The IMF global economic review, published today, is a curious mix that still reflects its confusion on what government deficits represent, meaning that some of its recommendations look to be of limited value, at best. But what I was interested by, and thought worth sharing, as their commentary on why, despite strong signs of growth, this is very incomplete. They say:
Why do we say that the recovery is incomplete? It is incomplete in three important ways.
First, the recovery is incomplete within countries. Even as output nears potential in advanced economies, nominal and real wage growth have remained low. This wage sluggishness follows many years during which median real incomes grew much more slowly than incomes at the top, or even stagnated. Drivers of growth including technological advances and trade have had uneven effects, lifting some up but leaving others behind in the face of structural transformation. The resulting higher income and wealth inequalities have helped fuel political disenchantment and skepticism about the gains from globalization, putting recovery at risk.
Second, the recovery is incomplete across countries. While most of the world is sharing in the current upswing, emerging market and low-income commodity exporters, especially energy exporters, continue to face challenges, as do several countries experiencing civil or political unrest, mostly in the Middle East, North and sub-Saharan Africa, and Latin America. Many small states have been struggling. About a quarter of all countries saw negative per capita income growth in 2016, and despite the current upswing, nearly a fifth of them are projected to do the same in 2017.
Finally, the recovery is incomplete over time. The cyclical upswing masks much more subdued longer-run trends of productivity and demographics, even correcting for the arithmetical effect of more slowly growing populations. For advanced economies, per capita output growth is now projected to average only 1.4 percent a year during 2017—22 compared with 2.2 percent a year during 1996—2005. Moreover, we project that fully 43 emerging market and developing economies will grow even less in per capita terms than the advanced economies over the coming five years. These economies are diverging rather than converging, going against the more benign trend of declining inequality between countries due to rapid growth in dynamic emerging markets such as China and India.
To put it another way, the benefits of growth are desperately unequally shared, with potentially massive impacts arising.
Read between the lines and even the IMF is realising that growth is not a goal in itself because it simply cannot deliver by itself. That, at least, is encouraging.
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“Why do we say that the recovery is incomplete”
Because that is more polite than saying that there is no real recovery at all (at least not in net terms overall and certainly not in the real economy).
What there is, is stagnation that was being passed-off (unofficially) as the new normal when Cameron and Osborne were still around. For better and worse, perceptions have changed since then.
I think there is a recovery for the few, but not the many
And I think they are saying that
Yes, It also gives the impression of being an “I told you so” type warning in anticipation of further crises and unrest. Which is fair enough and good that they have said something like this, again.
I think my crabby response above was partly inspired by this bit: “as output nears potential in advanced economies”. I don’t know where those advanced economies are. Just going by the most dubious of conventional indicators alone (inflation, unemployment, underemployment, interest rates) the presence of a seemingly permanent excess capacity – of labour and capital – is clear in advanced economies generally.
I get annoyed by these silly, misleading, inexplicable, obsolete “output gap” delusions that so many economists persist with.
That and other bits irritated me too
But there was enough there to share
This is the continuing ‘ balance sheet recession ‘ that Richard Koo has defined . Prior to 2008 rising wages and ( relatively ) high inflation combined to , if not wipe out debt, at least maintain a balance between creditors and debtors . That ended in 2008 and the bailout by governments of creditors ensured that no reset of the balance was possible. ( As an aside that isn’t Capitalism ). So even to talk about ‘ recovery ‘ is false because by definition it implies a recovery of the pre 2008 status quo and as is evident no government – not the ours, nor the US’s, nor the Eurozone’s – has seen fit to let the creditors go to the wall so now we find ourselves in this jungle where central bank ‘ monetary policy ‘ is a joke , zombie banks post record ‘ profits ‘ , asset bubbles appear in every asset class etc etc . Fortunately for the good of their health most people that I encounter haven’t the faintest idea what lies behind the fact that their wages haven’t increased, but they are worse off financially than they were ten years ago and cannot conceive of the prospect of any kind of ‘ better tomorrow ‘ , but such is the indomitable human spirit on they go making the best of what they have in the present .
@John Hope
One paragraph packing a huge punch.
If only the Labour Party could articulate this the world be an instantly more promising place.
Agreed.
‘Incomplete growth’ is the new euphemism for ‘market failure’.
And the use of euphemism’s to explain stuff like this in my view shows us that there is a long way to go yet before we can state the bleedin’ obvious. And that remains a concern.
Bloody right PSR.
“And the use of euphemism’s to explain stuff like this in my view shows us that there is a long way to go yet before we can state the bleedin’ obvious. And that remains a concern.”
‘A long way to go’ like a journey of a thousand miles begins with a single step.
When people spout bullshit it is always worth asking what they mean. Nine times out of ten they haven’t a clue – they are repeating, almost verbatim, something they have heard which sounded sensible or clever. If you are of a charitable disposition you might assume that they are just trying it out, possibly for the first time, to see how it plays to an audience. It could well be an error to regard it as a considered opinion.
Until such time as you (with an assumed air of innocence) enquire what the hell they think they are talking about ( but politely) they won’t have realised that they don’t know.
