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Can Diplomacy Help Navigate an Upcoming Worldwide ‘Valley of Disappointment’?

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The current worldwide slowdown in productivity gains may reflect a combination of decreasing energy returns on energy investments in fossil fuels, and limitations on productivity gains in the early stages of development of renewable energy replacements.

A review of the development process in terms of non equilibrium thermodynamics concepts is in order. The stresses of the upcoming major worldwide energy transitions, accompanied by climate change protections, are likely severely to test national and international coordination systems, and demand insight into the thermodynamic and economic processes involved on the part of those who participate in international diplomacy.  

1.The Current Productivity Problem

Numerous publications have been reporting that rates of productivity gain have been declining in recent decades across much of ‘developed world’, and, from higher levels, in many ‘developing’ economies. A recent publication of the highly respected Brookings Institution probes this issue

The National Conference Board in the United States also reports almost imperceptible productivity gains, and some losses, in the most developed economies in the world. The Conference Board’s summation on this is as follows:

Zero or even negative total factor productivity growth suggests that improvements in the efficiency by which labor and capital are used have stalled . . . Ultimately declining TFP prevents companies from improving their competitiveness and profitability, and threatens the ability of countries to maintain or better people’s living standards.

As of this writing, the International Monetary Fund reports low growth prospects across a broad range of economies, and some difficulty in identifying why this should be so.

2. Current Related Financial Policy Actions

Institutions charged with coordinating national and global financial activities have undertaken attempts to encourage a resumption of ‘growth’ (typically measured within States as gross domestic product or gross national product). The conceptual basis for such measures seems to assume that growth rates should be those typical of the late 19th and the 20th centuries.

National governments have considered that they had two principal levers for trying to get economic activity back up to accustomed and/or targeted levels, termed ‘monetary’ and ‘fiscal’.

As to ‘fiscal’ action, the national government is assumed to be able to authorize economic activity directly, and to issue whatever monetary instruments, or forms, will be accepted in the markets supplying goods and services. This may create a current deficit, to be financed over time.

There seems to be more attention given to ‘monetary’ policy, typically managed by central banks, and institutions to coordinate the policies of national central banks.

National central banks have tended to try to stimulate economic activity by actions which make monetary units more amply available for national and international transactions. A part of this strategy is actions to lower the interest rates which generally apply in such transactions. This is thought likely to increase the levels of activity in investing in the production of goods and services (and in consumer purchases) by reducing the levels of yield needed over time from such activities to attract the ‘capital’ which will enable such activities.

At this time, most of the institutions with central bank functions, in the ‘developed’ economies, have been targeting very low interest rates for an extended period of time.

There have been at least two other, external but parallel discussions, with implications for economic activities. This article suggests that these inquiries are particularly significant at this time.

3. Current Awareness of A Need for An Energy Source Transition

It is generally understood that the enormous gains in human populations and activities have come from exploiting the ‘energy’ in fossil fuel, or earth-stockpiled, hydrocarbons. Discussions of productivity gains over time — generally the 19th and 20th centuries — seem to have assumed that the fossil fuel flows supporting such gains will be available at the same levels and costs as have been the case in these last two centuries. But looking ahead a century or two, this cannot continue to be taken as a given.

First, the prospective climate effects of combusting these hydrocarbons, to get the energy yield, has spurred a global search to replace these energy sources.

At the same time, the net energy yields from mining these hydrocarbons have tended to decrease. And, the limits of the most energy-rich hydrocarbon deposits seem visible, given current and prospective consumption rates.

The efforts to develop ‘renewable’ or ‘sustainable’ energy sources have led to a focus on a key measure — the energy returns on energy invested (EREOI) in such renewable technologies. Those tracking the development of renewables are keenly interested in when they will meet or exceed the EROEI of fossil fuels, and whether, and when, such energy yields will be sufficient to support a high energy industrial civilization in the future.

This author suggests that this should lead to shifting the conceptual center of discussion as to economic (and social) activity to the energy flow factors which enable such activity.

4. The Rise Of Academic Understandings of ‘Non Equilibrium Thermodynamics’

This dovetails into a stream of academic thought which has steadily expanded in recent decades, often termed ‘non equilibrium thermodynamics’.

The foundations of this thought go back at least as far as Heraclitus of Ephesus, born about 560 BC, who saw all things as process. However, in recent decades astronomers, physicists and others have expanded, elaborated, and measured these concepts in universally applicable ways.

