ACT: Days of Future Past
Following a four and a
half hour train journey speeding through the very gorgeous and green Great
British countryside (SO many lambs!) I arrived at the ACT Annual Conference
2014 in Glasgow in good spirits. Clearly the conference organisers knew this
would be the case, as they kept the good times rolling with an opening double
bill of plenary speakers that were both entertaining and thought provoking.
I'm not sure I'd have
ever described the Right Honourable Alistair Darling MP in that way before, but
perhaps that's more of a comment on my general ignorance than Darling's
political career. As the Chancellor of Exchequer at the time of the financial
crisis, Darling faced fearful flack from both political opponents and the
media, who cheerfully ignored the fact that the crisis was not a uniquely
British phenomenon. That would be enough to turn anyone's hair mostly white.
Delivering the opening
keynote address of the conference, Darling recalled just how close to a
meltdown one the largest banks in the UK had come, an event that could have
triggered a far worse collapse of the world's banking system. Asking the then
CEO of RBS how much time they had until it folded, Darling was informed that a
couple of hours was about as long as they could hold on. Two hours. That's
frightening.
At the time Darling and Prime Minister Gordon Brown acted essentially bet the UK economy on the survival of RBS (without the knowledge of any other ministers - something that simply could not happen in many other EU countries or the US). Crisis was, to some extent, averted and today UK taxpayers hold stakes in more than one bank that is hopefully heading in the right direction.
Darling asserted that before the financial crisis, people didn't understand the risks that they were exposed to, and that a similar crisis could happen again in the future, most likely when the last person with knowledge of the most recent crisis leaves the industry.
Looking further afield, Darling stressed that, while the ECB performed "miracles" to stop the European banking system collapsing in 2012, it needs to do more still going forward.
Speaking of going forward (SEAMLESS LINK KLAXON!), part two of the opening plenary double bill saw Karen Ward, senior global economist at HSBC, take delegates on a journey to 2050, with some surprising results. Ward's paper, The World In 2050, is firmly based on economic research but shifts the focus to ask two main questions when looking at national economies:
- What stage of development is that economy at today? This covers the low hanging fruit and what "stuff" the country has.
- What is the potential for development? This question looks at areas such as education, rule of law, health, and all that good stuff.
By evaluating countries in this way, Ward found that many of the 'big earners' of the emerging markets are still at a very early stage of development. If you look at income per capita, for example, China and India are below a number of the other emerging markets, and still only reach 7% and 4% respectively of the income per capita in the US.
Ward made the point that China is just at the start of its development process in terms of shifting from a manufacturing-driven economy to a services and consumer-focused economy. "China today is where the US was in 1900 and Japan was in 1950 in this regard," explained Ward. "This is where people judge China's position today incorrectly."
Projecting forward to 2050 and using research around her two key questions to guide the process, Ward showed how income per capita gains in emerging markets during this time will far outstrip those of the US, with China seeing some 800% growth in this time. However, as we all know, it is easy to have a high percentage of growth when you're coming from a low base. Ward's figures showed that, despite the 800% increase, by 2050 China's income per capita could still only be one-third that of the US.
While her research shows that 19 of the top 30 economies in the world in 2050 are those that today we call 'emerging', Ward closed her presentation by encouraging the audience not to be fearful of this statistic. She pointed to the fact these emerging markets will power global growth as developed markets retract, which will be good for businesses. Yet another reason to be cheerful on a great first day at the ACT Annual Conference!
In : ACT Annual Conference 2014
Tags: "alistair darling" "rbs" "act annual conference 2014" "the world in 2050" "karen ward"