Poland Ex-FinMin: "The Global Economy's Glory Days Are Over"

Tyler Durden's picture

Authored by Marek Dabrowski, originally posted at Project Syndicate,

The global economy’s glory days are surely over. Yet policymakers continue to focus on short-term demand management in the hope of resurrecting the heady growth rates enjoyed before the 2008-09 financial crisis. This is a mistake. When one analyzes the neo-classical growth factors – labor, capital, and total factor productivity – it is doubtful whether stimulating demand can be sustainable over the longer term, or even serve as an effective short-term policy.

Consider each of those growth factors. Over the next 15 years, demographic changes will reverse, or at least slow, labor-supply growth everywhere except Africa, the Middle East, and South Central Asia. Europe, Japan, the United States, and eventually China and East Asia will face labor shortages.

Although large-scale migration from labor-surplus regions to deficit regions would benefit recipient economies, it would almost certainly trigger popular resistance, especially in Europe and East Asia, making it difficult to support. Increasing the labor-force participation rate, especially among women and the elderly, might ease tight labor markets, but this alone would be insufficient to counter the decline in working-age populations.

The world economy cannot count on higher investment levels either. The global investment/GDP ratio, especially in advanced economies, has been gradually declining over the past 30 years, and there is no obvious reason why it would pick up again in the medium to long-term. Until recently, falling investment in the developed world had been offset by rapid increases in investment in emerging markets, mostly in Asia. But high rates of investment there are also unsustainable. As in Japan, China’s investment rate (running at almost 50% of GDP since 2009) will decline as its per capita income rises.

The third engine of growth, total factor productivity, will also be unable to maintain the relentless gains witnessed from the late 1990’s to the mid-2000’s. During this time, the global economy benefited from the confluence of several unique developments: an information and communications revolution; a “peace dividend” resulting from the end of the Cold War; and the implementation of market reforms in many former communist and other developing economies. Moreover, global growth received a further boost from the completion of the Uruguay Round of free-trade negotiations in 1994 and the overall liberalization of capital flows.

It is difficult to point to any growth impetus of similar magnitude – whether innovation or public policy – in today’s economy. No new technological revolution appears to be on the horizon. The World Trade Organization produced only a limited agreement in Bali in December, despite 12 years of negotiations, while numerous bilateral and regional free-trade agreements might even reduce world trade overall.

Worse, in the wake of the 2008 financial crisis, sluggish growth and high unemployment in developed countries have fueled demands for more protectionism. Thus, the financial liberalization of the 1990’s and early 2000’s is also under threat.

The far-reaching macroeconomic and political reforms of the post-Cold War era also seem to have run their course. The easy gains have already been banked; any further structural change will take longer to agree and be tougher to implement.

Thus, with supply-side factors no longer driving global growth, we must reassess our expectations of what monetary and fiscal policies can achieve. If actual growth is already close to potential growth, then continuing the current fiscal and monetary stimulus will only create more bubbles, exacerbate sovereign-debt problems, and, by reducing the pool of global savings available to finance private investment, undercut long-term growth prospects.

Instead, policymakers should focus on removing their economies’ structural and institutional bottlenecks. In advanced markets, these stem largely from a declining and aging population, labor-market rigidities, an unaffordable welfare state, high and distorting taxes, and government indebtedness.

The list of growth obstacles in emerging markets is even longer: corruption and weak rule of law, state capture, organized crime, poor infrastructure, an unskilled workforce, limited access to finance, and too much state ownership. In addition, markets of all sizes and levels of development continue to suffer from protectionism, restrictions on foreign capital flows, rising economic populism, and profligate or poorly targeted welfare programs.

If these problems can be addressed, both globally and at the national level, we can end the dangerous fiscal and monetary expansionism on which the world economy has come to rely and allow growth to be sustained over the long term – though at lower rates than in recent years.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Flakmeister's picture

Peak oil bitchez...

fonzannoon's picture

Funny how it's always ex this and ex that. Who listens to the last guy?

Fredo Corleone's picture

Poland: the former Warsaw Pact signatory nation which, in 2013, nationalized half of its citizens' private pension funds ?

Take this commentary from whence it comes.

