June 16, 2024
World Economy

Draghi: “The global economic order is changing, bringing challenges for politics”

The phase of profound change that is characterizing the global economic order due to conflicts, the pandemic and climate change brings with it profound challenges in terms of economic policy. He said it Mario Draghi, former Prime Minister and former President of the European Central Bank (ECB), speaking at the 40th annual conference of National Association for Business Economics (Nabe), during which he received the Paul Volcker Lifetime Achievement Award for Economic Policy. “The nature of the shocks our economies face will change: more frequent, irregular and large negative supply shocks are likely to arise, emerging not only from new frictions in the global economy, but even more so from the economic policies we put in place. in place to mitigate these frictions,” he said.

“A change in overall economic policy strategy is necessary to stabilize growth potential and reduce inflation volatility. This shift will need to focus on completing ongoing supply-side transitions, but also on stimulating productivity growth, where broad adoption of artificial intelligence could help,” he said, underlining the need for a appropriate policy mix to achieve these objectives. “A cost of capital low enough to anticipate investment spending, financial regulation that supports innovation and reallocation of capital, and competition policies that facilitate state aid,” she explained.

“Fiscal policy will be called upon to increase public investment to meet the range of new needs, governments will have to address inequalities in terms of wealth and income: and it is likely that it will also have to play a stabilization role, previously attributed to monetary policy,” he said.

“Globalization, contrary to initial expectations, has failed to spread the liberal values ​​of democracy and freedom, which do not always travel on the same level: on the contrary, it has weakened them in the countries that had been their main supporters, ending up fueling growth of forces that look more at the internal dimension” he added.

“People were asking for a more equitable distribution of the benefits of globalization, and a greater focus on economic growth: and to achieve these results they expected a more active use of government practice,” he explained, adding that in Western communities there was widespread perception that citizens were involved in a “distorted game”, in which millions of jobs are moved elsewhere while governments and companies remain indifferent.

The war in Ukraine “has highlighted the dangers of over-reliance on large, unreliable trading partners for essential inputs that threaten our jobs. The war of aggression has caused us to rethink not only where we buy goods, but also from whom,” she said. “Ukraine would be one of the largest members of the European Union, with many resources but also with a huge need for reconstruction after the war,” he said, adding that the risk, after the conflict with Russia, is that of “ leave Ukraine alone”, because reconstruction is “always an opportunity”.

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