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Indigenous people have played a role in the climate change and poverty. They protect the “lungs of the planet” which is one the most effective ways to control climate change.

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Idjwi is an isolated island that has social and environmental challenges. About 80 percent of the people living on the island survive off of fishing and farming.

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Fishing for prosperity by United Nations Development Programme on Exposure

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In the Democratic Republic of Congo, a tiny island is making great strides.

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Employment and economic growth have been an issue in developing countries. 470 million jobs will need new clients between 2016 and 2030.

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The SDGs promote sustained economic growth, higher levels of productivity and technological innovation. Encouraging entrepreneurship and job creation are key to this, as are effective measures to eradicate forced labour, slavery and human trafficking. With these targets in mind, the goal is to achieve full and productive employment, and decent work, for all women and men by 2030.

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When the recession hit in 2008 it impacted a lot of people causing them to lose jobs and making company’s come close to being broke. This recession can effect the whole world and if ithits  country’s like China then it can really effect the world as a whole.

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Editor's Note: As the economies of the U.S. and China both struggle under the global recession, what is the future of the U.S.-China economic relationship and how will both countries respond to invigorate economic growth? In testimony to the U.S.-China Economic and Security Review Commission, Wing Thye Woo details challenges for both economies and proposes effective policy responses.

Watch video of the testimony " (Woo's discussion begins at 2:00:00 minutes)

The unexpected depth and global nature of the current recession

China's economic situation in 2009 does not look good. The 9.0 percent GDP growth rate in 2008 was not representative of the annualized quarter-to-quarter (q-o-q) growth rate of 2.6 percent in the fourth quarter of 2008. Despite Premier Wen Jiabao's prediction in Davos at the end of January 2009 that China's growth would be 8 percent in 2009, the IMF's January 2009 projection was 6.7 percent, which was down from its November 2008 projection of 8.5 percent. The February 2009 estimate of the number of jobs lost by migrant workers was 20 million, which was double the estimate of December 2008; and an additional 6 to 7 million rural residents were expected to join the migrant work force. The factory-gate price index fell 3.3 percent in January 2009 and is expected to fall 6.3 percent in February 2009. The pace of China's growth slowdown has consistently exceeded the expectations of the Chinese government and most outside analysts.

The dramatic drop in level of economic activity in China is also seen across the world; the q-o-q growth rate in 2009:4Q was -12.7 percent in Japan; -3.8 percent in the U.S.; -2.1 percent in Germany; 1.8 percent in Italy; -1.5 percent in UK; and -1.5 percent in the Euro Zone. The overall growth in 2009 has been forecasted to be -2.3 percent for the U.S.; -3.4 percent for Japan; -2.7 percent for the Euro Zone (Citigroup, January 22, 2009); and 0.5 percent for the World Output (IMF, January 28, 2009). The unanticipated nature of the decline in China is also shared by other countries, as evidenced in Table 1 by the IMF's continual downward revision of its projected 2009 growth rates for different countries, e.g. the Euro Zone growth rate in 2009 was expected to be 1.2 percent in the July 2008 projection but -2.2 percent in the January 2009 projection.
What caused the output decline in China and elsewhere?
A sizzling growth of 13 percent was produced for the 17th Congress of the Communist Party of China (CPC) in October 2007, which consolidated the political leadership of President Hu Jintao. It was therefore to be expected that inflation fighting became the primary policy focus and economic technocrats switched from accommodative enforcement to rigid enforcement of the credit quotas that every bank was subject to, and initiated a faster rate of yuan appreciation. The q-o-q GDP growth rate went from 10.8 percent in the fourth quarter of 2007 to 7.3 percent in the first quarter or 2008; 11.8 in the second quarter of 2008 and 6.2 percent in the third quarter of 2008. The slowdown in the first three quarters of 2009 is attributable primarily to macroeconomic and exchange rate policies and other domestic factors because there was no sign of a slowdown in export growth in the first three quarters of 2008, and the year-to-year (y-o-y) export growth rate in October was 19 percent which was consistent the monthly growth rates in the second and third quarters of 2008.

Then export growth (y-o-y) plunged to -2.2 percent in 2008:11M; -2.8 percent in 2008:12M; and -17.5 percent in 2009:1M (while the yuan-dollar exchange rate was unchanged). The precipitous drop (y-o-y) in industrial production from the double digit level in January-September (11.4 percent in 2008:9M) to 8.2 percent in 2008:10M, 5.4 percent in 2008:11M, and 5.7 percent in 2008:12M, and the large jump in unemployment of migrant workers was no doubt the consequences of the negative shock from China's export market. In short, China's present economic crisis resulted from a policy-induced slowdown that has been greatly exacerbated by an unexpectedly deep economic collapse in US, EU, and Japan.