Re-casting the productivity issues in thermodynamic terms may help answer a key question.

On the one hand, some suggest that the current slowdown in productivity growth in developed economies is just a pause in the realization of gains from innovations in process as to the economic potentials of current developed societies — e.g. ‘big data’ computations, self driving cars, the spread of ‘digitization’ of business and government operations.

An alternative suggestion might be that the combination of restrictions of fossil fuel use, the energy costs of such use, and the energy investment costs of creating and deploying   renewable energy sources now imposes or will impose constraints on the rate of productivity gains, if any, which we can project for coming decades.

Given the recent ascent into widespread scholarly discussion of non equilibrium thermodynamics, I should to state at the outset what version of nonequilibrium thermodynamics frames the premises here used in approaching human productivity and ‘finance’.

Briefly stated, this essay proceeds from the premise that all ordered structures in the Universe are manifestations of ordered energy flows. All ‘tangible’ structures are composed of relational systems — systems of correlated elements. Thus, the ‘order’ In the universe arises from correlations among the elements in the structures. In some, as in ‘solids’, the correlations are so stable as to stabilize both spatial dispersion, and radial degrees of freedom, over the periods of observation — or interaction with another ordered structure, or system.

Dynamic systems at the macro scale available to humans — processing energy flows and altering its internal conformation and/or relationships with external systems over time, or process — entail both energy intake and dissipation. Ilya Prigogine condensed this seminal insight long ago. A simple and visible astronomic example is the Red Spot on Jupiter.

Thus, ‘energy’ is in a fundamental sense the sovereign coin of the realm, so to speak, in the creation and maintenance of all ordered systems.

The leading explicant of the underlying dynamic nature of the Universe is Tufts/Harvard professor Eric Chaisson. In a series of exhaustively documented, elegant books and articles, he explains the energy densities, and related complexity levels, of galaxies, suns, ants, plants, humans and human societies. See for example “Cosmic Evolution”, Harvard, 2001, and for beautiful illustrations

A critical metric in Chaisson’s extensive documentation of energy flows is ‘free energy rate density’ (the amount of energy flow through a system per unit of mass and unit of time). Life units, for example, embody higher free energy rate densities than do galaxies or suns: animals higher free energy rate densities than plants, and humans, with their artifacts, like cities and particular elements in cities (e.. Jet planes and computers) much higher free energy rate densities than animals as a whole. In the energy scales of the Universe, human civilization is an extremely rare high free energy density phenomenon.

For a somewhat broader context, though condensed, overview for the interested general public,   one can consult an article on ‘relational order theories’

As humans have organized the world around them, they have identified and constructed systems which have, to the humans, the characteristic of yielding more energy to the humans than the humans invest in them.

In agricultural societies, ‘land’ was often used as a conceptual catch-all for an energy yielding asset. (However, I understand the the word ‘capital’ was derived from the indo-european term for cattle, in an semi-nomadic phase of the indo europeans). A fishing resource, or the ocean as a whole, could also be so considered.

Let us focus on a world in which systems other than ‘land’ (or a fishery area) were made to yield energy returns on energy invested in them.

In the fossil fuel era, such a system could be a coal mine, an oil or gas well, etc. where we have accessed energy bound in hydrocarbons by previously living systems, and learned how to liberate and turn to our use that energy. In this world, more types of resource, and energy flows, are organized more flexibly, by entities including the holders of the symbols of ‘capital’.

As we seek to enter a larger scale ‘sustainable’ or ‘renewable’ energy era we consider artifactual photosynthetic systems, wind energy systems, nuclear energy systems, etc. As to all such systems specialized so as to yield to humans more energy than humans organize into them, we have come to seek to measure the ‘energy return on energy invested’.

5. Initial Application of Non Equilibrium Thermodynamics Concepts to Productivity and Energy Transition Issues.

Assuming that ‘productivity’, as to humans, corresponds roughly to the ‘energy’ which the human or the system in which the human functions brings to ‘goods and services’ — the fabrication, transport, communication, etc. which the human becomes involved in ‘producing’ — productivity, as measured by the output of units specified per person work unit, would be enhanced by more energy entrainment, and decreased by less.

Generalizing this, one might posit that in a world of high EROEI, per person ‘productivity’ gains can be high, and in a world of low EROEI, they will be low.

