A new world order could be carved out on the basis of how different countries are experiencing the global slowdown. The BRICS countries would be redubbed the Inflation Infected. The Western economies would be the Bloc of No Jobs.
In the past, most countries experienced a world economic crisis in largely the same way — oil-exporters and the Swiss excepted. Today, the residents of the rich nations and those in emerging countries have wholly different economic worries.
Armies may separate them, but rising prices are the common link between the average Indian and Chinese. Beijing’s official inflation rate is 2%. Chinese know better. “The actual rate of inflation could be around 10%,” says Xia Yeliang, economics professor at Peking University. Those on the street think it’s higher.
Says Aviva Zhao, a brand director at Geek Park tech forum, “Prices are rising 20% every year. Vegetables, fruits, clothes, housing…Prices of everything has gone up by over 150% in five years.”
This will echo with Indians who have seen the income gains of the past decade eaten away by double-digit inflation, especially for food.
A similar story can be heard in other emerging economies. Brazil’s central bank last month increased interest rates in an attempt to kill off rising prices — prices that fed massive urban protests this summer. Russians are also experiencing 6%inflation.
Switch to the West and the economic complaint changes. A Pew survey in May asked rich country citizens to name their number one economic concern. Only 11% said prices; 49% said jobs.
This is acute in a Europe battling the double whammy of the subprime loan crisis and a sovereign debt blowout.
France, Europe’s number two economy, lies between Germany’s economic glow and southern Europe’s black recessionary hole.
“The French are mainly worried about their purchasing power,” says Jerome Creel of the French Economic Observatory. “This is because the unemployment rate has been rising since 2009 because of the global financial crisis and since 2011, the fiscal tax policies of the government.”
Eurozone unemployment is over 12%. Jobless numbers fell recently by 15,000, but in a sea of 19 million unemployed this is a drop. Commented World Economic Forum founder Claude Smadja, “One needs to be desperate to take any comfort from that kind of ‘improvement.’”
French film-maker Arnaud Bigeard, with funds drying up as austerity bites, does odd jobs in Paris to make ends meet. Things are even worse for industrial workers who have seen recession shutter automobile and steel factories across Europe.
France’s projected economic growth this year: a tenth of 1%.
In Greece and Spain, unemployment is feeding into political instability. The media speak of a “lost generation” of young Europeans destined to live on the dole. Over 56% of Spain’s young are now jobless. In Greece it’s a staggering 65%.
Frenchwoman Christine Jodet says she has decided to send her sons to the United States to study because she fears for Europe’s future.
Americans would be surprised to be told there are those who see their life as being so rosy. On paper, the US economy is growing — 2.5% last quarter. Shale fuels alone have created 700,000 jobs. Unemployment has fallen from close to 10% to 7.3%.
But, as Pimco CEO Mohammed el Erian noted recently, this hides a lot of bad news including the number of Americans who have switched to part-time work and the many who have dropped out of the labour market. Labour participation rates are at a 35-year-low. As for European youth being out of a job — teen joblessness in the US is 23%.
Washington is fretting about prices — because they are going down. The US experienced deflation in the second quarter. Indians and Chinese would see that as heaven-sent, but in the US it means households so poor businesses are slashing prices.
The poorest of the poor countries have problems on both fronts, rising prices and poor job prospects. Which is why Indians should fret about their future. Growth is tapering off, but inflation is not. The next act in this economic tragedy is the plague of dismissal letters.
“India has structural job coma,” says Manish Sabharwal, chairman of the manpower firm Teamlease Services. “One hundred per cent of job creation for 20 years has happened in informal jobs. This has been masked by service sector growth that is now rapidly slowing.” India is entering “a jobs emergency” with one million youth entering the labour force each month for jobs that are not coming.
At this point, the country Indians may find them being hyphenated with is Pakistan. Its economy has stalled as its youth numbers are bulging. Prime Minister Nawaz Sharif last week announced a youth employment package. Inflation plus joblessness plus low growth: this would put South Asia in the economic grouping of Worst Of Both Worlds.
(By Pramit Pal Chaudhuri, Sutirtho Patranobis, Noopur Tiwari, Imtiaz Ahmad)