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At this event the main trends and challenges at the global and EU level have been outlined by the panelists. Mikhail Fridman recalled that the main global challenges in the past used to be related to energy resources, implying the need for conquering and defending territories. This idea is today steadily disappearing and the developed world is moving towards the exploitation of intellectual capacity. It is striking to look at the sector in which the top companies by market capitalization operate: the power of technologies outpaced that of natural resources. This applies also to emerging markets: as far as infrastructure and resource exploitation was concerned, China, for instance, performed well thanks to a centralized system. This principle, however, does not apply to intellectual and social capital which require a long-standing development of rule of law, competition rights, intellectual property rights and so on.
Marco Buti looked back at the main expectations 20 years about future economic developments: a globalization of capital rather than labor; a skill-biased technological progress that would have displaced unskilled workers; the faith in multilateral solutions; the assumption that sharing (especially monetary) sovereignty would have brought convergence of social preferences and mutual trust; and that an inclusive welfare model in the EU would have protected from inequality. However, the actual developments have shown to be quite different. The globalization of people is now more pressing than that of capital. Globalization and technological change have negatively impacted mostly the middle class, and this trend will be accentuated even more by recent advancements in robotics. The current populist tendency is indeed addressing the median voter and her malcontent. Multilateral solutions and sharing sovereignty can be disputed since the recent economic crisis, as does the EU welfare model. According to him, six are now the main trends: low productivity growth, demographic transition, new innovation patterns, rising inequality, risk of fragmentation and widespread lack of trust. Looking at the governance levels, there are three main sets of responsibilities: the pre-market level (i.e. the endowments/resources), the market liberalization or integration and the post-market level, embodied by the tax and welfare system. Currently, only the second one is an EU prerogative, while the other two are up to National States. According to MB, this distinction of levels is not politically sustainable in the long term, and a rethinking of the responsibilities is needed.
Christian Kastrop contended whether the EU is fit for the megatrends of this century. Macro policies have become more supportive, but demand is still weak, unemployment high, financing for firms is still a problem, the barriers to intra-EU mobility remain too high and the level of investment is still below pre-crisis levels. GDP gains from EU structural reforms can be large, but more of them are needed, as well as a proper Digital Single Market to unleash the potential of the Industry 4.0 and a single market for services. Aggregate demand is weak as does the gross capital formation, while non-performing loans are still too high, hampering demand. Public investment cuts are needed, but there is a quality issue in selecting them. Regulatory burdens are still too high in Europe, e-commerce remains mostly domestic and the ICT capital stock gap with the US is still persistent. The quality of impact assessment and of ex-post evaluation should be increased, as well as the recognition of professional qualification in order to increase labor mobility, also for migrants.
Event Notes by Enrico Nano
Video and audio recordings
Perspectives of the world economy in the era of unprecedented çartindividual creativity - The Jerusalem Post 05/18/2016
Searching for growth in an unstable global-economy -The Milken Institute Review