We have noted that some suggest that underlying gains in efficiency — compositional productivity, or multiple factor productivity — are in operation but not yet manifested in ways which register in the statistical identities and measures we now use.

Let us entertain an alternate hypothesis oriented to a nonequilibrium thermodynamics framework, and a simple model which might be used to attempt to test such an hypothesis, over time, with enough data accumulation and analysis.

A candidate hypothesis would be that the energy returns on energy investments in the interconnected global economic systems are now rewarding investment in energy production at lower than historic levels, and at levels which, given all the energy dissipation in cycling energy through the generation and consumption, re-generation cycles does not allow for much increase in the over all activity levels of the societies involved, over time and the continuing cycling process.

Let us consider a simple model in which the key variables are a ‘capital’ sector, the energy return on energy which is invested into the ‘capital’ apparatus, and a population. These elements are arranged in a simple linear cycle, and the result which matters most to humans is designated as per capita wealth, in energy terms, as follows.

Per capita (energy) wealth = ((K*EROEI)-ReinvE)/P

That is, the wealth per person, calibrated in energy units (which have correspondences to ‘goods’ and ‘services’), equals the energy flow into the capital apparatus times the energy return from that apparatus per unit of energy investment, minus the energy reinvested in the capital apparatus, divided by the total population.

The physical system is a cyclical, reiterative one, as follows. The population inputs energy into the capital apparatus, the apparatus returns (and distributes) the energy back into the population, the population ‘consumes’ the energy, building some of it into population and amenities, etc, and returns energy into the capital apparatus. And keep cranking.

Using a model such as this, one can imagine differing endowments in different polities — e.g. higher or lower current capital endowments, populations, EROEI results. Some interesting possible relationships are noted in the footnote.

Malthus’s famous views come to mind. If we were to adapt a Malthusian point of view, the K, or capital, factor was largely seen as land. The yield — the EROEI — of land had not shown great increases in centuries prior to Malthus, and nothing like ‘geometric’, or exponential, or repetitive doubling, would seem plausible at his time. So if one assumed that the total population would increase faster than did energy production from land, using historic forms of agricultural technology, people would live more poorly, or some of them would, or some would have to go — to be subtracted from the equation.

Let us now put in this formula the Industrial (or fossil fuel) Revolution. Suddenly (in historical terms) EROEI skyrockets — let us say up to 50 times the energy input. The population can expand (improving food supply in various energy-fed ways), the energy using apparati generally (goods and services) can expand, and the capital factor can increase. The cycle becomes wonderfully virtuous, and humanity bestrides the Earth beyond its agricultural dreams.

But now let us suppose there are limits to the extent the capital factor can increase, or the EROEI begins to decrease, or both. Depending on how one varies the critical factors of population size, capital stock, and EROEI, many scenarios can be produced, as noted before. But with capital limited or fixed, and no appreciable gains in EROEI, we could be headed back to the Malthus type of calculation.

Let us sketch a more optimistic scenario for a few centuries ahead.

Let us continue to assume that the EROEI on fossil fuels decreases, and/or fossil fuel capacity is capped in order to avoid overheating the whole human complex, with major losses of system function and human welfare.

But our specialists advise us that life on earth taps only a very small fraction of the solar energy impinging on earth, we also tap a small fraction of the wind energy available, and if we are clever, farsighted, and disciplined enough we might replace the fossil fuels, at levels comparable to or above current civilization energy levels, at EROEI ratios sufficient to maintain our population levels and our per capita welfare, and also feed back into the capacity machinery enough energy to keep that machinery, and the whole system, stable and growing.

If humanity is not to go on a severe diet at some point, this is clearly the situation which will have to be managed. We humans have a very big and tricky energy supply transition coming up, and there are many uncertainties involved in it.

We may not know just how rapidly the energy supply transition can occur.

Vaclav Smil counsels that we think in terms of a century or so, and has historical evidence to support his view. Vaclav Smil (2011), Global Energy: The Latest Infatuations, American Scientist.

Others suggest that the coming transition could be managed more rapidly. The current Administration in the United States is pursuing an aggressive program to facilitate adaptation of the electricity system to increased proportions of wind and solar electricity generation.

