March 27, 2014
WHAT WOULD A REVERSE 9-11 LOOK LIKE?
The Global Economy's Tale Risks (Robert Schiller, 3/27/14, Project Syndicate)
Visiting Japan on a speaking tour, I am struck by the positive impact of the economy-related stories on people's thinking and behavior, and also by how fragile that change is. Since Prime Minister Shinzo Abe assumed office in December 2012 and launched his program of monetary and fiscal stimulus and structural reform, the impact on Japanese confidence has been profound. According to the International Monetary Fund, the output gap - the difference between actual and potential GDP - narrowed from -3.6% in 2011 to -0.9% in 2013.Most of the rest of the world lacks a comprehensive, easily understood narrative of positive change similar to Japan's "Abenomics." The output gap for the world's major advanced economies, as calculated by the IMF, remains disappointing, at -3.2% in 2013, which is less than half-way back to normal from 2009, the worst year of the global financial crisis, when the gap was -5.3%.We seem to be at the mercy of our narratives. Ever since 2009, most of us have just been waiting for some story to turn our hearts aglow with hope and confidence - and to reinvigorate our economies.
Which is why it seems silly for the UR to give up on a grand bargain. We need a big stunt to reverse the narrative. The underlying conditions do all the rest of the work.Posted by Orrin Judd at March 27, 2014 3:33 PM