This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

Go to Alex Carrick's blog home

Construction Industry Forecasts

Notes from Alex Carrick - Mar 31, 2009

Alex Carrick
The G20 – A Diversity of Goals and Answers

Versus the G7 and G8, the G20 marks a significant shift to global economic managment. In a time of world-wide recession, the interests of the G20 nations (listed at bottom) are of particular importance. They define much of what will be happening in political and economic circles over the near and longer terms. Three clear themes have emerged.

(1) The United States would like to see governments around the world provide more in the way of economic stimulus. The U.S. and a number of other countries (e.g., Canada, China, the United Kingdom and even India) have made huge spending commitments to spur on their economies.

Major countries in continental Europe have not opened their purses to the same extent. Some analysts have calculated, however, that if its more comprehensive social net is taken into account, Germany is deficit spending to about the same degree as the United States. France is contending with major street protests by its public sector workers against job cuts and in favour of a minimum wage increase. One stated goal is that 2% of world Gross Domestic Product (GDP) be applied as fiscal stimulus by the world’s public sector.

(2) Governments of the European Union blame the United States and Britain − through their financial centres in New York and London − for the world economic meltdown. They want to see more regulation of the financial sector. There is wide-spread agreement among nations that there has to be better regulation in the following ways: fewer but smarter regulatory agencies; formal oversight of previously free-wheeling near-banks (e.g., hedge and private equity funds); higher capital requirements for all financial firms; and guidelines about executive compensation, as well as controls on risk-promoting bonuses.

Where notions about greater controls differ is in terms of expanding international agencies or introducing new regulatory bodies with global authority. The U.S. is unlikely to give up sovereignty over its own financial sector. It also has to be recognized that different countries (e.g., European versus BRIC nations), due to their unique stages along the development time line, have differing needs from their banking and other lending/borrowing institutions.

(3) Developing and emerging nations want expanded roles in world economic bodies. These nations are suffering in the downturn due to a loss of export sales, either of commodities or finished products. They also speak for poorer nations around the globe which are suffering on account of weak raw material sales and a decline in wage remittances (i.e., money sent back home) from expatriate workers who have gone abroad.

Richer nations have “issues” with developing nations in several ways. Less rigorous environmental standards are viewed as a form of export subsidy. On their part, the developing nations place a portion of the blame for their polluting problems on the wealthier nations, since it is prosperous consumers who are buying the products that create carbon emissions in the production process.

More Domestic Consumption in Developing Nations

The point is also often made that such nations as China and those along the Asian Pacific Rim need to adjust their economies from export sales dominance to a more domestic consumption orientation. Savings rates in those countries are so high because money needs to be set aside for educating offspring and to pay for health care in an emergency.

If the public sector were to take over more responsibility in these social safety net areas, then more family funds would be available to spend on consumer goods and lifestyle improvements. Simply letting laid-off city workers move back to family farms in hard times is not an acceptable way for a modern nation to deal with its dispossessed.

Why so Important? Expanding World Trade a Necessity

The foregoing is so important because the economies of richer nations are going to be stretched in the years ahead. Most richer nations have declining worker-age populations as the post-war baby boom generation heads into its retirement years. Low population growth rates are also a factor. Add to the list declining goods production as almost all new wealthier-nation jobs are coming from the services side of the economy. Expanded world trade is what offers the most hope for longer-term prosperity in rich and developing nations alike.

International Monetary Fund (IMF)

Finally, there is agreement on a need for a bigger role to be played by the International Monetary Fund (IMF), as a lender of last resort for countries on the verge of foreign debt default. One target is that the IMF’s lending resources be tripled to $750 billion. Those developing nations that want an expanded say in the global economy are being called on to carry more of the “freight” as the price of approval. China has the excess of foreign currency reserves, earned through trade, which can make up some of the IMF’s new funding needs.

In alphabetical order, the G20 is comprised of: Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, India, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States and a European Union individual membership. This encompasses wide-ranging geographic representation.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


RSS Feed

» back to blog home

Member Comments

Post Your Own Comments 
» Not a member? Register now to become one. Otherwise, login to post your comments on this article.

Read Other Recent Alex Carrick Posts

10/12 - Latest Economic Nuggets: Mid-October 2012
10/04 - Auto Sales Set a Blistering Pace in the U.S. and Canada
09/18 - Canada’s Energy Future is Assured, Right? Think Again
09/14 - Latest Economic Nuggets: Mid-September 2012
09/06 - Auto Sector Labor Relations will Play a Role in Construction Outlook
08/30 - Raucous Behavior in the Party Room Next Door
08/13 - Latest Economic Nuggets: Mid-August 2012
07/31 - Canada’s GDP Advanced a Timid 0.1% in May but Support Will Come from Better U.S. Home Prices
07/19 - Finding the Pearls in the Latest U.S. and Canadian Economic News
07/13 - Latest Economic Nuggets: Mid-July 2012
07/04 - U.S. Auto Sales Continue Bullish While Canadian Incomes Languish
06/28 - Three Pivot Points for the World Economy - U.S. Housing, Europe’s Conundrum and Oil Prices
06/14 - Economic Nuggets – June 15, 2012
06/06 - Canada’s First Quarter GDP Growth Met Expectations, But What Comes Next?
05/30 - Ontario has a Backbone of Strength for the Decade Ahead
05/14 - Economic Nuggets - May 15, 2012
05/11 - Canada Rode a Second Consecutive Month of Strong Job Gains in April
05/04 - U.S. Employment Rose by a Mediocre 115,000 in April
04/27 - U.S. GDP +2.2% in Q1 2012 and Alberta led Canadian Provinces in 2011
04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates

click here to update your log-in and member information

click here to maintain your company profile & view metrics