As of this writing, a 2016 projection of the Bloomberg New Energy Finance group projects that by 2027 renewable electrical energy sources will cost less than operation of fossil fuel plants, and by 2040 renewable technologies will improve their cost levels 40-60% and fossil fuel production will have shrunk to less than 50% of total electrical energy production worldwide. In the advanced economies of Europe and America, the fossil fuel shares will have shrunk to a third or less of total electrical energy supplies. And, as to transportation, electric vehicles would constitute about 35% of new vehicles sold.

We also may not know exactly what system wide EROEI levels are required to maintain the high levels of free energy densities prevalent in highly industrialized civilization. A currently circulating guess is 10/1.

We do not know how well the public in the industrialized areas will understand their situation, and have the patience and foresight to soldier through the required transitions.

Given these uncertainties, we still must attempt to project a path forward.

Let us trace out a scenario reflecting the possibility that we are at or near a difficult point in our energy base transition.

This scenario might be called a ‘valley of disappointment’ scenario. (That is the pessimistic part. The optimism is reflected in the projection that only a valley, not a cliff, looms before us.)

If and as we are now entering a situation in which the fossil fuel energy recovery rates are declining, and the renewable energy yields are increasing, but are currently only a bit above the base rate needed for advanced civilization , account only a small part of energy supply at this moment and need extensive energy-consuming complements to fill out the entire range of energy uses, we might predict that our societies could encounter the following situation.

A slowdown in global, composite EROEI levels relative to historic fossil fuel boom era EROEI levels,

  • and thus widespread, aggregate slowdowns in GDP, or GDP growth
  • and related slowdowns in per person productivity gains,
  • and thus slowdowns in consequent ‘standard of living’ gains.

Even if the renewable energy sources were eventually to produce high and reliably increasing levels of energy flows in human societies, efficiently spread throughout our societies, we could see

  • lags between investment in the renewable energy sources, and the related complexes which are required to make them broadly and efficiently usable, and their full effectiveness, and thus
  • human societies enduring some decades of transiti

All this leading to

  • A lull in standard of living gains, if not a period of decline, and
  • slow progress in improving them again. And, consequently,

as these slowdowns occur, and a resumption of something like historic welfare gains seems remote, considerable dissatisfaction arising in populations which are accustomed to rapid gains in ‘welfare’, or standard of living.

Does this picture resemble what we now may be seeing in the ‘highly developed’, extremely entitled populations of America and Europe?

Were this overview accepted, the 2016 Bloomberg new energy investment scenario seems to suggest that by 2040 renewable EROEI would have increased by 40-60% and even transportation would be moving toward energy efficiency sufficient to service high energy human civilization. Such a rate of progress could make less onerous the ‘valley of disappointment’. We could at least better see our way to a more abundant future, perhaps even more abundant than our fossil fed recent past.  

6. Implications For Financial Policy

In this sort of scenario would the roles of ‘finance’ differ from those now prescribed?

‘Policy makers’ may be unclear whether they may just assume that ‘fiscal’ stimuli will draw on an underused and available well of production and productivity-increasing opportunities on which to spend money tokens, or whether their justification rests solely on a judgment that they, better than the market, can discriminate between higher EROEI possibilities and less productive ones. However, they may be inclined to choose to funnel resources to long term thermodynamic gain as well as or better than an unguided or unassisted market. We have done well in the past by encouraging canals and railroads, for two examples.

As to monetary tools, on the face of it, a regime in which low interest rates prevailed would seem to accord with a relative scarcity of thermodynamically fruitful (in customary language highly productive) investment opportunities. That is, low interest rates would appropriately reflect generally low returns to investments.  

If one expected that ‘natural forces’ — e.g. ‘innovations’ — would soon replenish the inventory of potentially rewarding opportunities, one might just hold steady and wait — perhaps a few years.

If on the other hand the ‘valley of disappointment’ construct more accurately depicts our situation, the ‘wait’ — the period of low returns on ‘capital’ generally — might go on for some decades. A great deal of adjustments in matters such as annuities, pensions, bond integrity — indeed, public and private finance generally — would be compelled.

Thus, there would seem to be a strong case for monetary policy functionaries and advisors to focus clearly on non equilibrium thermodynamics, EROEI oriented, analyses of economic phenomena. If this work is done thoroughly and well, the ‘valley of disappointment’ hypothesis may be confirmed in whole or substantial part, or disconfirmed. We may learn enough to get a better picture of workable paths through the transition before us.