The deepening US recession is caused by the generalised credit crunch generated by the implosion of the US financial system that was initiated by the bursting of the housing bubble in 6 which led to the subprime mortgage market melting down in 2007. The housing bubble was only the most prominent feature of a more generalized overvaluation of financial assets. This "irrational exuberance" displayed by investors produced by a number of interacting factors: the choice of CPI (and not a price index that included asset prices) not as the paramount guide to guide monetary policymaking, the Panglossian attitude of the economics profession that asset markets are most rational in its use of information (the "efficient markets" hypothesis), negligence by the financial regulatory bodies (e.g. the blind eye toward reports about the Madoff Ponzi scheme), inadequate supervision of new financial instruments (e.g. subprime mortgage bonds), and the complicity of the rating agencies in understating risks.

The front page report in T he New York Times of December 26, 2008, "Dollar Shift: Chinese Pockets Filled as Americans' Emptied", reported that the claim by some analysts that the US housing bubble was able to continue only because China prevented the long term interest rate from rising by continually investing its large trade surpluses into Freddie Mac and Fannie Mae bonds. I reject this claim that the flow of Chinese financial opiate through its chronic trade surpluses is a cause of the US financial crisis that is significant enough to be ranked together with erroneous money target, faulty bond rating, incompetent financial oversight, and complacency toward financial innovations. Pogo's verdict of "We Have Met The Enemy and He Is Us" is a more convincing explanation.

For someone who believes that the US financial crisis cannot be solved without staunching the intravenous flow of Chinese financial opiate through the trade channel, he will have to insist that the $787 billion stimulus package of the US Treasury, the expanded financial lifelines of the Federal Reserve, and the reorganization of the Securities and Exchange Commission will not work until the Obama administration also implements one of the following two proposals that have floating around in Washington for some a number of years: impose a 27.5 percent tariff on all imports from China, and force China to appreciate the yuan by 40 percent. (A first step to implementing either measure is to declare China guilty of currency manipulation.)

However, even if Pogo is wrong (i.e. I am wrong in rejecting Chinese trade imbalances as a necessary factor in causing the US financial crisis), I believe that starting a trade war in the middle of a global recession will worsen, not improve, the prospects for economic recovery in the US.
China's dilemma: short-run political expediency versus long-term economic efficiency
In November 2008, China announced a two-year stimulus package of 4 trillion yuan ($586 billion), which is about 7 percent of GDP per year. It is clear that China will increase the stimulus when necessary. My opinion is that, unless the global economy weakens significantly, China's growth in 2009 is likely to lie closer to Premier Wen's 8 percent target than to the IMF's projection of 6.7 percent, say, 7.5 percent in 2009 and 2010. The state-owned banks (SOBs) will be happy to obey the command to increase lending because they cannot now be held responsible for future nonperforming loans. The local governments and the state-owned enterprises (SOEs) can now satisfy more of their voracious hunger for investment motivated by the soft-budget constraint situation where the profits would be privatized and the losses socialized. The stimulus package will work very well because of the collusion between the managers of the SOBs and SOEs to transfer public assets to themselves.

Also, under the cover of economic emergency, the local governments will now ignore the recently-strengthened laws on environmental protection, worker safety, and medical insurance in order to encourage investment. The price of the 7.5 percent growth in the midst of a global recession will be paid later by the recapitalization of the SOBs and a more depleted natural environment.
The challenges to generating high sustainable growth in China
China's economy has been like a speeding car for almost 30 years. The high-probability failures that could cause the car to crash in the near future could be classified under three categories (1) hardware failure, (2) software failure, and (3) power supply failure; see Woo (2007).

A hardware failure refers to the breakdown of an economic mechanism, a development that is analogous to the collapse of the chassis of the car. Probable hardware failures are (1) a banking crisis that causes a credit crunch that, in turn, dislocates production economy-wide, and (2) a budget crisis that necessitates reductions in important infrastructure and social expenditure (and also possibly generates high inflation, and balance of payments difficulties as well).

A software failure refers to a flaw in governance that creates frequent widespread social disorders that disrupt production economy-wide and discourage private investment. This situation is similar to a car crash that resulted from a fight among the people inside the speeding car. Software failures could come from (1) the present high-growth strategy creating so much inequality, and corruption that, in turn, generates severe social unrest which dislocates economic activities; and (2) the state not being responsive enough to rising social expectations, hence causing social disorder.

