Rethink economy globally
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China Daily, August 29, 2011
The increasing fragility of the global recovery certainly warrants the attention given the annual gathering of the world's central bankers at Jackson Hole in the US State of Wyoming at the weekend.
But as the central bankers of the debt-laden rich countries have begun to realize, there is a limit to what monetary policy can do - these debt-laden countries should no longer count on cheap credit to overcome their fiscal and economic problems.
If the international community is to pursue a lasting global recovery, policymakers should pay more attention to the message aired at another meeting held on Friday.
In Inhotim, Brazil, four emerging market countries - Brazil, South Africa, India and China - called on industrialized nations to step up their commitment to reduce greenhouse gas emissions at a key UN climate summit later this year.
With the Kyoto protocol to expire next year, the international community has yet to come up with another deal that adequately recognizes the scale or urgency of the challenge of combating climate change.
The failure to reach a climate deal in Copenhagen in 2009 was perhaps understandable since the world economy was yet to lift itself out of the depths of the 2008 financial crisis. Massive stimulus packages enjoyed priority over long-term issues such as fiscal sustainability and climate change.
However, three years into the crisis, the fact that the world economy - especially those debt-laden rich countries - needs to prepare for a double-dip recession demands a thorough review of the legitimacy of procrastination in dealing with climate change.
Seemingly in the belief that reducing carbon emissions will erode the competitiveness of their economies, the leaders of the European Union and the US have already warned that there will be no binding deal on emissions at this year's climate summit in South Africa. This reluctance to commit to more meaningful CO2 reductions indicates that policymakers in those countries still view climate change as merely a challenge to their "business-as-usual" recovery, rather than a rare opportunity to ignite green economic growth.
While the bloc of four emerging market countries has done a lot to combat climate change and presented ambitious objectives to strengthen their role as global growth engines, debt-laden rich countries have largely shied away from their responsibilities and the opportunity to cut greenhouse gas emissions.
That the Fed did not suggest a new round of quantitative easing at the central banker meeting may not necessarily signal a departure from the US' addiction to cheap credit and government debt. But it does urge US policymakers to deal with high unemployment and economic woes with real growth measures other than monetary painkillers.
And if the disastrous Hurricane Irene that hit the US at the weekend can be viewed as the latest evidence of climate change, it adds to the urgency for global policymakers to think hard about the need to include an aggressive climate deal in international efforts to secure a lasting global recovery.
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