Beware of reassuring figures: the economic crisis is not totally behind us

In the spring of 2020, when the pandemic broke out and most national economies went into sleep mode, the most pessimistic comments circulated on the consequences of this new crisis: a surge in bankruptcies and unemployment seemed inevitable. The more than 30% drop in most stock markets at the end of March reflected these concerns.

On the other hand, some believed that this dramatic event was going to have at least one positive consequence: the link that was made by many researchers between the pandemic and the degradation of ecosystems should lead to better consideration of environmental issues and in particular to a slowdown. greenhouse gas emissions. The world after would be very different from the one before.

The sequence of events seems to strongly contradict these forecasts. After declining 3.9% in 2020, global GDP is expected to rebound 5.9% this year and continue to grow 4.9% in 2022, according to the latest forecasts from the International Monetary Fund. In the euro zone, according to initial Eurostat estimates, growth stood at 2.2% in the third quarter compared to the previous quarter; it would even have reached 3.3% in Austria and 3% in France.

Public funds in tire-larigot

Bruno Le Maire can certainly say that this quarterly performance, the best since 1968, is largely explained by because the state budget a «massively protected the French during the crisis, massively protected companies, massively protected employees“. But it must be recognized that in all developed countries, governments have resorted to “whatever the cost», In a more or less spectacular and more or less effective way.

According to IMF estimates, at the global level, approximately $ 16.9 trillion in public funds were injected into the economy, without always being able to sort out what was spent to deal with the crisis and what was spent to promote recovery. It would have been astonishing if such amounts had not had an impact.

This massive aid avoided the worst: the dreaded cascading bankruptcies did not take place, and the rise in unemployment was limited in scope and duration. In France, the unemployment rate fell to 8% in the second quarter of 2020 (the third quarter figure is due for release on November 19) after peaking at 9.1% in the third quarter of 2020. It has thus fallen back to the value it had before the crisis (it is even less than a tenth of a point). Job creation picked up at a sustained pace and, in total, private salaried employment exceeded its pre-crisis level at the end of September. of 185,600 jobs.

The poverty rate, to be taken with a grain of salt

Another surprising result in the right direction. Contrary to what might have been expected and what had been announced by charities, the poverty rate did not increase in our country in 2020: it would have remained stable at 14.6% of the population. However, as the Director General of INSEE points out in a blog post, do not make this figure say more than it says.

First, behind the percentage, we must see the reality: a poverty rate of 14.6% means that our country has 9.3 million people in a situation of monetary poverty, which is not nothing. Then the number of poor may not have changed much, but these poor may be even poorer than they were before. We are considered poor when we are below 60% of the median standard of living, but we can be at 59%, 40% or 30% of this level …

The number of undernourished people in the world has risen to over 800 million in 2020.

Finally, the estimate of monetary poverty does not exactly match the one observed by taking into account other more concrete parameters, which describe poverty in living conditions. This study is still in progress; we will have to wait until next year to get a more precise idea of ​​the social consequences of the Covid-19 crisis.

It should not be forgotten either that not all countries have had the means to support the activity of their economy and the standard of living of their population, that many are very far from having received the necessary international aid, and that they are still badly in need of vaccines. While the global average population fully vaccinated against Covid-19 is approaching 40% and France is more than 70%, many countries do not even reach 1% (especially in South-Saharan Africa), which is slowing down the resumption of their activity.

Large emerging countries such as India or Indonesia have had to undergo new containment or travel restriction measures; poverty is gaining ground in Brazil. And, recalls Kristalina Giorgeva, Managing Director of the IMF, the number of undernourished people in the world has been increased to more than 800 million in 2020.

Slow growth

If the crisis has been rather well managed at the global level, we can therefore see that the benefits of this action have not benefited everyone in the same way within each State and between States. But other problems are likely to arise in the more or less long term. In the short term, growth is hampered by disruptions in the supply chain of companies. Strong fiscal stimulus, especially in the United States, has led to a rapid increase in demand, and suppliers can no longer keep up. Images that we have all seen long lines of container ships waiting to be unloaded in the Port of Los Angeles says more than all the talk of economists.

