Global economy remains fragile
By Cathy Rose A. Garcia
The recovery of the global economy remains uneven and very fragile, according to noted American economist Laura Tyson.
Tyson, a member of President Barack Obama’s Economic Recovery Advisory Board, spoke about the challenges to the global economy during the 2010 Global Women’s Leadership Conference session on ``Women & the Global Economy: The Outlook and Opportunities for Business’’ at The Shilla Hotel, Seoul, Monday.
The global recovery has been uneven, because while the U.S. has had a slow recovery, the emerging markets, such as China, India, Korea and Latin American countries, have come out of the crisis very quickly and strongly.
Worried about its economy, the U.S. has been using its policy tools to encourage growth for the economy and create more employment. ``What we need is a fiscal policy that continues to support the economy and a bit more fiscal stimulus, which is quite controversial. This combined with a multi-year deficit reduction that won’t begin to take effect until 2015 or 2016 when the U.S. economy has finally recovered,’’ Tyson said.
Tyson also advocated the continued easing of monetary policy by the Federal Reserve, which is being criticized by many countries. ``From the U.S. policymaker’s point of view, it is clear, if you think the problem is unemployment and slow growth and the possibility of slipping back into recession and deflation, what you do is as expansionary a monetary policy you can do relative to the politics of the country,’’ she said.
Tyson admitted the easing monetary policy in the U.S. has represented a problem for Korea. ``I think Korea is doing the right thing, allowing interest rates to go up and imposing macro prudential policies to make it less attractive for hot money... Korea’s success has encouraged a particular problem to develop, a rapid inflow of capital that can flow out again and it creates potential financial market bubbles in Korea,’’ she said.
In the long-term, Tyson said Korea has to adjust its development strategy to become less dependent on exports, and more dependent on domestic service and demand.
``Korea and emerging markets need to understand the economic situation is fragile in the sense that U.S., Europe and Japan, remain very fragile, and what they need from the emerging markets is room to grow, meaning more demand from more products from U.S., Japan and Europe. Emerging markets can spend more time to develop products for their own markets rather than for exports... It would be good for Korea to adjust its development strategy to be less dependent on exports and dependent on domestic services and demand, and good for the global and U.S. economy,’’ Tyson said.
Tyson, who works with the World Economic Forum on its annual Gender Gap Index, noted the challenge for Korea ranks 22nd in global competitiveness but ranks 104 out of 134 in the gender gap.
In the Gender Gap index, the four highest ranking countries are Iceland, Norway, Finland and Sweden. Among Asian countries, Korea’s ranking lagged far behind the Philippines (9), Sri Lanka (16), Singapore (56), China (61), and Japan (94).
``Scandinavian countries are always on the top of the gender gap and world competitiveness surveys. Norway, in particular, has done a lot to ease the trade-offs between family and work life with series of policies to make it easier to spend time with families in a paid way, very progressive which have taken declining birthrates and turned them around,’’ Tyson said.
Lucy P. Marcus, founder and CEO of Marcus Venture Consulting, said the results of the gender gap survey can be a challenge for Korea to harness the potential of women in the workforce.
``Think of the potential if you harnessed the women in this room and outside and brought to leadership position where would you be ranking now? It is important to harness diversity in society, not just women but in thought and experience,’’ Marcus said.
Korea has to grapple with twin problems of low fertility rate and aging population, which has serious economic implications for its future.
Jung Jin-hwa, a professor at Seoul National University, said Korea has to balance increasing its fertility rate and actively utilize females in the workforce.
``The bottom line is while expanding women's employment, we must also increase rate fertility rates and it is also critical to secure work-family compatibility and fair treatment and compensation for women,’’ Jung said.
China is already creating a positive context for development of women in the business world, according to Lorna Davis, president of Kraft Foods China. Women’s participation rate in the Chinese economy is 74 percent. At Kraft Foods China, 45 percent of its managerial positions and 50 percent of its board of directors are women.
`` In a practical sense, the one child policy supports women in business... And in a philosophical perspective, I can’t count the number of times I have heard Mao’s statement `Women hold up half the sky.’ It is ingrained in many of the attitudes in China,’’ Davis said.
Davis also cited ``China’s virtuous circle,’’ which combines various elements that help foster women’s success in business.
``The combination of an open mind, the willingness to learn, belief that nothing is impossible and examples of success, creates an extraordinary virtuous circle that won't be easy to stop,’’ she said.