Ian Goldin, professor of globalisation and development at the University of Oxford, delivered the closing keynote at the IPE Annual Conference 2022 in Rotterdam, discussing the disruptive trends that are shaping the future of societies and investments.
Goldin drew parallels between the current era and the Renaissance, both characterised by substantial changes in perception over fundamental aspects of life and nature and the rapid pace of change.
The Renaissance ended with a retrenchment towards a darker age, however. “The question is whether we can keep up with the pace of change,” said Goldin.
He also provided an optimistic outlook for the world, including globalisation. He argued, however, that the rate of growth is likely to slow, due to changes in consumption patterns, particularly in developed countries.
“A greater share of our wealth is being spent on what economists call non-tradable. That is why we see global trade coming down”, said Goldin.
That, he added, is the reason why we see stagnant productivity in developing countries, despite the technological improvements. “That fundamentally means that growth must slow down now,” Goldin added.
“The other fundamental change is that we are getting older and, with population growth slowing, the labour force will get smaller. For that reason, the way we grapple with migration will be crucial,” he said.
Goldin said that contrary to early analyses, globalisation did not create a more equal, more distributed world. “What we have discovered in this period of rapid change, where you are matters even more. You need to be in the more dynamic places. Globalisation has actually produced more Inequality,” he noted.
“A greater share of our wealth is being spent on what economists call non-tradable”
Ian Goldin, professor of globalisation and development at the University of Oxford
Globalisation was also responsible for systemic crises such as pandemics, which Goldin said he had predicted in his 2014 book, The Butterfly Defect, and the global financial crisis.
Goldin argued that the global financial crisis, especially, is responsible for the rise of nationalism that eventually led to the election of Donald Trump as US president as well as Brexit. Disruptive nationalistic behaviour by states continues to this day, but the European Union represented a unique and positive exception, he said, adding that he regretted the UK leaving the bloc.
“European countries are much stronger for having given up sovereignty and they have discovered that their own cultural identity is stronger, not weaker, as a result,” said Goldin.
“Nationalism and protectionism are the natural responses when people feel insecure. The way to manage it is to address systemic risks and to create credible ways of collaborating.
“Politicians and leaders and business people, who have been so silent on this, need to make the arguments for why trade and why open economies are important,” he added.
Nationalistic behaviour means that the world has not become more resilient to a future pandemic, according to Goldin. At the same time, global institutions such as the United Nations and World Health Organisation, are unfit for global challenges and will not resume their role unless proper attention is paid to them.
The rising tensions between the US and China are a concern, said Goldin. “None of the systemic problems we have, including pandemics and climate change, can be resolved without the US and China working together,” he said.
While the world may have to become used to a slower growth rate, Goldin said he was very sceptical about the de-growth agenda. “We have to invest to be able to transform. We cannot get to zero carbon without massive investment. We have to invest at much higher rates, in areas such as education and infrastructure.”
Goldin said: “I am an optimist, because I see that we have learnt from the past. The world will be at a crossroad for the next 30 to 40 years. History will remember it either as the best period to live, or the time when the generations that had it within their grasp failed to hold it. But history does not happen by accident. It is made by individuals.”
“There is huge potential for like-minded groups, including the pension industry, to come up with solutions to global challenges,” he added.
Back to the future
Michael Howell, founder and director at CrossBorder Capital, told the IPE Annual Conference audience that a return to quantitative easing is likely in the near future, because of the declining levels of global liquidity.
Howell joined a panel consisting of Radu Craiciun, president of Romania’s Private Pensions Association, Monica Defend, head of the Amundi Institute, Timo Löttyniemi, CEO of Finland’s State Pension Fund and Hans Stoter, global head of AXA IM core. The panel discussed asset allocation strategy in the context of quantitative tightening, inflation and geopolitical tensions.
There were different views on the merit and the likelihood of a return to QE, but the panel agreed that the prospects for fixed income assets and diversification were improved. Panellists also debated the need for fiscal policy to act in harmony with monetary policy, at a time when global debt to GDP was at record highs.
Some of the panellists shared their views on the December issue of IPE, in the Special Report on Prospects for 2023.
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