Global economics in The Monday Briefing
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The global recovery since the financial crisis has not been vigorous. But it has been running for 11 years and it has absorbed a lot of workers. Globally a record 3.3 billion people are in work, 14% more than ten years ago.
Depending on how Brexit goes 2019 could see UK growth accelerate or almost grind to a halt. So, say two forecasting groups which have modelled the economic effects of the UK’s exit from the EU.
In time, breakneck growth in the early stages of industrialisation gives way to slower growth. All industrialised nations experience this change as a manufacturing boom fuelled by cheap labour runs its course.
Slowing growth in Europe and emerging markets and October’s equity sell off have got economists pondering when the next recession might strike.
It ended on a high note last week, but overall October was a rotten month for equities. The world equity market has just had its worst month since 2012, with the benchmark MSCI world index down 7% in October. This fall has more than reversed earlier gains, leaving the global index down 3% so far this year.
Free market capitalism has faced intense criticism in recent years. Even that most basic tenet of the post-‘70s era, the free movement of capital and floating exchange rates, has its critics. Some on the left believe that a government set on fundamentally reforming capitalism might need to bring in controls to prevent capital leaving the country and a sharp currency devaluation.
The third quarter Deloitte survey of UK Chief Financial Officers released today shows concerns about Brexit weighing heavily on business sentiment.
In May we wrote that geopolitical factors posed an upside risk to oil prices. Those risks have materialised. Last week the oil price reached $82 a barrel, up 40% over the last 12 months and the highest level in almost four years. Some analysts are warning of a spike above $100.
Last week the team came across some remarkable data. The Oxford economist Max Roser estimates that in 1820 more than 90% of the world’s population lived in extreme, absolute poverty, defined as living on less than $2 per day in today’s money. By 1981 this had fallen to 44% of the world’s population. Today it stands at less than 10% of the world’s population.