7. Diplomacy

If the more advanced economies are facing thermodynamic/economic constraints in the upcoming Great Energy Transition, whereas on the other hand less developed venues feel entitled to a great deal of economic catch-up, regardless of atmosphere heating results, we have a continuing difficulty in managing world climate protection and acceptable rates of welfare improvement in some large and ambitious countries.  

The oil-laden Persian Gulf area is a continuing management problem. The deepest and most easily accessible pools of liquid hydrocarbons are in the hands of archaic political systems, some of whom — like Iran — have felt badly treated by the industrialized ‘West’. But USA Investment in an order-maintaining military presence in the Persian Gulf area most directly benefits India and China –the US only indirectly. This has not escaped the attention of one of the presidential contenders in the United States.

Diplomacy will be involved in finding ways to reconcile nativist-nationalist impulses in several European countries, and in the United States, with the economic and social advantages of global integration. The recent ‘Brexit’ act highlights the significance of this phenomenon.

Notwithstanding all the above, the hierarchy building imperative evident the hierarchical construction of order in the Universe explains at the most basic level currently available the tendency to global human integration evident in the last few centuries. This integration dynamic is fundamental.

But the equally underlying stochastic nature of the Universe counsels that nothing is guaranteed to we weird, extreme, socialized apes who seek to live like high technology, high energy, densely clustered ants, in a dynamic, promising, but perilous journey through life’s accumulated energy bounty into a new era of energy entrapment on Earth.

Thus the civilized effort to make light out of international heat, and workable coherence out of urgent parochialisms, has fundamental tasks before it in this era of change in the energy fundamentals. An understanding of the currents moving the ships of state, as well as steady hands on the helms, are needed.

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Economy

Can e-commerce help save the planet?

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If you have logged onto Google Flights recently, you might have noticed a small change in the page’s layout. Alongside the usual sortable categories, like price, duration, and departure time, there is a new field: CO2 emissions.

Launched in October 2021, the column gives would-be travellers an estimate of how much carbon dioxide they will be responsible for emitting.

“When you’re choosing among flights of similar cost or timing, you can also factor carbon emissions into your decision,” wrote Google’s Vice President of Travel Products, Richard Holden.

Google is part of a wave of digital companies, including Amazon, and Ant Financial, encouraging consumers to make more sustainable choices by offering eco-friendly filter options, outlining the environmental impact of products, and leveraging engagement strategies used in video games.

Experts say these digital nudges can help increase awareness about environmental threats and the uptake of solutions to reduce greenhouse gas emissions.   

“Our consumption practices are putting tremendous pressure on the planet, driving climate change, stoking pollution and pushing species towards extinction,” says David Jensen, Digital Transformation Coordinator with the United Nations Environment Programme (UNEP).

“We need to make better decisions about the things we buy and trips we take,” he added. “These green digital nudges help consumers make better decisions as well as collectively drive businesses to adopt sustainable practices through consumer pressure.”

Global reach

At least 1.5 billion people consume products and services through e-commerce platforms, and global e-commerce sales reached US$26.7 trillion in 2019, according to a recent UN Conference on Trade and Development (UNCTAD) report.

Meanwhile, 4.5 billion people are on social media and 2.5 billion play online games. These tallies mean digital platforms could influence green behaviors at a planetary scale, says Jensen.

One example is UNEP-led Playing for the Planet Alliance, which places green activations in games. UNEP’s Little Book of Green Nudges has also led to more than 130 universities piloting 40 different nudges to shift behaviour.

A 2020 study by Globescan involving many of the world’s largest retailers found that seven out of 10 consumers want to become more sustainable. However, only three out of 10 have been able to change their lifestyles.

E-commerce providers can help close this gap.

“The algorithms and filters that underpin e-commerce platforms must begin to nudge sustainable and net-zero products and services by default,” said Jensen. “Sustainable consumption should be a core part of the shopping experience empowering people to make choices that align with their values.”

Embedding sustainability in tech

Many groups are trying to leverage this opportunity to make the world a more sustainable place.

The Green Digital Finance Alliance (GDFA), launched by Ant Group and UNEP, aims to enhance financing for sustainable development through digital platforms and fintech applications. It launched the Every Action Counts Coalition, a global network of digital, financial, retail investment, e-commerce and consumer goods companies. The coalition aims to help 1 billion people make greener choices and take action for the planet by 2025 through online tools and platforms.

We will bring like-minded members together to experiment with new innovative business models that empower everyone to become a green digital champion,” says Marianne Haahr, GDFA Executive Director.

