Download A world trapped into debt

AUGUR stakeholder’s workshop, 17-18 November 2011
A WORLD
TRAPPED INTO DEBT
AUGUR SCENARIO 1
Terry McKinley and Giovanni Cozzi
Centre for Development Policy and Research (CDPR)
School of Oriental and African Studies (SOAS)
University of London
DG Research and Innovation, CDMA building, 21 rue Champ de Mars, Brussels
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
SCENARIO 1 ASSUMPTIONS

Continued Fiscal Consolidation in developed countries:
 Budget Deficits limited to -3% of GDP in European blocs
 Debt stock reduced also in other developed countries (such as to 60%
of GDP in the US)
 Government Revenue is allowed to decline in Europe, US and Other
Developed Countries
 Revenue/GDP drops to 15% in the US & 20% in most European Blocs
 There is a consequent drop of private investment in Central and
North Europe and reduced intra-Europe migration

Multinationals tend to move Industrial Production and Exports to
other regions, such as South America and India
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
SCENARIO 1 BACKGROUND ASSUMPTIONS


The pervasive influence of Global Markets continues to increase
National and International Governments have a declining influence
over economic and financial developments
 Global Investors and Corporate Management determine the
availability of finance and the distribution of economic growth

Any improvements in the Environment are driven mainly by slow
growth in developed countries and continued high oil prices

There is no concerted effort to achieve Greater Inclusiveness of
Economic Growth, regionally (within Europe) or globally

Developing Countries continue to grow at a faster rate than
Developed Countries—although some, such as China, slow down
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
East Europe
Central Europe
80
110
107%
100
74%
70
90
60
80
50
70
60
40
50
30
40
20
80
30
85
90
95
00
05
10
15
20
25
30
80
85
90
95
South Europe
00
05
10
15
20
25
30
15
20
25
30
North Europe
160
80
150%
140
61%
70
120
60
100
80
50
60
40
40
20
30
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
GOVERNMENT DEBT (% of GDP)
05
10
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
UK
USA
110
90
91%
100
66%
80
90
70
80
60
70
50
60
40
50
40
30
80
85
90
95
00
05
10
15
20
25
30
80
85
90
Japan
95
00
05
10
15
20
25
30
20
25
30
Other Developed
200
80
125%
160
62%
76
72
68
120
64
80
60
56
40
52
0
48
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
GOVERNMENT DEBT (% of GDP)
05
10
15
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
East Europe
Central Europe
30
25
24
28
23
26
22
1.7%
21
20
19
24
22
2.1%
20
18
18
17
16
16
80
85
90
95
00
05
GOV. INCOM E
10
15
20
25
80
30
85
90
95
00
05
GOV. INCOM E
GOV. EXPENDITURE
South Europe
10
15
20
25
30
GOV. EXPENDITURE
UK
26
28
24
26
22
3.0%
20
24
22
1.5%
18
20
16
18
14
16
12
10
14
80
85
90
95
00
GOV. INCOM E
05
10
15
20
GOV. EXPENDITURE
25
30
80
85
90
95
00
GOV. INCOM E
05
10
15
20
25
30
GOV. EXPENDITURE
AUGUR
GOVERNMENT EXPENDITURE VERSUS INCOME (% OF GDP)
AUGUR stakeholder’s workshop, 17-18 November 2011
Central Europe
East Europe
6
4
5
2
4
0
3
-2
2
-4
1
-6
0
-1
-8
-2
-10
-3
-12
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
South Europe
05
10
15
20
25
30
10
15
20
25
30
UK
2
4
3
0
2
1
-2
0
-4
-1
-2
-6
-3
-8
-4
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
CURRENT ACCOUNT (% OF GDP)
00
05
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
East Europe
Central Europe
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-8
-6
80
85
90
95
00
05
10
15
20
25
80
30
85
90
95
South Europe
00
05
10
15
20
25
30
15
20
25
30
North Europe
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
REAL GDP GROWTH (% p.a.)
00
05
10
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
UK
USA
6
8
4
6
2
4
0
2
-2
0
-4
-2
-6
-4
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
Japan
05
10
15
20
25
30
10
15
20
25
30
China
8
20
6
16
4
12
2
0
8
-2
4
-4
-6
80
85
90
95
00
05
10
15
20
25
30
0
80
85
90
95
REAL GDP GROWTH (% p.a.)
00
05
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
India
CIS
12
15
10
10
8
5
6
0
4
-5
2
-10
0
-2
-15
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
10
15
20
25
30
25
30
World GDP at market rates
Other Africa
12
5
10
4
3
8
2
6
1
4
0
2
-1
0
-2
-3
-2
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
REAL GDP GROWTH (% p.a.)
00
05
10
15
20
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
Central Europe
East Europe
68
70
66
68
64
66
54%
62
60
64
58
62
56
69%
60
54
52
58
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
South Europe
05
10
15
20
25
30
15
20
25
30
UK
64
72
62
71
70
60
69
58
68
56
67
54
66
56%
52
69%
65
50
64
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
10
AUGUR
EMPLOYMENT RATE (% OF WORKING AGE POPULATION)
AUGUR stakeholder’s workshop, 17-18 November 2011
Central Europe
East Europe
70
71
68
70
69
66
68
64
67
62
66
60
65
58
64
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
South Europe
05
10
15
20
25
30
10
15
20
25
30
UK
68
67
67
66
65
66
64
65
63
64
62
63
61
62
60
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
AUGUR
WORKING AGE POPULATION (% OF TOTAL POPULATION)
AUGUR stakeholder’s workshop, 17-18 November 2011
East Europe
Central Europe
22
28
26
20
24
18
22
16
20
14
18
12
16
10
14
8
12
80
85
90
95
00
05
10
15
20
25
80
30
85
90
95
00
South Europe
05
10
15
20
25
30
10
15
20
25
30
UK
24
22
21
22
20
20
19
18
18
17
16
16
14
15
12
14
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
ELDERLY POPULATION (% OF TOTAL POPULATION)
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
Central Europe
East Europe
1.0
.1
0.8
.0
0.6
-.1
0.4
-.2
0.2
-.3
0.0
-.4
-0.2
-.5
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
South Europe
05
10
15
20
25
30
10
15
20
25
30
UK
1.4
.24
1.2
.20
1.0
.16
0.8
.12
0.6
.08
0.4
.04
0.2
.00
0.0
-0.2
-.04
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
NET MIGRATION (MILLION)
00
05
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
REDUCTIONS IN GOVERNMENT EXPENDITURES