0b1knob's picture

 "corruption and weak rule of law, state capture, organized crime, poor infrastructure, an unskilled workforce, limited access to finance, and too much state ownership"

But enough about the USSA.   What about the undeveloped world.

Charles Wilson's picture

"But enough about the USSA.   What about the undeveloped world."

If I read another story about Detroit, I'm gonna scream!

idea_hamster's picture

Didn't this guy hear about MyRA?!  It's risk free!  


Skateboarder's picture

Fonz, that was my sentiment exactly too. Always the ex-something guy who becomes the saintly voice of reason.

Vice's picture

like the ZZZZ Best Cleaners dude going all JESUS, then admits he steals money from the church. 

Gotta hand it to him, it's easy taking money from muppets these days I guess. 

People more concerned with signing a deport Justin Beiber petition . .  

Skateboarder's picture

And even MIley Beiber can be an ex-something someday, the saintly voice of hypnopropagandic reason.

Lore's picture

Re: "Who listens to the last guy?"

It's usually wise.  Once you're out the door, your words are no longer 'official,' enabling you to explore controversial topics more freely.  In fact, many such voices are seen in retrospect to have predictive value.  For example, they literally disclose knowledge of coming events, and table intelligent, innovative positions that can have real value in forming new policy.  There's a reason why many retired professionals become consultants.  They have a lifetime of knowledge, training, experience, aptitude and seasoning that makes them an asset to other groups and organizations.  They're often headhunted for that reason.

Lost My Shorts's picture

Gag.  Once you are out the door (the revolving door), your words become servants of your new big dollar employer, and you become a shill for big money.  The words go from bullshit to damned bullshit.

Notice that the "structural problems" cited by this guy are all code-phrases for making the financial elite ever richer, and busting 90% of the population down to poverty.  Strange that crony capitalism, excessive financialization, parasitic financial innovation, atrophy of human capital in the busted down former middle class, the rigged game, the revolving door, and official servitude to big money interests never seem to make the list of structural obstacles when these richly employed ex-officials pontificate on the economy.

Lore's picture

There's truth there, but it's too easy to generalise.

eclectic syncretist's picture

Without some serious investments into discovering, developing, and bringing to market new and alternative energy sources the perpetual growth model most people apply to the world economy is about to become a thing of the past, as it inevitably would anyway.

Lore's picture

What does your cut and paste of bottled "alternative energy" rhetoric have to do with my post?

Croesus's picture

@ Fonzannoon: 

I tend to listen to the "last guy", as the "last guy" tends to be a lot more open and truthful, once he's no longer restrained by the 'invisible hand' above him. 

Just an observation...

Calmyourself's picture

Look I will help you; divorce the dragon lady, get your kid better math tutors and stop blogging ok..

doctor10's picture

Peak oil-centralized power -centralized government. All will end in our lifetimes. Maybe sooner

sixsigma cygnusatratus's picture

Bankers commiting suicide, former financial ministers and chief economists telling the truth...I'm expecting that pretty soon, Carlton Sheets will put out a late night infomercial to show you how to get rich slowly by getting a second job.  What the heck is going on out there?

gwar5's picture

.... No shit Sherlock.


IOW, the whole socialism thingy is bust and was just a utopian dream after all, like Hayek said. Serf's up.

401K of Dooom's picture

You know Tyler, we need the Zero Hedge national/world economic summit.  We need this to be held in Muscle Shoals, Alabama, in order to honor the memory of Lynard Skynard.  That and to give another opinion of what is going on.

DavidC's picture

At least get the name correct, it's Lynyrd Skynyrd.


Kirk2NCC1701's picture

Lizard Skinner, if in Alabama.
(Bankster) Lazard Skinner, if in NY.

Midas's picture

I don't know man, I think misspelling it might be a sign of a true fan in the case of Skynyrd(sp?).

James's picture

it's Lynyrd Skynyrd.


That band took the name of their high school gym class teacher.

Oldwood's picture

The glory days are over...and I missed it? What the fuck!

Ban KKiller's picture

Yes, of course, we are still in a decline that started in 1971, the peak year. 70 year cycle puts us where? Oh yeah still going down. Or so I have read....