In one example, GDFA member Mastercard, in collaboration with the fintech company Doconomy, provides shoppers with a personalized carbon footprint tracker to inform their spending decisions.

In the UK, Mastercard is partnering with HELPFUL to offer incentives for purchasing products from a list of over 150 sustainable brands.

Mobile apps like Ant Forest, by Ant Group, are also using a combination of incentives and digital engagement models to urge 600 million people make sustainable choices. Users are rewarded for low-carbon decisions through green energy points they can use to plant real trees. So far, the Ant Forest app has resulted in 122 million trees being planted, reducing carbon emissions by over 6 million tons.

Three e-commerce titans are also aiming to support greener lifestyles. Amazon has adopted the Climate Pledge Friendly initiative to help at least 100 million people find climate-friendly products that carry at least one of 32 different environmental certifications.

SAP’s Ariba platform is the largest digital business-to-business network on the planet. It has also embraced the idea of “procuring with purpose,” offering a detailed look at corporate supply chains so potential partners can assess the social, economic and environmental impact of transactions.

“Digital transformation is an opportunity to rethink how our business models can contribute to sustainability and how we can achieve full environmental transparency and accountability across our entire value chain,” said SAP’s Chief Sustainability Officer Daniel Schmid.

UNEP’s Jensen says a crucial next step would be for mobile phone operating systems to adopt standards that would allow apps to share environment and carbon footprint information.

“This would enable people to seamlessly calculate their footprints across all applications to develop insights and change behaviours,” Jensen said. “Everyone needs access to an individual’ environmental dashboard’ to truly understand their impact and options for more sustainable living.”

Need for common standards

As platforms begin to encode sustainability into their algorithms and product recommendations, common standards are needed to ensure reliability and public trust, say experts. 

Indeed, many online retailers are claiming to do more for the environment than they actually are. A January analysis by the European Commission and European national consumer authorities found that in 42 per cent, sustainability claims were exaggerated or false.

To help change that, UNEP serves as the secretariat of the One Planet network, a global community of practitioners, policymakers and experts that encourages sustainable consumption and production.

In November, the One Planet network issued guidance material for e-commerce platforms that outlines how to better inform consumers and enable more sustainable consumption, based on 10 principles from UNEP and the International Trade Centre.

The European Union is also pioneering core standards for digital sustainability through digital product passports that contain relevant information on a product’s origin, composition, environmental and carbon performance.

“Digital product passports will be an essential tool to strengthen consumer protection and increase the level of trust and rigour to environmental performance claims,” says Jensen. “They are the next frontier on the pathway to planetary sustainability in the digital age.”

UNEP

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2022: Small Medium Business & Economic Development Errors

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Calling Michelangelo: would Michelangelo erect a skyscraper or can an architect liberate David from a rock of marble? When visibly damaged are the global economies, already drowning their citizenry, how can their economic development departments in hands of those who never ever created a single SME or ran a business, expect anything else from them other than lingering economic agonies?

The day pandemic ends; immediately, on the next day, the panic on the center stage would be the struggling economies across the world.  On the small medium business economic fronts, despite, already accepted globally, as the largest tax contributor to any nation. Visible worldwide, already abandoned and ignored without any specific solutions, there is something strategically wrong with upskilling exporters and reskilling manufacturers or the building growth of small medium business economies. The SME sectors in most nations are in serious trouble but are their economic development rightly balanced?   

Matching Mindsets: Across the world, hard working citizens across the world pursue their goals and some end up with a job seeker mindset and some job creator mindset; both are good. Here is a globally proven fact; job seekers help build enterprises but job creators are the ones who create that enterprise in the first place. Study in your neighborhoods anywhere across the world and discover the difference.

Visible on LinkedIn: Today, on the SME economic development fronts of the world, clearly visible on their LinkedIn profiles, the related Ministries, mandated government departments, trade-groups, chambers, trade associations and export promotion agencies are primarily led by job seeker mindsets and academic or bureaucratic mentality. Check all this on LinkedIn profiles of economic development teams anywhere across the world.

Will jumbo-pilots do heart transplant, after all, economic performance depends on matching right competency; Needed today, post pandemic economic recovery demands skilled warriors with mastery of national mobilization to decipher SME creation and scalability of diversified SME verticals on digital platforms of upskilling for global age exportability. This fact has hindered any serious progress on such fronts during the last decade. The absence of any significant progress on digitization, national mobilization of entrepreneurialism and upskilling of exportability are clear proofs of a tragically one-sided mindset.

