Economic Outlook for 2013

Economic Outlook for 2013

Bob Pollin: With austerity policies in Europe and the USA and slow down in China and India, 2013 needs innovative policies or more recession is likely -   January 2, 2013
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Robert Pollin is professor of economics at the University of Massachusetts Amherst. He is the founding co-director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.


Economic Outlook for 2013PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The PERI Report. Now joining us from Amherst, Massachusetts, is Bob Pollin. He's codirector, cofounder of the PERI institute. Hi, Bob.


JAY: So, looking forward to 2013, the American economy, global economy, more of the same? Dramatically better? Or what's the potential for dramatically worse?

POLLIN: Well, let's get realistic. Starting with Europe, the crisis in Europe is not getting any better. There's no evidence a solution, a serious solution is being implemented, so that therefore it's fair to say that conditions there are more likely to get worse. That is, in Greece there is no resolution to the crisis, the severe crisis that has been experienced there now for two years, and there's no serious relief in terms of facing the cuts, the severe cuts, the austerity agenda that's been implemented there, similar to Spain, similar in Italy, similar in Ireland. We do not have a solution there. Technically I can sketch out a solution very easily. Politically, there is no solution, because the dominant politicians, certainly in Germany, remain fundamentally committed to the idea of austerity as a solution, and austerity is not a solution.

So, now, without Europe experiencing some kind of turnaround, some kind of growth, it's impossible to see how the rest of the world is going to be buoyant, even if everything else were to continue to improve. But everything else is not getting stronger. As we see, the Federal Reserve itself is forecasting that unemployment in the U.S. is going to stay between 7.3 and 7.7 percent, so essentially no improvement in the United States.

On top of that, in the United States we face the problem of the Fed having ineffective policies to date, even though, at one level, the zero interest rate policy is extremely aggressive. It looks extremely aggressive. It is extremely aggressive for helping the banks. It is not extremely aggressive for getting money into the economy. The prospects for a significant fiscal stimulus, which is what we need for the coming year to get the unemployment rate down: most unlikely. Quite the contrary. Again, we're talking about how much austerity we're going to impose.

Then let's look to Asia. The economies China and India have slowed down. They're still obviously doing a lot better than we are here in terms of growth, but there's a big difference between China growing at 5 percent versus China growing at 9 percent. So we do not see a clear growth engine coming out of any region of the world that is likely to move the engine. And that is going to continue as long as Europe and the United States are completely enveloped by this notion that cutting fiscal deficits, austerity, is the order of the day.

We have to overcome that idea, and we have to undertake innovative, aggressive policies focused on job creation. And investing long-term in infrastructure and the green economy is a way to build out jobs, raise productivity, and reverse climate change. That's not happening, though. We need to get onto those points.

JAY: Thanks for joining us, Bob.

POLLIN: Okay. Thank you.

JAY: And thank you for joining us on The Real News Network.


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