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Regulation : factor of growth of the world’s economy
chargé d’études de momagri
We present here-below the work of the Group France 2025, led by Eric Besson, former Secretary of State for Prospective, Public Policy Evaluation and Development of the Digital Economy, which demonstrates its positive impact on economic growth regulation.
For some 12 months now, the world has found itself in an storm unknown in economic history, and which was started by the combination of 3 major crises with varying connecting levels: a food crisis in spring 2008, a financial crisis which peak was probably reached at the time of the Lehman Brothers banking institution bankruptcy, and finally an economic crisis which consequences are far from being over.
Through a happy coincidence, it was in April 2008 at the climax of the food crisis and the premiss of the financial and economic crises that N.Sarkozy President of the French Republic inaugurated the work of a prospective group. Called France 2025 and bringing together 350 personalities from very different backgrounds (members of parliament, social partners, experts, representatives of the civilian society…), it was in charge of establishing a strategic diagnostic on the different possible evolution paths looking at the year 2025 horizon, while at the same time striving to highlight the main decisions which will need to be taken to remain “competitive and united”.
While the G20 which is expected to define the future world, is meeting in less than a week, this group has just submitted its conclusions which implications are particularly interesting given the evolution of the international context. Indeed by confirming the relevance of the momagri point of view, France 2025 stresses the fact that regulation is not only essential during this crisis period but also that regulation and the stability of world prices are factors of international growth.
* * Organised in 8 thematic working groups1, the France 2025 work was translated into scenarios. And among those carried out by the “Europe – Internationalisation” group, there is one of particular interest : a quantification made by « France 2025 » would indeed tend to show that in the context of regulated internationalisation2, annual growth would be greater than 3% over the 2008-20253period. On the contrary, in the absence of international regulation (called the scenario of “disequilibrium”) growth would only be slightly greater than 2% according to this same quantification.
Apart from the fact that this report confirms that there exists a real and unanimous awareness around the need to regulate, such a quantification is objectively very interesting insofar as it tends to prove that regulation is not only positive because it reduces market default risks (not to talk about induced social and political benefits), but it also allows higher economic gains.
Which is far from being the same thing. Thus, as is underlined by Eric Besson in his introductory report4, year after year, these different growth rhythms introduce considerable discrepancies : in just one generation, the difference in the standard of living between these 2 scenarios would be of more than a third ; in terms of well-being, measured here by basing oneself on the consumption capacities (share of final revenue devoted to consumption in terms of equivalent utility variances), regulated growth would increase the world’s gains by 2%, while the absence of regulation would reduce them by 12%.
* * If, following the financial crisis, international political and economic decision-makers seem to have become aware of the dangers of an absence of regulation, the France 2025 prospective group simulation results offer the advantage of going further by highlighting not only the cost of regulatory absence but also the economic benefits of such policies.
These simulations coincide on all counts with the latest results achieved with our momagri model, concerning the impact of trade liberalisation on agricultural markets, and which particularly stunning results will be communicated before the end of March. Letting the invisible hand act on the market will not stabilise world prices and won’t translate into international economic growth such as the one we could experience through adequate regulatory policies. And it is to be expected that, on the basis of these results, the G20 meeting will be an opportunity to set up a true international governance on agricultural as well as financial markets which, let’s not forget it, were the two fertile grounds for the generalised crisis which is affecting us today.
|1 The working groups are organised according to 8 major subjects which are: Internationalisation, Production, Creation, Living together, Risks and Protection, Scarce Resources, Technology and Everyday Life, Government and Public Utilities.|
2 According to France 2025, regulation consists in making growth bearable, i.e. acceptable by all in the short term and lasting in the long term. It’s about putting in place mechanisms which reduce iniquity at international level, if need be through the adoption of special and differentiated treatment in commercial relations and an access guarantee to international public goods, but also international regulatory mechanisms, especially financial and relative to pricing, which will limit the impact of market volatility on the most exposed individuals and economies.
3 Source : CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), MIRAGE model. MIRAGE is a general equilibrium model calculated at a multi-sector and multi-regional level intended for commercial policy analysis.
4 «Eric Besson, « Dix défis pour la France », January 2009 www.strategie.gouv.fr