«This time we need a sustained rebound, not a bounce. If this time is to be different, we need certainty, not uncertainty. We need decision makers to be real action takers. We need delivery». These were the words of Christine Lagarde, Managing Director of the International Monetary Fund, in a speech at the Peterson Institute for International Economics. Words that clearly express the need to achieve a decisive change in the global crisis.
Five years after the Great Recession erupted, the world economy has yet to regain the growth rates seen in previous years. The global recovery is evidently fragile and slower than in other crises.
But something has not changed: the decisive role of the United States in the world economic scenario. In spite of the extraordinary rise of the emerging countries, there's no doubt that America is still the key driving force and the crisis cannot be resolved without its help. That's why the outcome of the presidential elections to be held in November in the United States is so important, especially taking into account the fact that the two contenders, Obama and Romney, are planning quite different economic policies.
Public accounts lie at the heart of the electoral battle. The public sector deficit is close to 8% of gross domestic product and debt exceeds 105% of it.
In Europe, such figures would lead any state to request a bail-out, such is the size of a problem that must be tackled without delay. The incumbent President opts for tax hikes. The presidential candidate, for spending cuts. In the fray, two different models for issues such as the size of public administration, the composition of spending and the mix of taxes to be applied.
Monetary policy presents fewer discrepancies, led by the Federal Reserve of Ben Bernanke. Given the impossibility of cutting interest rates any further, the Fed has chosen unconventional expansionary policies, of note being the central bank's quantitative easing programmes. This territory is not very familiar and raises questions as to its possible inflationary effects in the future or the distortions it might generate in terms of the efficient assignment of financial resources.
But the question is how far monetary and fiscal policies are stimulating the economy. The available evidence suggests that they have probably avoided a relapse in activity, although they are not managing to decisively boost the labour market nor increase industrial capacity utilization. Demand for employment is being hindered by a general tone of uncertainty regarding economic prospects within a context of excessive debt and the wearing out of fiscal stimuli.
Yet, these are not just cyclical effects, as changes of a structural nature can also be detected that are impairing the traditional flexibility shown by the US labour market to adapt to the most diverse of situations.
With Europe deep in recession and China slowing down, resolving these and other questions facing the world's first economy (trade with China, real estate) will not only affect future developments in terms of its own affairs but will also be decisive in leaving behind the period of international crisis and uncertainty that started five years ago.