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SESSION THREE: Brave New World

SESSION THREE: Brave New World. Questioning Anglo-Saxon model. Dominant, deregulated FINANCIAL MARKETS: Key promise securitisation – reduced risk - proved false Economy actually MORE vulnerable to financial disruption . Questioning Anglo-Saxon model.

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SESSION THREE: Brave New World

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  1. SESSION THREE: Brave New World

  2. Questioning Anglo-Saxon model • Dominant, deregulated FINANCIAL MARKETS: • Key promise securitisation – • reduced risk - proved false • Economy actually MORE • vulnerable to financial disruption

  3. Questioning 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

  4. Questioning 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

  5. The future of capitalism 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 “The rich need a dose of capitalism. Capitalism punishes those who invest in companies that fail.” – The Guardian, 24 March 2009

  6. Economic 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

  7. New role for government OBAMA: overhaul Washington’s approach to education, health care, science and infrastructure all in effort to “lay new foundation for growth”

  8. New 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)

  9. New growth sector: energy Oil consumption since 1980:

  10. New growth sector: energy

  11. New 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

  12. New 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

  13. SA 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”.

  14. US 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

  15. US 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

  16. US labour market reflects change

  17. Brave new world: growth sectors UNDERPEFORMERS GROWTH SECTORS - Basic consumer goods - Alternative energy: related technology and manufacturing - Infrastructure and related industries - Retailers: luxury goods - Auto manufacturers - Financial services - Manufacturers: consumer goods - Residential construction and related industries

  18. US and CHINA: trading places?

  19. CHINA: infrastructure boom

  20. CHINA: a global green leader “Save energy, cut emissions” - Energy efficiency - Reduce pollution - Tackle global warming

  21. CHINA: the emerging superpower • - China more assertive on world stage • Using dollar reserves to secure • resources • Pressuring for reform of IMF • and World Bank

  22. GREEN: the future growth sector • FUTURE GREEN ISSUES: • Energy technology, the next • revolution • - Natural capital • - Sustainable development

  23. GREEN: energy technology MASDAR CITY: World’s first zero waste, zero emissions city

  24. GREEN: 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.”

  25. GREEN: sustainable development • KEY ISSUES: • Biodiversity • Water • Energy • Food • Pollution • Climate change

  26. “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

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