A power supply failure refers to the economy being stopped because it hits either a natural limit or an externally-imposed limit, a situation that is akin to the car running out of gas or having its ignition key pulled out by an outsider. Examples of power supply failures are (1) an environmental collapse, e.g. climate change; and (2) a collapse in China's exports because of a trade war

The Chinese leadership is moderately confident that it could prevent and respond appropriately to most hardware failures because it knows that the technical solutions can be learned quite quickly from previous hardware failures in other countries. As long the technocrats are well-educated and the politicians are relatively non-ideological, stealing with one's eyes is an effective strategy to handling hardware failures.

A good clue as to what the most likely precipitating factors are is found in the discussions of the 6th Plenum of the 16th Central Committee of the Communist Party of China (CPC) that concluded on October 11, 2006. The 6th Plenum passed a resolution to commit the CPC to establish a Harmonious Society by 2020. The proposed harmonious socialist society would encompass a democratic society under the rule of law; a society based on equality and justice; and a society in which humans live in harmony with nature. The obvious implication from this commitment is that the present major social, economic and political trends within China might not lead to a harmonious society or, at least, not lead to a harmonious society fast enough. The difficulty is that software failures and power supply failures are harder for the leadership to handle because their solutions are politically more difficult, often rely on the cooperation of other countries, and require scientific knowledge that is not yet developed.
The need to improve governance to prevent software failures in China
China's strategy of incremental reform combined with the fact that institution building is a time-consuming process meant that many of its regulatory institutions are either absent or ineffective. The most well-known recent regulatory failures occur in the food and pharmaceutical sectors, e.g. misuse of chemicals to lower production costs has resulted in the addition of poisonous substitutes into toothpaste, cough medicine, and animal feed; the application of lead paint to children toys; and the over-employment of antifungals and antibacterials in fish farming. There have also been significant regulatory failures in the protection of labor, e.g. wage arrears and forced labor of kidnapped children in the brick kilns of Shanxi and Henan provinces.

Inadequate institutions of governance are not the only cause of social tensions in China, however. The present economic development strategy, despite its ability to generate high growth, also generates high social tensions because, in the last ten years, it has had great difficulties in reducing extreme poverty further and in improving significantly the rural-urban income distribution and the regional income distribution. In the 1999-2005 period, the proportion of rural population receiving an income of $0.50 a day actually increased from 1.9 percent in 1998 to 2.8 percent in 2005. In a recent study, the Asian Development Bank that China is probably the most unequal country in Asia today, with a Gini coefficient of 0.473 in 2004 and the combined income of the richest 20 percent being 11.4 times the combined income of the poorest 20 percent.

Doing more of the same economic policies today will not produce the same salubrious results generated in the early phases of economic reform because the development problems have changed. In the first phase of economic development, the provision of more jobs was enough to lower poverty significantly. At the present, many of the poor people need an infusion of assistance (e.g. empowering them with human capital through education and health interventions) first in order to be able to take up the job opportunities. The weakening of China's trickling-down mechanism does not bode well for future social stability.

The incidence of public disorder, labeled "social incidents," has risen steadily from 8,700 in 1993 to 32,500 in 1999 and then to 74,000 in 2004; with the average number of persons in a mass incident rising from 8 in 1993 to 50 in 2004. Clearly, the number of mass incidents would have been lower if China had better governance. There would have been more pre-emptive efforts at conflict mediation by the government, more programs to increase human capital formation in the rural areas, and less abuse of power by government officials if the government's actions had been monitored closely by an independent mechanism, and the government had also been held more accountable for its performance.

The experiences from the developed countries show that three elements are important in improving governance: democratic institutions, a free press, and an independent judiciary. The challenge to preventing a software failure in China is whether the CPC could rise to the demands of the Harmonious Society objectives and transform itself into a social democratic party.
China's present development strategy is environmentally unsustainable
The present mode of economic development has given China the dirtiest air in the world, is polluting more and more of the water resources, and, is, possibly, changing the climate pattern within China. The reality is that CPC's new objective of living in harmony with nature is not a choice because the Maoist adage of "man conquering nature" is just as unrealistic as creating prosperity through central planning.

Water shortage appears to pose the most immediate environmental threat to China's continued high growth. Presently, China uses 67 to 75 percent of the 800 to 900 billion cubic meters of water available annually, and present trends in water consumption would project the usage rate in 2030 to be 78 to 100 percent. The present water situation is actually already fairly critical because of the uneven distribution of water and the lower than normal rainfall in the past fifteen years. Right now, "[about] 400 of China's 660 cities face water shortages, with 110 of them severely short."[1] The extended period of semi-drought in northern China combined with the economic and population growth have caused more and more water to be pumped from the aquifers, leading the water table to drop three to six meters a year.

