São Paulo – With European nations in recession and United States and Japan forecasted to progress slowly, developing countries will spearhead the growth of the world economy in 2012, according to the Trade and Development Report – Policies for Inclusive and Balanced Growth, issued this Wednesday (12th) by the United Nations Conference on Trade and Development (Unctad). The study also claims that austere macroeconomic policies do not lead to growth, and warns that social inequality needs to be reduced.
According to the survey, the world’s Gross Domestic Product (GDP) was up 4.7% in 2010, 2.7% in 2011, and should not grow by more than 2.5% this year. Such growth will be made possibly only by the performance of developing countries, which should grow at a rate of 5% in 2012. The lower growth forecast than in previous years is a result of the timid recovery of developed nations.
The study claims that China was able to cushion the decline in its current account surplus, which led to a slight decline in growth, but did not affect wage increase, and that Latin America, whose economic growth is also decelerating, should grow by 3.5% in 2012. “This growth stems from strong domestic demand, which is being sustained by rising real wages and credit to the private sector,” the report explains.
The growth forecast for Asia is 6.8%, despite the slowdown. In Africa, the expected growth is a result of the expansion of the economies of countries in Sub-Saharan Africa and the recovery of the economies of North African countries after the Arab Spring of 2011.
Less austerity
“Despite a very modest improvement of GDP growth in the United States and a more significant one in Japan, developed economies as a whole are likely to grow by only slightly more than 1% in 2012 owing to the recession currently gripping the European Union,” the report claims.
According to the survey, the recession is concentrated in the Eurozone countries, where authorities have failed to present a convincing solution to internal imbalances and debts. “The macroeconomic policy of unconditional austerity is suffocating the return to sustainable economic growth. Indeed, a further deterioration of economic conditions in Europe cannot be excluded.”
The Unctad survey criticizes recent macroeconomic reforms which allow for wage cuts, the disparity of incomes between different sectors of the economy, and the weakening of collective negotiations. According to the UN agency, this type of structural reform is “dangerous” because it leads unemployment to increase and consumer demand to drop. To the Unctad, declining demand is what has rendered Europe unable to recover. To the organization, an economic policy with GDP growth and low interest rates would contribute to ensure the fiscal balance of countries, and keep debts at a “sustainable” level.
Fight against inequality
Another means to promote the growth of economies and thus fight the crisis is to reduce social inequality, which has increased around the world in the last few years. According to the Unctad survey, in the 1980s and 1990s, inequality increased in 14 out of 18 countries in Latin America, and decreased in 15 out of 18 from the year 2000 onwards. Still, inequality in the region remains higher than it was before the 1980s. In Africa, social inequality increased from 1980 to 1995, after which it began to decline, but of the ten most unequal countries in the world, six are located in Sub-Saharan Africa. Inequality has also increased in Asia and China starting in the 1980s.
The report suggests that labour and wage policies must be revised for a fairer distribution of income and less social inequality. One suggestion is for wages to be pegged to productivity. Furthermore, according to the report, there should be no major distortions in wages in different companies and economic sectors. Wage increases should be obtained through negotiation between unions and employers “complemented by government recommendations.” To the Unctad, income distribution is what leads to sustained growth in an economy, and not the opposite, which is generally the case.
*Translated by Gabriel Pomerancblum
