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Our writers working on their articles.

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Kenneth Rogoff: Secular Stagnation or Post Financial Crisis Trauma?

by Janet Wi

October 14, 2014

At the 15th Annual World Knowledge Forum, Kenneth Rogoff, the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University, expressed confidence that the current global financial crisis is not an instance of secular stagnation, but rather a typical trend of post-financial crisis trauma that has occurred for the past 800 years.

In response to the growing public concern that economic growth is slowing down in a way that will cause a train wreck of problems in the future, Mr. Rogoff sais, “The idea that we’re in some kind of permanent growth trap is very misleading.”

Increased pessimism amongst the public, particularly in the idea that the middle class is no better off than 25 years ago and that capitalism is not working, is something that Mr. Rogoff takes issue with.

“Capitalism is not only working,” he said, “but this has been the best three decades in its history.”

Although some economists have stated that the current issue lies in secular stagnation, or sustained lack of demand, Mr. Rogoff believes this mischaracterizes several important elements. While these economists use statistics of real interest rates dropping significantly as evidence of a failing economy, Mr. Rogoff stressed that a graph taken from the same time period showing high stock market rates could just as easily be used to prove the opposite.

Without using multiple approaches and weighing multiple variables, Mr. Rogoff said, these economists are not able to get the full picture.

“Some people seem to think they have the model of the world that is the correct one,” he said. “I think it’s wildly premature to say that [the crisis is] secular stagnation.”

Mr. Rogoff went further to criticize European governments in particular.

“[They are] putting enormous pressure on their banks to hold European assets… obviously that’s not good for risk sharing,” he said.

In contrast, he praised China for recovering from debt, citing the sharp rise in the country’s credit rate as a concrete example becoming a stronger world power. Mr. Rogoff predicted that China will eventually surpass the US as a superpower, adding that the Chinese Renminbi has the potential to become the reserve currency.

Mr. Rogoff showed concern for the state of the South Korean economy. Despite having a good number of large firms that are competitive in the international sphere, he said, there is a lack in competition among the smaller parts of the economy. He added that it is much less dynamic than is seen in other advanced economies worldwide.

Due to high levels of regulation and risk, there are difficulties in starting new firms, which hinders new businesses from emerging into the market. This is an issue, according to Mr. Rogoff, because emerging markets have been a source of global growth.

Even with these concerns, Mr. Rogoff stated that this is a time of accelerated innovation, not fading innovation. He showed optimism for the economy as a whole.

“After you experience the systemic financial crisis, it is very typical to have growth be low for a very long time,” he said. “We’re still well within the time frame of a typical post financial crisis. When historians look back, they will view this as a period of abundance.”

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Tony Tyler: Building the Next Century of Aviation

by Janet Wi

October 14, 2014

This year marks 100 years of commercial flight. Tony Tyler, the International Air Transport Association (IATA) Director General and CEO, celebrated this moment in history at the 15th World Knowledge Forum in Seoul, South Korea.

Mr. Tyler spoke fondly of the history of commercial flight and said he looks forward to the second century of aviation. He anticipates the next 100 years will bring forth increased accessibility and innovation in the airline industry as a whole, making flying safer, more convenient, and more sustainable.

“As far as invigorating the economy, my answer is connectivity,” he said. “Aviation connectivity is the lifeblood of the global economy.”

Since the first commercial flight was made in 1914 with a single passenger onboard, airlines have transformed into an industry that provides a great value, according to Mr. Tyler. He explained that airlines have “turned our wonderfully big planet into a wonderfully small world” by connecting people, countries, and ideas. 

Mr. Tyler explained that he sees a bright future in the convenience of air travel, and that South Korea is at the forefront of innovation. To pave the way for smooth and hassle-free air travel, he suggested using technology to keep consumers connected and well-informed.

In creating a more convenient and innovative way for consumers to partake in air travel, Mr. Tyler praised South Korea as “a global leader in creating an environment for aviation.” This, he added, gives the country an economic and competitive advantage.

Mr. Tyler contrasted this sentiment by explaining the situation of government interference of air travel in Europe, causing the IATA to experience hurdles in reaching a new frontier of aviation. He cited the UK as having some of the highest airline taxes. “By making connectivity more expensive,” Mr. Tyler said, “the UK is sacrificing its own competitiveness and missing out on economic opportunities. ...[they should] let the industry blossom by lowering taxes.”

Tax on air travel is not the only thing Mr. Tyler sees the need to contain. The future of innovation in air travel cannot be guaranteed without sustainability, Mr. Tyler noted, as he set forth the specific goals that the IATA is committed to achieving. “In 2020, for example, we will cap our emissions and our growth. After that, we will be carbon neutral. By 2050, the aspiration is to cut our emissions back to half the levels they were in 2005,” he said. The main issue for this, however, lies in the high cost for sustainable bio-fuels.

Mr. Tyler also spoke on the safety of aircrafts, stating that there is “no safer way to get from A to B than by flying.” Although he referenced the tragedies of the Malaysia Airlines flights MH370 and MH17, he said that all airlines have a deep sense of responsibility and commitment to the safety of their passengers. Mr. Tyler cited statistics that showed the chance of stepping onto a plane that suffers a fatal accident was no more than a one in 2.4 million.

According to Mr. Tyler, the IATA is dedicated to innovation in air travel safety. In the event that an accident should occur, the IATA intends to “learn from the accident and change things so it doesn’t happen again,” he said. “We need to have an approach to an investigation that is transparent and open.”

Mr. Tyler ended on a positive note. “I am an optimist about the future,” he said, adding an insight from the founder of the Airboat Line, P. Elliot Fansler: “What was impossible yesterday is an accomplishment today, while tomorrow heralds the unbelievable.

[npcfury]

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