The desert is expanding (possibly, at an accelerating pace), and man appears to be the chief culprit through over-cultivation, overgrazing, deforestation and poor irrigation practices. One direct upshot is a great increase in the frequency of major sandstorms that play "havoc with aviation in northern China for weeks, cripples high-tech manufacturing and worsens respiratory problems as far downstream as Japan, the Korean peninsula and even the western United States."[2]

While northern China has been getting drier and experiencing desertification, nature as if in compensation (or in mockery) has been blasting southern China with heavier rains, causing heavy floods which have brought considerable deaths and property damage almost every summer since 1998.[3] The sad possibility is that the northern droughts and southern floods may not be independent events but a combination caused by pollution that originates in China. I will have more to say about this possibility later.

Clearly, without water, growth cannot endure. And in response, the government begun implementation in 2002 of Mao Zedong's 1952 proposal that three canals be built to bring water from the south to the north: an eastern coastal canal from Jiangsu to Shandong and Tianjin, a central canal from Hubei to Beijing and Tianjin, and a western route from Tibet to the northwestern provinces, and each canal will be over a thousand miles long.[4] Construction of the eastern canal (which would be built upon a part of the existing Grand Canal) started in 2002, and the central canal in 2003. Work on the western canal is scheduled to begin in 2010 upon completion of the first stage of the central canal.

This massive construction project will not only be technically challenging but also extremely sensitive politically and fraught with environmental risks. The central canal will have to tunnel through the foot of the huge dyke that contains the elevated Yellow River, and the western canal will have to transport water through regions susceptible to freezing. The western canal has generated a lively controversy. Some scientists are contending that it "would cause more ecological damage than good"[5] because it "could cause dramatic climate changes ... [and] the changed flow and water temperature would lead to a rapid decline in fish and other aquatic species."[6]

The fact is that water conservation could go a long way toward addressing the water shortage problem because currently a tremendous amount of the water is just wasted, e.g. only 50 percent of China's industrial water is recycled compared to 80 percent in the industrialized countries,[7] and China consumes 3,860 cubic meters of water to produce $10,000 of GDP compared to the world average of 965 cubic meters.[8] The most important reason for this inefficient use of water lies in the fact that "China's farmers, factories and householders enjoy some of the cheapest water in the world"[9] even though China's per capita endowment of water is a quarter of the world average.[10]

There is, however, the unhappy possibility that neither the price mechanism nor the three canals can solve China's water problem and make its growth sustainable unless the present mode of economic development is drastically amended. There is now persuasive evidence that China's voluminous emission of black carbon (particles of incompletely combusted carbon) has contributed significantly to the shift to a climate pattern that produces northern droughts and southern floods of increasing intensity.[11] So, until China reduces its emission of black carbon significantly, it means that (a) China's massive reforestation program will not succeed in reducing sandstorms in the north because trees cannot survive if the amount of rainfall is declining over time; and (b) the number of south-north canals will have to be increased over time in order to meet the demand for water in northern China;
Defusing a power supply failure: tensions created by the exchange rate and trade imbalances
China has been accused exchange rate manipulation that has caused large U.S. trade deficits, which have reduced U.S. welfare by increasing unemployment and reducing wages. In addition, the strong claims by some observers that the prolonged large trade imbalances would sooner or later cause a rocketing of inflation in China almost make it a moral imperative for the United States to use tariffs to force a 40 percent yuan appreciation for China's own good. The facts are however contrary to the above claims, and the do-gooder instinct is misguided; see Woo (2008).

The alleged negative effects on U.S. labor from the trade imbalances are greatly exaggerated. The average unemployment rate in 1999-06 was 5 percent compared to 6 percent in 1991-1998; and the total compensation (including benefits) for blue-collar workers rose in the 1991-2006 period. In order for the take-home pay of the blue-collar to increase substantially, it is important that the cost of healthcare be brought under control. Beside accelerated globalization, accelerated technological innovation was another important trend in this period. The latter produced large productivity gains that enabled labor income to rise despite the greater competition from imports and immigrant labor. The negative consequence of quickened technological progress is that it has caused more frequent job turnovers, and this has increased the anxiety of US worker greatly because US social safety nets are the least adequate within the OECD. The real source for the anxieties that have given rise to the present U.S. obsession with yuan appreciation is not the large trade imbalances but the large amount of structural adjustment necessitated by the acceleration of economic globalization and of labor-saving technological progress. Dollar depreciation and trade barriers will slow down the process of structural adjustment but will not stop it because the other main driver (quite possibly, the bigger driver) of structural adjustment in the United States is technological progress.

