The Center for Prospective Studies and International Information (CEPII) delivers its annual deciphering of the major trends to come in its book collective “The World Economy 2023” published by Éditions La Découverte (Repères collection), to be published on September 8. Overview of the major issues of the coming year with Isabelle Bensidoun and Jézabel Couppey-Soubeyran, coordinators of the book.
The Conversation France: A year ago, we could hope that the global economy would recover from the health crisis without too many consequences. The looming inflation was only meant to be transitory and supply chains needed to recover from the lockdowns. Hopes that were swept away by Russia's invasion of Ukraine. So what are the prospects?
Dark outlook. Because, indeed, the crises, even if they are of very different natures, follow one another, and the war in ukraine comes to comfort those who thought that inflation was here to stay, to accentuate the pressures on the prices of raw materials, to create new dysfunctions in the global value chains and to confront Europe with an unprecedented energy crisis.
What put the world economy on the edge of the precipice, according to Thomas Grjebine, with the risk of food, financial and debt crises. A very different scenario from the one that prevailed last year. As a result, the recovery is no longer there. Growth forecasts are regularly revised downwards and monetary tightening to fight against inflation, which reached 9,1% in the United States et 8,6% in the euro zone in June 2022, risk plunging the global economy into stagnation, if not recession, without managing to curb a inflation whose structural causes are piling up (less dynamic globalization, ecological transition and wage catch-up).
Added to this is a Chinese engine that seizes up. Not only because of the zero-Covid policy, but there also for more structural reasons, linked to the aging of the Chinese population and the slowdown in productivity that the country's economic development is causing.
TCF: Do we not run the risk, in having to manage the emergencies caused by the consequences of the war, of having to relegate to the background the ultimate emergency which is the ecological transition?
In the short term, policy makers are faced with delicate choices because, by wanting to curb inflation, it is growth that they could weigh down; by wanting to face the energy crisis, it is the ecological transition that they are threatening; not to mention an international framework that is crumbling with geopolitical tensions that are taking precedence over economic issues. On the ecological transition, the risk of slowing down when it should be accelerated is at its highest.
The war in Ukraine is indeed forcing the Europeans, but also the Americans, to make decisions that run counter to the priorities they had set themselves. Germany to use more coal to deal with gas shortages. US restarts oil and gas production. In addition, the return of inflation also threatens the ecological transition because social tensions are likely to be exacerbated with the consequences of greater difficulties in implementing measures such as taxes on COXNUMX emissions.2 in a context of declining purchasing power.
TCF: Do these gloomy prospects call into question the recovery plans decided to fight against the pandemic? Have we gone too far?
After the fact, it's always easy to say to yourself that it was too much and that inflation paid the price. But, at the time these plans were decided, Russia had not invaded Ukraine and it must be remembered that the responses to the financial crisis had been deemed insufficient. At the time of the health crisis, the authorities learned the lessons of these shortcomings and it is clear that, faced with a shock of such brutality, they were not unworthy. For Jérôme Héricourt, their budgetary effort was much greater than at the time of the financial crisis and much better combined with the action of the central banks.
Even the countries of the European Union were able, during the crisis, to free themselves from their budgetary dogmatism. Admittedly, there would be something to say about the destination of the aid, which went much more to businesses than to households, and to emergencies more than to preparing for the future. But, overall, these support plans succeeded in preserving employment and, even if they obviously resulted in a sharp increase in public spending, without them, public finances would have deteriorated much more. What they did not avoid, however, was the rise in inequality which the health crisis seems to have led to.
TCF: But, all the same, aren't these plans the cause of the resurgence of inflation?
For the countries which have very strongly supported demand, like the United States, perhaps, but as we pointed out just before, aid went primarily to supply. As for the monetary support from the central banks, it has mainly benefited the banking and financial sector. The increase in money has flooded the financial sphere much more than the real sphere. So, current inflation may have a monetary component, but it is certainly not the only or the main one.
According to Thomas Grjebine, there are deeper, more structural and also more worrying factors because they are the ones that could make inflation durable and recalcitrant to the monetary tightening of central banks. This is perhaps the end of the low inflation regime in which Western countries had settled for thirty years.