Is it a cruise holiday, or what? Today, the estimated numbers of all frontline economic development team members across 200 nations are roughly enough to fill the world-largest-cruise-ship Symphony that holds 6200 guests. If 99.9% of them are job-seeker mindsets, how can the global economic development fraternity sleep tonight? As many billion people already rely on their performances, some two billion in a critical economic crisis, plus one billion starving and fighting deep poverty. If this is what is holding grassroots prosperity for the last decade, when will be the best time to push the red panic button? 

The Big Fallacy of “Access to Finance” Notion: The goals of banking and every major institution on over-fanaticized notions of intricate banking, taxation are of little or no value as SME of the world are not primarily looking for “Access to Capital” they are rather seeking answers and dialogue with entrepreneurial job creator mindsets. SME management and economic development is not about fancy PDF studies of recycled data and extra rubber stamps to convince that lip service is working. No, it is not working right across the world.

SME are also not looking for government loans. They do not require expensive programs offered on Tax relief, as they make no profit, they do not require free financial audits, as they already know what their financial problems are and they also do that require mechanical surveys created by bureaucracies asking the wrong questions. This is the state of SME recovery and economic development outputs and lingering of sufferings.

SME development teams across the world now require mandatory direct SME ownership experiences

The New Hypothesis 2022: The new hypothesis challenges any program on the small medium business development fronts unless in the right hands and right mindsets they are only damaging the national economy. Upon satisfactory research and study, create right equilibrium and bring job seeker and job creator mindsets to collaborate for desired results. As a start 50-50, balances are good targets, however, anything less than 10% active participation of the job creator mindset at any frontline mandated SME Ministry, department, agency or trade groups automatically raises red flags and is deemed ineffective and irrelevant. 

The accidental economists: The hypothesis, further challenges, around the world, economic institutes of sorts, already, focused on past, present and future of local and global economy. Although brilliant in their own rights and great job seekers, they too lack the entrepreneurial job creator mindsets and have no experience of creating enterprises at large. Brilliantly tabulating data creating colorful illustrative charts, but seriously void of specific solutions, justifiably as their profession rejects speculations, however, such bodies never ready to bring such disruptive issues in fear of creating conflicts amongst their own job seeker fraternities. The March of Displaced cometh, the cries of the replaced by automation get louder, the anger of talented misplaced by wrong mindsets becomes visible. Act accordingly

The trail of silence: Academia will neither, as they know well their own myopic job seeker mindset. In a world where facial recognition used to select desired groups, pronouns to right gatherings, social media to isolate voting, but on economic survival fronts where, either print currency or buy riot gears or both, a new norm; unforgiveable is the treatment of small medium business economies and mishmash support of growth. Last century, laborious and procedural skills were precious, this century surrounded by extreme automation; mindsets are now very precious.  

Global-age of national mobilization: Start with a constructive open-minded collaborative narrative, demonstrate open courage to allow entrepreneurial points of views heard and critically analyze ideas on mobilization of small mid size business economies. Applying the same new hypotheses across all high potential contributors to SME growth, like national trade groups, associations and chambers as their frontline economic developers must also balance with the job creator mindset otherwise they too become irrelevant. Such ideas are not just criticism rather survival strategies. Across the world, this is a new revolution to arm SME with the right skills to become masters of trade and exports, something abandoned by their economic policies. To further discuss or debate at Cabinet Level explore how Expothon is making footprints on new SME thinking and tabling new deployment strategies. Expothon is also planning a global series of virtual events to uplift SME economies in dozens of selected nations.

Two wheels of the same cart: Silence on such matters is not a good sign. Address candidly; allow both mindsets to debate on how and why as the future becomes workless and how and why small medium business sectors can become the driving engine of new economic progress. Job seekers and job creators are two wheels of the same cart; right assembly will take us far on this economic growth passage. Face the new global age with new confidence. Let the nation witness leadership on mobilization of entrepreneurialism and see a tide of SME growth rise. The rest is easy.

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Rebalancing Act: China’s 2022 Outlook

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Authors: Ibrahim Chowdhury, Ekaterine T. Vashakmadze and Li Yusha

After a strong rebound last year, the world economy is entering a challenging 2022. The advanced economies have recovered rapidly thanks to big stimulus packages and rapid progress with vaccination, but many developing countries continue to struggle.