The claim that China's swelling balance of payments surplus had caused the People's Bank of China (PBC) to lose some control of credit growth is wrong. Chinese banks face credit quotas, and credit growth could not have stayed high in 2003-2007 without continual upward adjustments of the credit quotas by the PBC. The reason is not technical inability to control money growth but the political reality of factional politics before the CPC congress in October 2007. In other words, even if the Chinese balance of payments surplus had not increased secularly during the 2003-07 period, the PBC would have engineered the observed money growth in this period.

The claim that a 40 percent appreciation of the Renminbi (RMB) against the US$ would reduce the U.S. global trade deficit represents the triumph of hope over experience. When the average Yen-US$ exchange rate fell from 239 in 1985 to 128 in 1988, the U.S. global current account deficit only fell from 2.1 percent to 1.7 percent of GDP because Japanese companies started investing abroad and exported to the U.S. from there. For similar reasons, a large yuan appreciation would succeed in reducing the bilateral US-China trade imbalance but it would not reduce the U.S global trade deficits significantly because the US would now switch its import supplier from China toward other Asian and Latin American countries. The outcome would be a disgruntled China and a US that is not any happier than before. It is instructive to recall that when the U.S. global trade deficit fell only slightly despite the huge Yen appreciation, Japan-bashing continued under a new guise: the additional demand that Japan must remove its "structural impediments" to import.

China's current account surplus exists because its dysfunctional financial system cannot intermediate the growing savings into investments. The private savings rate is high because China does not have the variety of financial institutions that would, one, pool risks by providing medical insurance, pension insurance, and unemployment insurance; and, two, transform savings into education loans, housing loans, and other types of investment loans. The backward financial system in China has made the private savings rate in China 7.0 to 12.2 percentage points higher than in the U.S.

The optimum solution to reducing the friction in U.S.-China trade relations is a policy package that emphasizes multilateral actions to achieve several important objectives. It is bad economics and bad politics to dwell on adjustment by only one region (China), induce the adjustment by employing only one policy instrument (RMB appreciation), and focus only one policy target (external imbalance).

What should the United States do? Congress should accelerate the reduction in fiscal imbalance; strengthen social safety nets and programs that upgrade the skills of younger workers; and make healthcare insurance coverage independent of individual employers. In addition to improving the TAA program, the establishment of wage insurance is an excellent way to bring U.S. social safety nets more in line with the type of structural adjustments driven by globalization and technological changes. Occupational obsolescence created by the latter should not be accommodated by establishing extensive skill-upgrading programs (e.g. training loans, apprentice stipends) and improving the formal education system especially at the grade school and high school levels.

What should China do? The obvious short-run policy package has three components. First, the appreciation of the yuan appreciation begun in July 2005 should be resumed after the current global crisis is over. Second, state expenditure (e.g. rural infrastructure investments, and rural health programs) should be accentuated to soak up the excess savings, with an emphasis on import-intensive investments (e.g. buying airplanes and sending students abroad).

It is now common to hear calls for China to rebalance its growth path by reducing investment and increasing consumption. This notion of consumption-led growth is an oxymoron because growth requires expansion of production and this cannot be achieved by lowering investment. The correct rebalancing is to increase consumption at the expense of the trade surplus and not at the expense of domestic capital accumulation. A government-induced increase in consumption that lowers investment will maintain full usage of the existing output capacity but it will diminish the expansion of output capacity, causing a lower GDP growth rate and, hence, a slower absorption of China's surplus labor. Furthermore, China still has a long way to go before its technological level reaches that of the G-7; and technological upgrading requires investing in more modern capital equipment. So a policy that increases consumption and decreases investment is not only a slow-growth policy, it is also a slow technological upgrading policy.

Consumption could be increased without lowering investment by, one, the state providing an integrated health insurance system, a comprehensive pension system, and an extensive scholarship program; and, two, the financial system providing more sophisticated financial products like education and housing loans, and various types of insurance schemes, and stopping its discrimination against private investors. The establishment of a modern financial system requires the appearance and growth of competitive domestic private banks. As China is required by its WTO accession agreement to allow foreign banks to compete against its SOBs on an equal basis by 2007, it would be akin to self-loathing not to allow the formation of truly private banks of domestic origin.

