How politics and economics interact nationally and globally is one of the important questions for 2013 and beyond. There are three scenarios: good economics and effective politics provide the basis for a growing and more cooperative global economy; bad economics interact with dysfunctional politics to ruin the day; or the world muddles through, increasingly unstable, as a tug of war between economics and politics plays out, with no clear result or direction.
Will Politics Dominate The World Economy In 2013?: Mohamed El-Erian
Is The Global Economy In 2013 Once Again In The Hands Of Politicians?
Photo Credit: Keith Williamson - flickr
NEWPORT BEACH – Watching America’s leaders scramble in the closing days of 2012 to avoid a “fiscal cliff†that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of economic developments.
In some cases during 2012, politics was a force for good: consider Prime Minister Mario Monti’s ability to pull Italy back from the brink of financial turmoil. But, in other cases, like Greece, political dysfunction aggravated economic problems.
Close and defining linkages between politics and economics are likely to persist in 2013. Having said this, we should also expect much greater segmentation in terms of impact – and that the consequences will affect both individual countries and the global system as a whole.
In some countries – for example, Italy, Japan, and the United States – politics will remain the primary driver of economic-policy approaches. But elsewhere – China, Egypt, Germany, and Greece come to mind – the reverse will be true, with economics becoming a key determinant of political outcomes.
This duality in causation speaks to a world that will become more heterogeneous in 2013 – and in at least two ways: it will lack unifying political themes, and it will be subject to multi-speed growth and financial dynamics that imply a range of possible scenarios for multilateral policy interactions.
