefing will return in the New Year. In the meantime the Economics Team – Ian, Alex, Debo, Jemma and Anthea – send our very best wishes to you for Christmas and the New Year.
With Christmas approaching here is our seasonal offering of six thought-provoking articles to occupy the quiet time during the holidays. All are available free and on-line.
The continuing problems faced by Italian banks, some of the oldest in the world, is a reminder of Italy’s long banking history. This History Today article describes how the Italian Medici family built their banking empire in the fifteenth century; “not merely the most profitable organisation in Europe, but the richest commercial house there has been anywhere.”
Our Christmas Quiz offers an eclectic test of knowledge of economics and business. The answers, and a brief explanation of the factors at work, are at the end of this note.
- Which of the following countries is likely to show the fastest growth of the seven major industrialised nations this year?