What should the United States and China do collaboratively? Arecent survey by the Pew Research Center found that there has been a dramatic decline in support for free trade within the United States and the major developed countries. With the United States weakening in its resolve to protect the multilateral free trade system, it is the time for China to show that it is a responsible stakeholder by joining in the stewardship of the multilateral free trade system, from which it had received immense benefits. With China so far playing a passive role in pushing the Doha Round forward; by default, Brazil and India have assumed the leadership of the developing economies camp in the trade negotiations. According to Susan Schwab, the U.S. Trade Representative, at the G-4 (the United States, the EU, Brazil, and India) meeting in Potsdam in June 2007, Brazil and India retreated from their earlier offers to reduce their manufacturing tariffs in return for cuts in agricultural subsides by the developed economies because of "their fear of growing Chinese imports."[12] The failed Potsdam talks hurt the many developing economies that were agricultural exporters.

The reality is that Brazil is now attempting to bypass multilateral trade liberalization by entering into FTA negotiations with the EU. A growing number of nations like Brazil "are increasingly wary of a multilateral deal because it would mandate tariff cuts, exposing them more deeply to low-cost competition from China. Instead, they are seeking bilateral deals with rich countries that are tailored to the two parties' needs."[13] China and the United States must now work together to provide leadership to prevent the unraveling of multilateral free trade. It is not possible for China to become harmonious society in a non-harmonious world. For its own sake as well as for the world's, China must help to build a harmonious world, and the existing world powers should not misinterpret this as a power play by China.
The US and China at the G-20 meeting in London: hanging together or hanging separately?
The present global recession certainly makes it clear that large countries like the US and China should focus not just on stabilizing themselves but also on stabilizing the global economic system in order to produce rapid national recovery. China and the US should not only use their fiscal stimulus to stabilize themselves directly (and hence stabilize the rest of the world indirectly), China should also use its large foreign exchange reserves and the US should also use its dollar-creation power to help stabilize other regions directly in order to stabilize themselves indirectly. Both two sets of stabilizing actions should be enacted because they are mutually-reinforcing not mutually exclusive.

At the G-20 meeting in London on April 2, 2009, China and the U.S. should focus the discussion on the global coordination of fiscal stimulus and monetary loosening, global avoidance of beggar-thy-neighbor policies of export promotion and import restrictions, global harmonization of regulation governing financial institutions and accounting practices, and the feasibility of the U.S. Federal Reserve broadening its temporary network of bilateral swap lines to other well-managed emerging economies. An ad hoc Global Financial Crisis Secretariat (GFCS) should be established to undertake global coordination on these matters, and be temporarily housed as an autonomous unit (in the manner of the World Bank) within the office of the UN Secretary-General. Simultaneity in expansionary macroeconomic policies is GFCS's most important objective because it prevents deterioration in the trade balances from rendering each country's expansionary policies unsustainable.

China and US should also support the establishment of a GFCS working group on the reform of the IMF: how much to increase its resources to allow it to fight global financial fires, how wide to increase its jurisdiction to authorize it to improve regulation of financial markets, and how radically to restructure its ownership to give it the legitimacy to impose its will on prostrate economies. While an improved IMF is highly desirable, both the US and China should recognize that the better first line of Asian defense against financial contagion would be a greatly enhanced swap facility, the Asian Financial Facility (AFF), because Asia collectively now has enough reserves to fend off unwarranted speculative attacks on a subset of its members. It must be emphasized that the core mission of the AFF is to combat financial contagion and not to finance balance of payments adjustment caused by economic mismanagement.

An AFF is necessary because it is simply impossible (certainly, inefficient) to increase the size of the IMF enough to enable it to have in-depth expertise on most of the countries to be able to respond optimally in a timely manner to each national crisis. Even if the improved technical competence of the IMF is not doomed to disappoint the emerging economies, the emerging economies would be disappointed by the long time required for an improved IMF to appear. The negotiations on meaningful IMF reforms would inevitably be cantankerous and hence protracted.

Right now, East Asia has a thin network of swap lines to defend their currencies. It would be desirable to hasten the evolution of the existing swap facility into the AFF by two actions. First, the existing swap facility specifies that a cumulative drawing that exceeds 20 percent of a country's quota would require the country to accept IMF supervision. This "flight-to-IMF" clause should be removed because painful memories of 1997-98 make it politically suicidal for any East Asian leader to do so. Second, because the primary purpose of the AFF is to reduce the cost of bad luck and not of bad economic policies, the removal of the "flight-to-IMF" clause requires that the swap facility establish a surveillance mechanism to pre-qualify its members for emergency loans. Without this surveillance mechanism, the Asian Financial Facility would not attain a meaningful size because no member would be willing to risk committing a large part of its reserves to the facility.

