Four Big Trends Shaping Modern Economies: Insights from Adair Turner
Adair Turner, Chairman of the Institute for New Economic Thinking, discusses rising wealth inequality, falling interest rates, average income increases, wealth and employment in ICT businesses, and US job growth forecasts. The data highlights key economic shifts and challenges in contemporary economies.
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Four Big Trends Shaping Modern Economies Adair Turner Chairman Institute for New Economic Thinking The Shadow Chancellor s STATE OF THE ECONOMY CONFERENCE Imperial College London, 19 May 2018 INET_newlogo_BLUE.eps ineteconomics.org | facebook.com/ineteconomics USA 300 Park Avenue South, 5th Floor, New York, NY 10010 | UK 22 Park Street, London W1K 2JB
Rising wealth/income Rising inequality 500% bottom 20% top 5% 350 450% 300 250 400% % of national income 200 350% 150 300% 100 250% 50 0 200% 1980 1985 1990 1995 2000 2005 2010 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 S Falling interest rates Rising leverage 5 180 4 160 140 3 120 2 % 100 1 80 0 60 -1 40 -2 20 Jun-16 Jun-17 1986-90 1991-95 1996-00 2001-05 2006-10 2011-15 INET_newlogo_BLUE.eps 1995 1950 1950 1960 1965 1970 1975 1980 1985 1990 2000 2005 2010 1
Averageincome increases US (1980=100) bottom 20% top 5% top 1% 350 300 250 200 150 100 50 0 1996 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: US Census Bureau; World Top Incomes Database S INET_newlogo_BLUE.eps 2
Wealth and employment in ICT businesses Market Value ($bn) (27 Apr 2018) Employees (000s) (2017) 736 124,000 716 72,000 502 25,000 455 51,000 472 45,000 INET_newlogo_BLUE.eps 3
US Jobs growth forecast: 2014 2024 Forecast job growth (000s) Occupational categories by speed of job growth Median annual wage May 2014 ($000s) 1 1 Personal care aides 458 20 2 2 Registered nurses 439 67 3 3 21 Home health aides 348 4 4 21 Food preparation and serving workers 343 5 18 5 Retail sales persons 314 6 25 6 Nursing assistants 262 7 22 7 Customer services reps 253 8 31 8 Cooks, restaurant 158 9 97 9 General and operations managers 151 1 31 10 Construction labourers 147 Total top 10 2873 (29%) 13 Janitors and cleaners 136 1 23 14 Software developers, applications 135 2 95 All sector average: 36 Source: Bureau of Labor Statistics, www.bls.gov; Projections of Occupational Employment, 2014 2024 INET_newlogo_BLUE.eps 4
Private domestic credit as a % of GDP: Advanced economies 1950 2011 180 160 140 120 100 80 60 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2010 2005 Source: Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten, C. Reinhart & K. Rogoff, 2013 INET_newlogo_BLUE.eps 5
Share of real estate lending in total bank lending 60% 50% 40% Percentage 30% 20% 10% 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: The Great Mortgaging , Oscar Jord , Moritz Schularick and Alan Taylor, 2014) INET_newlogo_BLUE.eps 6
Debt as % of GDP: Advanced Economies 300 Households Non-financial Corporates General Government 250 200 150 100 50 0 End-2007 End-2010 End-2013 End-2016 Source: Bank for International Settlements 87th Annual Report, 2017 INET_newlogo_BLUE.eps 7
Fiscal deficit as % of GDP: US and Eurozone, 2010-2018 12 USA EUROZONE 10.9 10 9.6 Forecast in 2017 Forecast in 2016 8 7.9 GDP % 6.2 6 4.5 4.4 4.4 4.2 4 4 4 3.6 3.5 3 2.6 2.1 2 1.7 1.5 1.2 1.0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Fiscal Monitor, International Monetary Fund, April 2017 INET_newlogo_BLUE.eps 8
Fiscal deficit as percentage of GDP: China, 2010 2018 Oct 2017 projection 4.5 4 3.7 3.7 3.9 3.7 3.5 April 2016 projection 3 2.8 2.6 2.5 2.4 GDP % 2.1 2 1.5 1 0.9 0.8 0.5 0.3 0.1 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Fiscal Monitor, International Monetary Fund, April 2017 INET_newlogo_BLUE.eps 9
Sterling 10 year index-linked gilt: Yield to maturity 1985 2017 5 3.85 4 3.59 3 2.54 1.95 2 % 1.22 1 0 -0.62 -1 -1.5 -1.8 Source: Bank of England Statistics -2 1986-90 1991-95 1996-00 2001-05 2006-10 2011-15 Jun-16 Jun-17 10 INET_newlogo_BLUE.eps
Advanced economy investment as % of GDP: 1986 2015 five-year averages 25.1 25 23.6 23.5 23 22.3 % 21.8 21 20.7 19 1986-90 1991-95 1996-00 2001-05 2006-10 2011-15 INET_newlogo_BLUE.eps 11 Source: IMF World Economic Outlook Database, April 2016
Capital in France 1700 2010 800% Net foreign assets Other domestic capital Housing Agricultural land 700% 600% % national income 500% 400% 300% 200% 100% 0% 1880 2010 1700 1750 1780 1810 1850 1910 1920 1950 1970 1990 2000 Source: Capital in the Twenty First Century, T. Piketty (2013) INET_newlogo_BLUE.eps 12
Rising wealth/income Rising inequality 500% bottom 20% top 5% 350 450% 300 250 400% % of national income 200 350% 150 300% 100 250% 50 0 200% 1980 1985 1990 1995 2000 2005 2010 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 S Falling interest rates Rising leverage 5 180 4 160 140 3 120 2 % 100 1 80 0 60 -1 40 -2 20 Jun-16 Jun-17 1986-90 1991-95 1996-00 2001-05 2006-10 2011-15 INET_newlogo_BLUE.eps 1995 1950 1950 1960 1965 1970 1975 1980 1985 1990 2000 2005 2010 13