We must expect more conflicts of distribution and sacred macroeconomic dilemmas for our rulers. They need to save the purchasing power without reducing competitiveness or fueling inflation. They must also limit increases in the prices of raw materials and energy but not curb incentives for ecological transition. About the rise in interest rates decided by the central banks to fight against inflation, it should not lead to a debt crisis, particularly in the euro zone. Because it is undoubtedly the investments in the ecological transition that would suffer.
TCF: Can the ecological transition nevertheless accelerate?
At this point, it's hard to say. The risk is great that the transition will continue to slip. It would be dramatic, because there is so much to do. Moreover, there is no shortage of insights to guide public and private action in this area. Because, for Michel Aglietta and Renaud du Tertre, it is imperative to articulate the two. Make proactive and coherent public action driven by strategic planning interact with the action of companies which, at their level, can limit inequalities, social exclusion and injustice, and participate in the fight against climate change, the degradation environment and biodiversity.
But, for that, they will have to change their governance in depth, no longer be managed in the sole interest of their shareholders and open up to that of all their stakeholders, taking into account the objectives of sustainable development. . The dual carbon beneficiation, consisting of pricing “embedded” carbon in polluting goods, but also “avoided” carbon, constitutes in this respect an interesting proposal to encourage companies to turn away from investments that emit the most greenhouse gases and to align with low carbon objectives.
TCF: And trade policies that have long ignored the climate, are they beginning to care about it?
Certainly, because even if it is still impossible, for lack of sufficiently detailed data, to know whether the negative effects of trade on climate change (such as international transport or increased production) outweigh its positive effects ( such as technological transfers or the development of less polluting production that the interplay of comparative advantages can stimulate), it would be irresponsible for Cecilia Bellora to continue to pursue commercial policies disconnected from climate concerns.
However, today, we are sometimes only at the stage of the tracks. This is the case of that which would consist of raising customs duties on the most polluting goods and lowering them on those that are less polluting. A little less of that of using trade as a lever to encourage our trading partners to be more ambitious in their climate policies, as evidenced by the free trade agreement recently signed by the EU with New Zealand.
A third track, the most advanced, is to act on trade flows to put on an equal footing, in terms of rights to emit greenhouse gases, producers in countries that are virtuous in climate matters and their foreign competitors. in their national market. This last option is the one that Europe is trying to put in place with its carbon border adjustment mechanism which, if materialized, would be a world first.
TCF: Europe is making a little progress on the climate, but what about its ambition to build its sovereignty vis-à-vis countries on which it is too dependent today?
In this area, Europe is also making progress. It must be said that the health crisis and now the war in Ukraine have cast a harsh light on the vulnerabilities that our interdependencies cause. For Vincent Vicard and Pauline Wibaux, it is around the concept of open strategic autonomy that the coherence of economic policy instruments, both internal and external, that the EU mobilizes to build its economic sovereignty, while while preserving economic openness.
Process underway, it is already relatively advanced on certain issues, such as major projects of common European interest which authorize State aid for private investment in strategic areas (microelectronics, electric batteries, hydrogen or semiconductors). But it is still at the negotiation stage on others, such as the carbon border adjustment mechanism or the anti-subsidy instrument. Be that as it may, the process has begun to redraw the contours of the international integration of the EU, which can no longer be accused of naivety.
TCF: Is public opinion now seizing all these subjects?
Not enough and, from this point of view, we hope that works like The World Economy. Because, in the climate of uncertainty and in the face of the economic and social suffering that this incessant chain of crises engenders, it is withdrawal into oneself and the search for scapegoats that could prevail. For sure then, it is immigration much more than climate change that we will hear about. The media have a major responsibility, a crucial role to play in ensuring that the immigration debate is well informed. And we must collectively take care that this fact-finding mission is not misguided. When we bring together the results of social science research devoted to immigration, as Anthony Edo shows, we realize the discrepancy between representations of the phenomenon and reality. A shift that has been clearly demonstrated to influence political opinions and the vote. So, on immigration as on all other subjects, let's work on education!
Isabelle Bensidoun, Assistant to the Director, CEPII et Jezabel Couppey-Soubeyran, Lecturer in Economics, Paris 1 Panthéon-Sorbonne University
This article is republished from The Conversation under Creative Commons license. Read theoriginal article.