Why should the G-20 support a GFCS? The IMF simply lacks legitimacy and credibility in the eyes of East Asia. If need be, the assignment of global financial regulation to an expanded BIS would be a better alternative. The IMF should forgo its dream of jurisdiction-expansion and become instead a more specialized agency that undertakes macroeconomic surveillance for the world, and balance of payments assistance for the emerging economies. The UN is the global organization with the most legitimacy, and its temporary custody of the GFCS would, one, be a good signal by the G-20 of their genuine desire to make multilateralism work; and, two, be a collective statement that it is time for the national allocation of global responsibilities to be reconfigured.

Why should the US support an AFF? The US and the rest of the interested world would be members of the AFF just as they are now influential members of the Asian Development Bank. In dealing with Asia, the US should rely less on the hard power of a formal dominant role in global leadership, and more on the soft power of US example, like helping Asia do what's best for Asia (which is an excellent start to the US re-engagement with Asia). The AFF would expand over time to be an APEC-level institution; and be a good partner to the IMF because "two heads are better than one" in analyzing unexpected quickly-evolving crises and in preventing their contagion.

The bottom line for the April 2 meeting is that the focus should be on fighting global recession and not on reforming the international financial architecture; and the bottom line for beyond April 2 is that the better way to improve the supply of global public goods is not to simply increase the size of the existing providers but to increase the number of providers while seeking to improve the performance of existing ones. The establishment of the GFSC will enable simultaneous implementation of macroeconomic stimulus, and harmonized regulation of financial markets. The US support for AFF will be a much-needed change toward an inclusive US approach that is diversified in modality to handle each specific multilateral issue. If the G-20 can act decisively on April 2 on these well-defined economic tasks, the world can then have more faith that enlightened self interests will also accomplish the much more arduous task of containing environmental contagion from global climate change.
References
Menon, Surabi, James Hansen, Larissa Nazarenko, and Yunfeng Luo, 2002, "Climate Effects of Black Carbon in China and India," Science, Vol. 297, 27 September, pp. 2250-2253.

National Development and Reform Commission, 2007, China's National Climate Change Programme, June.

Woo, Wing Thye, 2007, "The Challenges of Governance Structure, Trade Disputes and Natural Environment to China's Growth," Comparative Economic Studies, Volume 40, Issue 4, December, pp. 572-602.

Woo, Wing Thye, 2008, "Understanding the Sources of Friction in U.S.-China Trade Relations: The Exchange Rate Debate Diverts Attention Away from Optimum Adjustment," Asian Economic Papers, Vol. 7 No. 3, Fall, pp. 65-99.

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China's Short-term and Long-term Economic Goals and Prospects

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As the economies of the U.S. and China both struggle under the global recession, what is the future of the U.S.-China economic relationship and how will both countries respond to invigorate economic growth? In testimony to the U.S.-China Economic and Security Review Commission, Wing Thye Woo details challenges for both economies and proposes effective policy responses.

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This is from the global goals website which describes what they are trying to achieve, the steps they are taking and the targets they have for the future.

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Goal 8: Decent work and economic growth - The Global Goals

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Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

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This website addresses what the problems are that can limit Econimc growth and provides solutions

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Why are politicians ignoring the math and the desire of the American public? A recent Gallup pollfound that out of a list of 12 policy issues, Americans cited restoring a strong economy and job market as the number one priority for President Obama in his second term. The economy, jobs and the role of government were the central issue in the government election, yet listening to the President's big government Inauguration speech, the deficit and jobs were barely mentioned. I expected more given four years of stunted job growth, rising debt, and a January 2013 Government Accountability Report starkly declaring that "absent policy changes - the federal government continues to face an unsustainable path."

What can be done to fix our current economic downturn and cut the deficit? Congress will have to lead on the big issues. The Simpson Bowles Commission, created by President Obama, proposed a reasonable set of shared pain proposals that are a great starting point for debate. But even without Simpson Bowles, here are a few common-sense proposals which would reverse the "new normal" with policies focused on economic growth.

1. Promote economic growth through innovation. Just as we saw at the 2013 International CES®, innovation and start-ups fuel our economic growth. They are the ultimate job creators who start with ingenious ideas, take risks and create value for the American consumer. Our nation has been built by encouraging entrepreneurship and innovation. Especially in our current economic downturn, it is crucial that we pursue national policies that promote innovation to ensure that there will be enough prosperity to carry on into the next generation.

