Trade and Development Report 2017

Beyond austerity: Towards a global new deal

Dr. Aadil Nakhoda, Assistant Professor at IBA, arranged a video conference on 4th May 2018 in G & T Auditorium, Main Campus, between UNCTAD (United Nations Conference for Trade and Development) and his students taking International Trade and History of Economic Thought. The presentation was followed by a short discussion with Dr. Farrukh Iqbal, Dean and Director at IBA. He exchanged views with the students on the importance of the trends and data presented in Trade and Development Report 2017 in terms of the impact on Pakistan as well as his opinions and perceptions on CPEC (China Pakistan Economic Corridor).

Trade and Development Report 2017

The presentation on Trade and Development Report 2017 was given by Piergiuseppe Fortunato who is currently an economist at UNCTAD. He presented from Geneva, Switzerland. Before joining UNCTAD he was an economist at Department of Economic and Social Affairs of the United Nations. In the past he held a position of Assistant Professor in Economics at the University of Bologna and was a research fellow at the Université Paris I Panthéon Sorbonne. His research interests include economic development, political economics, international trade and South-South integration. In these fields he has published in journals such as the Journal of Economic Growth, The Economic Journal and the European Economic Review. He is also heavily involved in policy oriented research; he edited a volume on post-conflict recovery for Bloomsbury Academic, published in policy journals like Global Policy and contributes to several blogs (e.g. Vox and La Voce).

Mr. Fortunato raised various crucial aspects of today’s economy. He mentioned how underwhelmed the global recovery is and discussed how the United States of America recovered very drastically after the 1929 crisis. Unfortunately, the recovery was slower in the periods following the more recent recessions. He also discussed how the economy is overwhelmed by “Business as usual” which he referred to as the economic deadweight of austerity (the new normal). He discussed the difficult economic conditions that are created by government measures resulting in reduction of public expenditure.

Trade and Development Report 2017

Mr. Fortunato also mentioned how economists are increasingly becoming more anxious about the likelihood of building inclusive and sustainable economies (SDG and Paris Agreement). Further, they are also anxious about the fact that developed countries are no longer providing net demand stimulus to global economy, commodity prices once again are showing signs of weakness only after a brief recovery and that capital inflows in developing countries are still negative.

He discussed the current shift that is taking place in the society. The debate ranges from the rising inequality due to trade to the technological adjustment taking place and the shifting market power, rentiers capitalism and politics that influence international trade.

He also discussed other issues such as automation, gender and financial instability. He discussed the increasing role of industrial robots, which are getting smarter and cheaper as well as more compact. This in turn is threatening large-scale job displacement and wage erosion. However, the use of industrial robots still remains low in the developed countries to prevent wage erosion as industrial robots seem technically feasible but not economically profitable. Developing countries on the other hand are not as threatened by the robot-based automation due to the existing structure of their industries. Another interesting perspective he mentioned was that the employment rates for men are declining while that for women are increasing. The evolving gender composition may be a source of gender conflict. He further reported the exclusion of women from industrial jobs as several developing countries are facing premature industrialization.

Mr. Fortunato also talked about the financial instability and how there was no strict causality found between inequality and financial crisis. The common channels of transmission before the crisis were inequality -> under-consumption, uncertainties, diversion of productive investment to speculative investment (Keynes) -> Credit booms and instability but common channels of transmission after crisis were instability and economic dislocation -> bankruptcies, creditor bailouts, austerity policies, unemployment, declining wages and stagnation -> further inequality. He finally concluded his presentation with an emphasis on a New Global Deal guided by principles from the Marshall Plan. The New Global Deal is to focus on inclusive recovery, expansion of the fiscal space and redistribution of income from rich to poor.

Trade and Development Report 2017

Following Mr. Fortunato’s presentation, Dr. Farrukh Iqbal, Dean and Director at IBA, had a discussion on the relevance of the presentation to the Pakistani economy. Although, Pakistan may not have faced the same shocks as other developing countries mentioned, the presentation did provide an opportunity for students to think about potential challenges as Pakistani economy evolves and expands. Dr. Farrukh Iqbal also discussed the advantages and costs of the China Pakistan Economic Corridor (CPEC) and the opportunity it provides to the development and progress of Pakistan.

Both the presentation and the discussion that followed were well-received by the students.