At the same time, the power shortage is hampering Chinese industrial production. In this regard, nothing has changed: we talk a lot about relocations, we have seen a few limited examples, but the reality is that China remains the workshop of the world; when it has problems, the activity of other countries suffers the consequences.

China could also give us other concerns. Faced with the crisis caused by the pandemic, the central government had provisionally put aside the restrictive policy it had previously put in place so that local authorities and heavily indebted companies consolidate their finances. But, since the beginning of this year, he has been trying to resume this policy of deleveraging.

This is not without difficulties, as evidenced by the misadventures of Evergrande, the biggest real estate developer in the country and also the most in debt. And growth is suffering: on an annual basis, it fell sharply by 7.9% in the second quarter 4.9% in the third. The uncertainties surrounding Chinese growth over the next few months are prompting all economic institutes to be cautious in their forecasts.

Attention, risk of inflation

These institutes have another reason to moderate their enthusiasm: inflation. On this point, we must be right to keep: it is not because certain prices, those of energy for example, increase sharply at a given moment and cause the consumer price index to rise, that we have to talk about inflation. This only really appears if this rising phenomenon continues over time, if it gains in all products and services and if it triggers a price-wage spiral.

Questions are being asked about the future policy of central banks everywhere.

This is not yet the case, but central banks are starting to admit one after another that the rise is ultimately stronger and lasts longer than they initially envisioned. In the United States, we are currently to a price increase of 5.4%, caused in particular by a rise of nearly 25% in energy prices with a rate on ten-year government bonds of around 1.45%.

Can this situation last for a long time? It is indeed very favorable to the federal government, which can borrow at strongly negative real rates to finance the recovery, but in a period of price pressures, does this policy not amount to adding oil to the economy? fire? The Federal Reserve is showing very understanding for the moment and is tightening its monetary policy very slightly and gradually without further threatening to raise interest rates. But no one can say for sure what will happen in the next few months. Questions are being asked about the future policy of central banks everywhere.

Debt: beware of the point of no return

This question of interest rates also leads to the question of the sustainability of State debt. With very low or even negative interest rates, public debt was not a problem: even the most orthodox economists could hardly blame states for taking on debt to support businesses and preserve the standard of living of households. But this policy could only last a long time.

One day or another, it would have been necessary anyway to wonder about the way to stabilize the public debt, or even to reduce it. If an inflationary slippage leads to a tightening of monetary policies, fiscal policies will also be called into question. However, a simple stabilization of the debt would already lead States to have to make significant efforts, as the economists of the OFCE show very well, who are not, however, staunch supporters of budgetary austerity. A context of pressure on interest rates would make matters even more complicated.

Against global warming, a costly fight

Whatever the results of COP26, all countries will have to invest massively in energy to achieve carbon neutrality more or less quickly. Contrary to what Greta Thunberg says before you even know what will be said in the second week of the conference, it’s not just a “Celebration of business ‘as usual’ and blah blah”. It is certain that governments, including in the countries which count the most by their greenhouse gas emissions (like China, Russia or Australia), seek first to preserve their economic positions.

Promising a reduction in public spending and taxes in the next few years would be reckless.

All those who, like India, make big promises for 2050, 2060 or 2070 without making very binding commitments for the next few years – when we must act now – are certainly to be denounced in the public square ( but also to help, when it comes to poor or emerging countries). Nevertheless, a dynamic is taking place and the movement will accelerate in the coming years. It’s going to be expensive, very expensive.

We will have to mobilize private money, but States will also have to play an active role. The ecological utopia – which consists in asserting that green energies and new ways of cultivating and producing will lead to the creation of millions of jobs, and that we will live better in a healthier world – must not hide a Hard reality. The transformation of the energy system and the ways of producing and consuming will not only bring winners, and public finances will have to be heavily strained to maintain social cohesion. Promising a reduction in public spending and taxes in the coming years would be rash …

So when we see the world stock markets soar as it was the case at the beginning of November in Paris as in New York, we can wonder if the market economists who call for caution are not right. Yes, the world economic situation in general and France in particular is clearly better than what we imagined in the spring of 2020. But no, it is not at all sure that this very favorable trend can continue for a long time without a few mishaps. …

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