[Economics] ‘The global economy is undergoing a ‘regime change’ today — India is the outstanding performer now’

[FazzNoth]

A. Michael Spence is a Nobel Laureate and professor of economics emeritus at Stanford University. Speaking to Srijana Mitra Das, he discusses profound economic changes taking place worldwide and the factors driving these:

Why do you say the global economy is undergoing a form of ‘regime change’ today?
Several things are occurring at the same time when you add them up, economically, it makes for a different world. The first is, we had a long deflationary environment during the pandemic with relatively little inflationary pressure. This was mostly a demand-constrained economy. Now, that’s changed and quite suddenly today, supply is the problem. Supply is constrained since a good part of the deflationary environment seen over earlier years came from a burst of productive capacity in emerging economies which were entering the global market. This is much less powerful now while the global economy is much bigger, with millions of new consumers in emerging markets expanding the demand side.

The second factor is, labour market behaviour has changed many industries are having trouble recruiting with young people preferring to work in hybrid mode and many in stressful or dangerous jobs not wanting to return to these. The power of labour in a supply-constrained economy is rising, adding to the shift. Further, three scientific and technological transformations are occurring, which will shape a changed world with new rules.

 

Can you tell us about these transformations?
The ongoing digital movement has enormous potential to increase productivity with inclusive growth in e-commerce, research in China, etc., shows the average distance between buyers and sellers is 1,000 kilometres now while in the offline world, this is five kilometres. That’s a dramatic expansion in the accessible market, giving everyone the outreach only big multinationals once had. Then there is artificial intelligence (AI) think of the breakthroughs in image recognition algorithms, which can now even detect cancers from pictures or diagnose diabetic retinopathy. These could dramatically extend medical diagnostics and healthcare services. In the life sciences and biomedical fields, the costs of very powerful tools are reducing. DNA sequencing once cost ten million dollars a full DNA sequence now costs around a thousand dollars. These are helping scientists advance the boundaries of their fields. Many pose regulatory challenges but their potential to improve productivity is huge. A third revolution is the energy transition, for which we need carbon capture, solar expansion, etc. These three movements are simultaneous and transformative.

https://www.google.com/amp/s/m.economictimes.com/news/et-evoke/the-global-economy-is-undergoing-a-regime-change-today-india-is-the-outstanding-performer-now/amp_articleshow/94542579.cms