The spread of new variants amid large inequalities in vaccination rates, elevated food and commodity prices, volatile asset markets, the prospect of policy tightening in the United States and other advanced economies, and continued geopolitical tensions provide a challenging backdrop for developing countries, as the World Bank’s Global Economic Prospects report published today highlights.

The global context will also weigh on China’s outlook in 2022, by dampening export performance, a key growth driver last year. Following a strong 8 percent cyclical rebound in 2021, the World Bank expects growth in China to slow to 5.1 percent in 2022, closer to its potential — the sustainable growth rate of output at full capacity.

Indeed, growth in the second half of 2021 was below this level, and so our forecast assumes a modest amount of policy loosening. Although we expect momentum to pick up, our outlook is subject to domestic in addition to global downside risks. Renewed domestic COVID-19 outbreaks, including the new Omicron variant and other highly transmittable variants, could require more broad-based and longer-lasting restrictions, leading to larger disruptions in economic activity. A severe and prolonged downturn in the real estate sector could have significant economy-wide reverberations.

In the face of these headwinds, China’s policymakers should nonetheless keep a steady hand. Our latest China Economic Update argues that the old playbook of boosting domestic demand through investment-led stimulus will merely exacerbate risks in the real estate sector and reap increasingly lower returns as China’s stock of public infrastructure approaches its saturation point.

Instead, to achieve sustained growth, China needs to stick to the challenging path of rebalancing its economy along three dimensions: first, the shift from external demand to domestic demand and from investment and industry-led growth to greater reliance on consumption and services; second, a greater role for markets and the private sector in driving innovation and the allocation of capital and talent; and third, the transition from a high to a low-carbon economy.

None of these rebalancing acts are easy. However, as the China Economic Update points out, structural reforms could help reduce the trade-offs involved in transitioning to a new path of high-quality growth.

First, fiscal reforms could aim to create a more progressive tax system while boosting social safety nets and spending on health and education. This would help lower precautionary household savings and thereby support the rebalancing toward domestic consumption, while also reducing income inequality among households.

Second, following tightening anti-monopoly provisions aimed at digital platforms, and a range of restrictions imposed on online consumer services, the authorities could consider shifting their attention to remaining barriers to market competition more broadly to spur innovation and productivity growth.

A further opening-up of the protected services sector, for example, could improve access to high-quality services and support the rebalancing toward high-value service jobs (a special focus of the World Bank report). Eliminating remaining restrictions on labor mobility by abolishing the hukou, China’s system of household registration, for all urban areas would equally support the growth of vibrant service economies in China’s largest cities.

Third, the wider use of carbon pricing, for example, through an expansion of the scope and tightening of the emissions trading system rules, as well power sector reforms to encourage the penetration and nationwide trade and dispatch of renewables, would not only generate environmental benefits but also contribute to China’s economic transformation to a more sustainable and innovation-based growth model.

In addition, a more robust corporate and bank resolution framework would contribute to mitigating moral hazards, thereby reducing the trade-offs between monetary policy easing and financial risk management. Addressing distortions in the access to credit — reflected in persistent spreads between private and State borrowers — could support the shift to more innovation-driven, private sector-led growth.

Productivity growth in China during the past four decades of reform and opening-up has been private-sector led. The scope for future productivity gains through the diffusion of modern technologies and practices among smaller private companies remains large. Realizing these gains will require a level playing field with State-owned enterprises.

While the latter have played an instrumental role during the pandemic to stabilize employment, deliver key services and, in some cases, close local government budget gaps, their ability to drive the next phase of growth is questionable given lower profits and productivity growth rates in the past.

In 2022, the authorities will face a significantly more challenging policy environment. They will need to remain vigilant and ready to recalibrate financial and monetary policies to ensure the difficulties in the real estate sector don’t spill over into broader economic distress. Recent policy loosening suggests the policymakers are well aware of these risks.

However, in aiming to keep growth on a steady path close to potential, they will need to be similarly alert to the risk of accumulating ever greater levels of corporate and local government debt. The transition to high-quality growth will require economic rebalancing toward consumption, services, and green investments. If the past is any guide to the future, the reliance on markets and private sector initiative is China’s best bet to achieve the required structural change swiftly and at minimum cost.

First published on China Daily, via World Bank

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