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Brazil Conference Blogging

Brazil Conference Blogging: Designing the Future: The Next Ten Years...

Real pode ser moeda internacional, diz Eichengreen - Rio - Brasil e Índia são as apostas do economista Barry Eichengreen, professor de Economia e Ciências Políticas da Universidade da Califórnia (UC), em Berkeley, para fornecerem moedas de reserva internacional num prazo de 10 ou 20 anos. Em apresentação no seminário "O Brasil e o mundo em 2022", nesta segunda-feira, no Rio, Eichengreen discorreu sobre as dificuldades dos Estados Unidos, sua perda de peso relativo na economia global e como isso afeta o dólar e os sistemas financeiros...

July 23: 2:30 PM: We have many more excellent speakers to hear over the next two days time. Therefore let me skip my remarks on the BNDES, on the great city of the River of January, on Tom Jobim, and also João Gilberto and Johnny Alf, the bossa nova, and the 50th anniversary of the composition of "Garota de Ipanema".

Let me instead jump right into the economics:

The purpose of this conference is to bring together smart and thoughtful people many of whom spend less time listening to each other than they should, and ask them how to design our future. The Brazilian Development Bank designs--in fact we all design our futures, only not under conditions of our own choosing. The future that Brazilians and the Brazilian Development Bank will attempt to design for themselves are enabled, influence, and constrained by the futures other regions of the globe are attempting to design as well..

And here I find myself at a quandary. I do not understand the future that the North Atlantic, the global North, is designing for itself.

Five years ago I would have confidently predicted that the North Atlantic industrial core of the global economy would continue on its relatively-smooth path of 5%/year growth in nominal GDP, 7%/year growth in nominal imports and exports, with about 2.5%/year of real GDP growth and 2.5%/year of inflation in both the dollar and the euro, and with interest rates and asset prices undergoing no major and few minor disturbances--with perhaps the then-anticipated slow deflation of the property bubble and the gradual unwinding of the global imbalance of East Asia's surplus as minor disturbing factors. The 1930s and 1940s had, I thought, taught the North Atlantic both the political urgency of avoiding mass unemployment and the demand-management tools to do so. The 1970s had, I thought, taught the North Atlantic both the political urgency of avoiding chronic even moderate-level inflation nd the demand-management tools to do so.

I was wrong. Wow! I was wrong.

Barry Eichengreen of the University of California at Berkeley, the National Bureau of Economic Research, and the Center for Economic Policy Research is without a doubt the world's leading expert on the international monetary economics of the Great Depression of the 1930s and, by virtue of that expertise, an expert on today. He is the only one still living of the four economists--Bagehot, Minsky, Kindleberger, and Eichengreen--whom last year Larry Summers told Martin Wolf knew the most about what has happened to the world economy since 2007.

Wolfgang Munchau of the Financial Times is one of the very, very best real-time observers of the global economy we have. On the phone to me last week Paul Krugman expressed envy at how he could not write the kinds of columns that Wolfgang could write and had the freedom to write for the Financial Times. Three months ago at breakfast Wolfgang's boss Gillian Tett described him as one of the invaluable contributors to the FT that keeps it at the very top of the financial-journalistic league table.

But first--roll the video...

Barry Eichengreen?

[Later] Friday afternoon I took a look at Barry's PowerPoint and was terrified--I did not see how he could do it in less than an hour. But he did. That was remarkable. I do find myself running backward in time: US dollar, British pound, Florentine florin, Venetian ducat, and then i get back to the Byzantine bezant under the reign of Irene Autocratix, who called herself equal to the Apostles--isoapostoles.

Wolfgang Munchau?

[Later] It was British 19th C. Romantic author Thomas Carlyle who famously complained that economists were no fun: dismal scientists. We have a couple of truly dismal scientists, here. Let me see if I can get either of these panelists to be more optimistic. Barry Eichengreen, if I could ask you--in two to five minutes--in your opinion, what did Wolfgang Munchau get wrong in the sense of being too gloomy?

[Later] Wolfgang Munchau, if I could now ask you, what in your opinion did Barry Eichengreen get right and what did he get wrong?

[Later] Before I ask for questions from the floor, I have a few questions of my own…

[Later] Questions from the floor?

[Later] That's the end of our time, and while I perhaps need coffee more than most--I left my home at 5 am yesterday yet did not get to Rio until noon today--the rule is that in Brazil you should never give up the chance to drink coffee…

July 23: 4:30 PM: It is now time for our second panel. If I might have your attention, please…

Let me start with two threads. The first--call it the neoliberal bet. The neoliberal bet starts from the observation that the market-heavy version of social democracy that evolved in the United States under the Progressive Republican President Roosevelt at the start of and the New Deal Democrat President Roosevelt in the middle of the twentieth century, and then spread to Western Europe after 1945 out of fear of Josef Stalin and desire to emulate Henry Ford. That--mode of production doesn't quite cover it--seemed to be the best institutional configuration for material prosperity and soft government we have yet seen. The neoliberal bet is the strong urging by the NAtl that other countries should emulate large chunks of its institutional setup and the promise that the NAtl economies will be prosperous and open enough to be importers of last resort--that what emerging markets make, the NAtl will buy. The conclusion i drew from the first panel is that the NAtl is drifting in the direction of welshing on its commitment to be the prosperous importer of last resort, as evidenced by a US presidential campaign in which two candidates who by advisors and intellectual pedigree are committed to free trade--these two candidates are competing to make the biggest product that no commodity currently produced in the US today will ever be produced in China...

In the very long-run sweep of history, Eurasian civilizations find themselves densest in first three and then four core regions--regions with rainfall and river valleys that provided sufficient water for the largest-scale effective farming. These are: East Asia--China--South Asia--India--the Fertile Crescent--the Arab Middle East--and, after the invention of the iron axe, the river valleys of northwest Europe. These economies have, since the invention of agriculture, dominated Eurasia and usually the world.

This session discusses the future economo-politic trajectories of two of these Eurasian core economies: China and the Arab world. Before the era of the Industrial Revolution these two core economies were crucial. It was only four centuries ago that we saw not English-speaking armies camped around Baghdad but a Turkish- and Arabic-speaking army camped around Vienna. The Ming Dynasty's voyages of exploration in the fifteenth century under Zheng He travelled as far as the Portuguese expeditions launched by the Infante Dom Henrique o Navegador--and did so with 20 times the number of ships.

Much of the history of the twenty-first century will be the return of these regions to their traditional relative influence within Eurasia--or their failure to do so, and the political consequences of economic events, and the economic consequences of political events.

We have asked Dr. FAN Gang and Ambassador Alfonso Celso de Ouro Preto here this afternoon. Among the ambassador's many accomplishments: being Brazil's Ambassador at Large to the Middle East from 2004-2009. They will speak on what futures China and the region that Europeans call the "Middle East" are going to design for themselves

Dr. Fan Gang of the National Institute of Economic Research is also Chairman of the China Reform Foundation. He is one of the world's top 100 global thinkers, according to Foreign Policy magazine.

Fan Gang? China: growth and overtaking, or relative stagnation a la Japan? Asset markets? Financial fragility? The drive to high mass consumption? International integration?

[Later] Mr. Ambassador? State, religion, society, and economy? The peculiar role of oil?

[Later] I know that there are many questions from the floor, but I am going to keep control of the microphone for a little while…

[Later] Questions from the floor?

[Later] And that reaches the end of our time for this panel. It is now too late for coffee--but it is not too early for cocktails