Rather than argue with an indefensible statement it frequently pays to ask for an explanation and allow the speaker to descend into a hole of their own making. Accept their crap as a gem of wisdom, previously unrevealed to you. You’ll know when they have ‘lost it’ by the look in their eyes. (And sometimes more obvious signs which could presage an incipient heart attack) Then leave them to go away and rehash their argument until it makes sense.
Next week/month/year they will come back to you and explain how deluded you were not to understand …what you were telling them in the first place. When your words come back to you they only need to be edited not argued with. The new insight is now ‘owned’ by a convert and you have won your case. Be sure not to signal that you realise this. And certainly never gloat. (Until you are out of sight and earshot. YES !)
(NB When Churchill admitted to John ‘Milton’ Keynes that he had come round to Keynes’ way of thinking on some matter of their mutual interest, Keynes is reputed to have replied, ‘That’s a shame because I’ve changed my mind.’
Anecdotal and literary evidence suggests Keynes was possessed of a functional mammalian brain which he exercised. Churchill on the other hand was reliant on the amygdala, the rest of it being a perfectly preserved example of the same brain design, but pickled, and strictly non-functional. Popular mythology disputes this, but history seems to bear it out. ( despite his having actually written most of it)
Mental agility is key. It is emphatically not wrong to change your mind when circumstances change. Keynes said as much and he was brighter than me by a good bit. (But possibly not so handsome and by no means as modest.)
“There’s no limit to what a man can do, or where he can go, if he doesn’t mind who gets the credit.” Source unknown (to me) I lifted it from Wings over Scotland website.
I now own that thought. It’s mine. I can’t unthink it, and if it’s useful to you it’s now yours aswell. I balk at the very idea of intellectual property: accept that and some bastard will be charging you to breathe before you can say ‘spit’.
For each statistic, every time, can we always insist on the median, not just the mean.
The median relates to real people.
The mean relates to things and to money, that don’t have feelings or pain.
(mean=average)
(median = half the population get more, half get less)
Completely agree with that – we should measure outcomes on the basis of the median rather than say GDP – medianism.
There a good discussion of the idea here.
https://medianism.org/
Interesting site
Michael Green,
“(mean=average)
(median = half the population get more, half get less)”
I’m not a mathematician, but I don’t think that is correctly defining either the mean or the median so it is not a good basis for drawing conclusions.
Yes. Mean is the average. Add all the elements and divide by the number of elements it gives you the middle value. Take ten apples – one person has ten the other has none they have an average of five each. Useful statistically? Not very. Dependent on what you wish to ‘prove’.
This is the mechanism which gives a centre line of value but no indication of distribution. Hence Michael Gove’s ‘howler’ about wishing to make all schools above average: a logical impossibility. Average (mean) values are not useless, but in some contexts they are, and often are used inappropriately and can give a very misleading impression. For example the ‘average wage’ can be calculated with great accuracy, if you have all the figures, but it doesn’t tell you much which is useful except as a comparison over time which may be indicative of the overall state of the economy. Like next year you may have twelve apples to share. The distribution (all and nothing)
remains the same but on average both have six apples and are on average better off by one apple each.
The median value tells you about distribution. It tells you what the middle people have. Some have less some have more. Possibly a lot less or astronomically more. How wide the band of reference is is a matter of choice for the presenter of the figures. So even a median figure can give a misleading impression. It’s something you can illustrate or even identify with Bell curves (if my memory serves me well.)
Anyone wishing to know more about the minutiae of statistical analysis could read a very boring technical textbook or perhaps be more entertained, and simultaneously informed, by reading Ben Goldacre’s book ‘Bad Science’ which I heartily recommend. It’s not all about numbers it’s about ways of presenting research to fit an agenda rather than reflect anything approaching objective reality.
I hope that is helpful and doesn’t sound like I’m being a smart arse (or a Worstallite troll !!)
There are three ‘averages’ : the mean, median and mode.
Have a look at the mode: it is the tool of those who seek the greatest good for the greatest number.
It is also impossible to calculate a modal average without also constructing a histogram or distribution curve that highlights inequality, the presence of a substantial underclass or overclass, and a visual representation of the gini coefficient.
Agreed
Thanks for sharing the extract, Richard. I don’t know when or if I would have clocked it elsewhere.
What I find ….er..dismaying (?) to put it mildly, is the assumed tone of complacent detached objectivity.
The IMF is commenting on a global economic landscape which it has been instrumental in creating. – Systematically; during the entire post war period of its existence.
I had hoped that Christine Legarde’s appointment as ‘convenor’ of the IMF would be ‘a good thing’ (a Sellar and Yeatman term I find I am fond of, and which is independent of any assessment of whether or not she is a good person). I am reserving my judgement of her influence on the working of the IMF by adopting the Chou En-Lai principle that it is too early to tell.
Yanis Varoufakis acknowledges her (CL’s) coining of the ‘Adults in the Room’ epithet which he adopted as title for his recent book. (I interpret it as plea for observing the rules, or conventions, of what we tend to call ‘realpolitik’).
If Christine Legarde is in fact one of ‘the adults in the room’ I think both she, and we, need to realise that her role is that of childminder.
In that respect the role model she could usefully refer to is Nanny McPfee rather than the charmingly quaint Mary Poppins.