Mike in GA's picture

Governments don't roll back laws.  Good luck on trying to institute change from within any of these ossified government regulated economies.  Change, at this point, will only come from great crisis.  Fortunately, there seems to be no end of evidence that great crisis is nearly upon us. 

walküre's picture

The federal and municipal pension royalty in the West is going to feel the decline more than anyone else. Of course governments are going to print, print, print to mask the cash flow problems and that 6 figure pension at age 55 is going to buy that teacher exactly a few groceries and gas a month.

Croesus's picture

@ Walkure: 

Around here, my town is loaded with people who are on government pensions (ex-military, mainly officers, and ex-dotgov, esp.). They are predominately the ones who think we're living in "Happy Times", because they retire early with a full pension, and immediately go out and get another job (preventing upward mobility for someone else).  

Speaking from my own experiences with them, it is their sense of entitlement that galls me the most, and while I wouldn't wish misfortune on them, I can also say that I won't feel too sorry for them when the bell tolls. 


TideFighter's picture

Watching what was happening when Atlanta got 2 inches of snow and ice was quite apocalyptic. People just parked their cars in the middle of the Interstate, formed their own bands of security (groups) and walked home, some taking 14 hours to get there! Two inches of ice and snow, and Hotlanta came to a abrupt halt. Imagine the day when shit hits the fan, can you say vigilantes? Most of those people will be robbed, raped, and killed. I hope the people of Atlanta have learned a lesson to be prepared and always, always carriy a gun.  

Lore's picture

14 hours?!  Were they from out of state or something?

DirkDiggler11's picture

A SuperFantastic event is what happened in Atlanta yesterday. Why so great you may ask? Two fold really, it demonstrated to the average citizen in the Atlanta Metro area that our government at all levels is completely incompetent to perform even the most basic of tasks such as clearing roads of snow and ice, getting school kids home from school, and providing police protection and emergency services.
A simple 30 minute drive took me from 1pm yesterday to 11:58 PM last night. What a joke.
You know what I did see that reassured me that the US is not totally down the drain yet ? Citizens taking matters into their own hands in the absence of their worthless government. I witnessed people actually getting out of their cars and helping to push total strangers cars up ice covered hills. I saw people driving ATV's from their houses to help school kids get off of busses that were stuck on the sides of roads. I saw people helping to direct traffic at intersections and making two lane roads into one way roads to get traffic moving, I also saw people in the city coming out if their homes to offer complete stranger stuck on the interstates shot meals, something to drink, and even taking in total strangers for the night that were trapped on the interstate in their cars. Nearby businesses opened their doors and even kept stranded motorists in their warehouses for the night so they could stay warm and get something to eat. I had multiple employees caught out int the storm yesterday on the roads, and the kindness of strangers in taking these folks in from average citizens to businesses was eye opening to me,
What I saw in Atlanta yesterday and last night was an event that showed everyone how you can't rely on your government for a damn thing. The storm also showed me that there are a lot more honest, decent people in this country than I have grown to believe over the past 10 years through my somewhat jaded lense,
Bring on another storm, I think the next one may have our republican crook Govenor and over promising democratic mayor being drug through the streets together, en-route to a good ol fashioned hanging,

El Vaquero's picture

And I thought people in NM sucked while driving on snow and ice!  My jeep is scary in 2wd on the stuff, but slow down, pop it into 4wd and it kicks ass.  And if it stops kicking ass, well, I've got chains. 


Anyhow, it is good to hear that there are plenty of us plebs who aren't complete fuckwads. 

tip e. canoe's picture

personally, i think most people are deeply craving to be kind to each other, but just need a little kick in the ass to do so.

El Vaquero's picture

Funny, I've found myself being kinder the past couple of years.  About a month and a half ago, there was a pregnant woman stranded out in the cold.  I drove her all the way across town to her home.  Some of my family members freaked out, because, you know, all 200lbs of me and the pistol I had on my hip really could have been put into danger by this little pregnant woman.  Or even somebody at her home.  The only person for whom there were adverse conditions was this gal.  During normal times, I think fear still rules the day for many.  I'm tired of treating every single human being as potentially dangerous.  Sure, there are dangerous people out there, but most people deep down, to paraphrase what you said, would like to be kind.  Maybe this gal will pay it forward in some small way.  It would make me happy.