While the elderly dependency ratio is rising, government
expenditures are falling: what is the impact?
 We use a composite index, the Government Service Standard,
to gauge the impact of expenditure cuts on dependants
 Government expenditures are compared to a weighted
population index (for the elderly, children and the workingage population)
 Then this ratio of public expenditures per population index is
compared to general income per capita
 The Results for Europe: There is a declining trend across the
various blocs
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
Central Europe
East Europe
17
20
19
16
18
15
17
14
16
13
15
12
14
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
10
15
20
25
30
10
15
20
25
30
UK
South Europe
18
18
17
17
16
16
15
15
14
14
13
13
12
12
80
85
90
95
00
05
10
15
20
25
30
80
85
90
95
00
05
GOVERNMENT SERVICE STANDARD (%)
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011

Conflicting Effects on Energy Use and Carbon Emissions:
 Slow Growth in Developed Countries but Faster Growth in Developing
Countries (along with a rising share of Global GDP)
 A High and Rising Price of Oil both slows growth and energy use
ENERGY USE AND CARBON EMISSIONS
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
WITHIN EUROPE
EUROPE AND OTHER
BLOCS
INCOME PER CAPITA
AUGUR
AUGUR stakeholder’s workshop, 17-18 November 2011
CONCLUDING REMARKS
The results of this scenario are not promising:
 Growth is slow and debt reduction unimpressive in Developed
Countries
 Employment is reduced and Government income and services decline
 Developing Countries maintain more rapid growth rates, as global
investment shifts towards them
 But energy intensity and emissions do not decline globally
 In terms of income per capita, East Asia gains on Developed Countries
but South Asia and Africa lag far behind, leaving pronounced global
inequalities unresolved
AUGUR