Decision Time for the Global Economy
— August 19, 2013
By A. Michael Spence
And when summer ends, uncertainty about key issues will be the order of the day – and not only in Europe. Largely unanticipated protest movements in Turkey and Brazil have raised questions about the economic and social sustainability of emerging-market growth. The fires in Bangladeshi garment factories have raised new questions about the governance of global supply chains.
In the United States, the Federal Reserve hinted at “tapering” its quantitative-easing policy later in the year, and a kind of global carry trade based on monetary conditions in advanced countries started to unwind as a result, causing credit tightening and market turbulence in emerging economies. This is probably only a preview of the complexity of the exit from the post-crisis assisted-growth model that has prevailed in the US, Europe, and now Japan. A possible political impasse in the US in September over the budget and debt ceiling complicates the outlook further.
Read the full article as published in Project Syndicate.
A. Michael Spence is the William R. Berkley Professor in Economics & Business.