Of course, when people get desperate because supply chains break, all bets are off. 

Woodhippie's picture

+1 for a great story.  Love hearing this type of commentary.

buzzsaw99's picture

The list of growth obstacles in emerging markets is even longer: corruption and weak rule of law, state capture, organized crime...

Yeah, 'cause only loser emerging markets have those kinds of problems. :roll:

AR15AU's picture

There is this meme about the taper hurting Gold and Silver.

Yet it occured to me that the taper will hurt EM currencies, stocks, and bonds far, far worse.

They will ALL tap out LONG before gold / silver can be vanquished by some kind of new strong dollar.

So I'm stacking silver at every price quoted to me.

Lore's picture

Yep. The weakest parts of the economy break first. That's what makes modern monetarism so dangerous: as an instrument of capital destruction and misallocation, it is the fundamental source of weakness.

Yenbot's picture

Yep, them glory days. Days when men on horses rode toward men in tanks...

cynicalskeptic's picture

Don't diss the Poles.  They accomplished far more against the Germans than they're given credit for - courtesy of Nazi propaganda efforts.  The Germans didn't want the Brits and French knowing just how much the Poles hurt them.  Equipped with obsolescent aircraft, they shot down a respectable number of German aircraft, hampered by logistics (ability to refuel and repair damaged aircraft).  On the ground, the Poles fought hard and inflicted serious casualties on the Germans.  Faced with defeat, many Poles fled to fight on with the French and then British.  Polish pilots wer a vital part of British defenses in the latter part of the Battle of Britain and were noticeably more'enthusiastic' than the French during the Battle of France.  Poles captured and interned by the Russians eventually retuned to combat after the Soviet Union was invaded - most making their way to Britain  They fought valiantly in Italy and Europe.  Despite fighting valiantly throughout the war they were sold out - with the Soviets running a 'liberated' Poland.  Poles were not even allowed to march in VE day parades in Britain.

ReactionToClosedMinds's picture

what was so objectionable with the above to generate a down vote?

Poland codebreakers captured GErman Enigma machines and partially cracked it before they had to run to France then England.  Brits finally took down all of it .... but Polish mathemeticians essentially broke open the dike with little resources or help.

Americans mistakenly bombed Monte Casino when the front edge attack by Poles was in process.... covered up ..... massive deadly casualties from friendly fire ... alot ....thank all of them & many many more everywhere ...or do you need a Saving Private Ryan moment?


Woodhippie's picture

I don't understand the down votes either.  I wish when people down voted they would take the time to say what they found they didn't agree with.  I like hearing multiple sides of a discussion. 

rygar's picture

polish calvalry against german tanks is completely false meme. In fact, quiote ooposite was true. Poland between world wars was rapidly developing country, with a lot of modern military designs (yet she not enough time to produce it in eqnough quantities). Whern germany attacked poland it was actually Germans who used calvarly in traditional sense (force about 750 000 men).  Germans upgraded their weaponry  later during german-soviet war. When germany attacked poland, they used wooden aircraft. That is reality.

TheCosmicTaco's picture

The Poles should stick to holding up telephone wires, which they are good at, and leave the economic forecasting gig to types like Marc Faber.

MrPalladium's picture

Bullshit. The Poles make fantastic vodka!

I especially like their potato vodka, and this from a single malt fan!!

Canucklehead's picture

True, they are good at making vodka, but being part Pole myself, I like the idea of holding telephone lines... in the ancient Greek tradition.

Kirk2NCC1701's picture

Until the BRICs and EMs realize that they are the Fed's bitch, because they're all using the Petro-Dollar, the bitch-slappings and worse will continue.

They need to agree on a system that has inherent merit and can't be hijacked by the Fed & Friends (GS, JPM...).

As I've said before... A system that meets these TWO criteria has each nation's currency based on (a) a mix of PM holdings and (b) a mix of Exportable Energies... As a way to settle their national FX accounts (for when their slick & easy politicians get compromised into excessive currency & debt creation).