The State of the World Economy
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Speaker: Olivier Blanchard This event was recorded on 4 November 2010 in Sheikh Zayed Theatre, New Academic Building A strong and sustained world recovery requires two rebalancing acts. Internal, with a shift, in advanced countries, from fiscal support to private demand. External, with an increase in net exports in deficit countries, notably the US, and a decrease in net exports in surplus countries, notably China. Policy should be aimed at increasing their pace. This lecture is one in a series of lectures to celebrate 21 years of the Centre for Economic Performance. Olivier Blanchard is Economic Counsellor and Director of the Research Department at the IMF and has worked closely with the CEP over the last 25 years.
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It is interesting to listen to the insights of economic experts made at the deep trough of the last economic cycle. Sadly, the most needed structural reforms needed have never made it into the political discourse. What was and is needed is a very significant restructuring of how government at all levels raises needed revenue. This is a message raised in recent years by former World Bank economist Joseph Stiglitz, one of just a few members of his discipline who understand the destructive character of "rent-seeking" speculation in land, natural resources and land-like assets (e.g., the broadcast spectrum and even take-off and landing slots at airports). Joseph Stiglitz sometimes refers to the 19th century political economist Henry George as a source of his insights. George called for the elimination of all taxation except the taxation of rents (an idea Milton Friedman endorsed as well).
One problem with the language utilized by mainstream economists, as indicated in this talk, is the reference to "housing" as a segment of the economy rather than the more correct reference to "property," which points to the fact that land markets operate very differently than the markets for housing units. If only more economists would spend some effort studying land markets they would have a better understanding of how the global economy actually operates.
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