2. Strategic immigration reform. As other countries aggressively reach out to skilled immigrants, we have made it more difficult for foreign entrepreneurs to come to and stay in America. Our refusal to let more highly skilled immigrants into America is costing jobs, delaying economic recovery and harming our international leadership in innovation and entrepreneurship. We should grant automatic green cards to STEM graduate students from U.S. universities and pass the Dream Act to allow law-abiding people brought to the U.S. as children to become citizens. The Startup Act is another common sense measure that would create green cards for immigrants who register through a business and meet employment and investment benchmarks in the U.S. We should work to expand and remove the country caps on H1-B visas and fix the EB-5 program, which would give visas to immigrants who invest at least $500,000 and create at least 10 jobs.

3. End the war on drugs. We have spent billions, incarcerated millions and made the situation worse. Why not follow Spain's lead and treat the addicted and decriminalize and tax marijuana? Evidence shows that legalization does not add to drug use and can generate large revenues. Economists have estimated that legalizing marijuana would save the government $7.7 billion per year on enforcement. Of this savings, $5.3 billion would go to state and local governments, while $2.4 billion would be accrued to the federal government. Two states who voted recently to legalize marijuana, Colorado and Washington, are expected to bring in $550 million in revenue combined.

4. Require unemployed workers to volunteer. We encourage unemployment by rewarding the unemployed. All research shows the longer the unemployment payments the longer the jobless stay jobless. By shortening the duration of unemployment insurance and requiring those receiving checks to volunteer at a non-profit, both parties can benefit. By contributing to society, they can gain skills, contacts and references that will help them be successful in the next job they attain and in turn, we would see fewer people claiming unemployment.

5. Cut health care costs. Let's be honest about our ability to afford Social Security and Medicare and means test based on wealth - including assets. We simply can't afford to pay for these any more. We can stop incentivizing doctors to use the most expensive drugs. Many doctors are paid a percentage of the cost of the drugs they use. If we ban drug company rebates to doctors and pay by the injection rather than the cost of the drugs, then we will cut Medicare spending. We must also allow Americans to buy prescription drugs from overseas. Thanks to the deal that the White House cut with drug companies, we have a wall around our nation for imported drugs and every nation in the world pays a lot less for the same drugs. We will save billions if we can pay what any other country pays.

6. Remove unnecessary and unclear laws. Industries often set international standards for testing and measurement, but the Department of Energy (DoE), flush with cash, seems intent on hiring consultants to create new and redundant test procedures. For example, there are industry standards for measuring energy usage in TVs and cable set-top boxes. Current DoE rulemakings waste taxpayer money reinventing the wheel. In addition, these new laws can also be ambiguous, making it harder for businesses to know if they are violating the laws. Government prosecutors have made their reputation at the agencies like the National Labor Relations Board (NLRB), the Federal Trade Commission (FTC) and the Fish and Wildlife Service by threatening legal action against great companies like Boeing, Gibson and Google. Unfair laws like these waste government resources and hurt the competitiveness of U.S. companies.

Along with these pro-growth proposals, we should incentivize Congress to cut the deficit. Today, the House is set to vote on a proposal to tie Congressional pay to an approved Congressional budget. That is a simple but big step. Our nation is in huge financial trouble. Our soldiers are the only ones sacrificing. It's time our generation stopped giving itself goodies we cannot afford and took some steps to cut the deficit and these six ideas are just one way to start.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and a New York Times best-selling author. His views are his own. Shapiro's latest book, Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses, launched this month. Connect with him on Twitter: @GaryShapiro.

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Why are politicians ignoring the math and the desire of the American public? A recent Gallup pollfound that out of a list of 12 policy issues, Americans cited restoring a strong economy and job market as the number one priority for President Obama in his second term. The economy, jobs [...]

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This website describes ways that people help increase GDP though investing and other means.

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Economic growth is measured by an increase in gross domestic product (GDP), which is defined as the combined value of all goods and services produced within a country in a year. Many forces contribute to economic growth. However, there is no single factor that consistently spurs the perfect or ideal amount of growth needed for an economy. Unfortunately, recessions are a fact of life and can be caused by external factors such as geopolitical and geofinancial events.

In the United States, economic growth often is driven by consumer spending and business investment. If consumers are buying homes, for example, home builders, contractors, and construction workers will experience economic growth. Businesses also drive the economy when they hire workers, raise wages, and invest in growing their businesses. A company that buys a new manufacturing plant or invests in new technologies creates jobs and spending, which leads to growth in the economy.

Other factors help promote consumer and business spending and prosperity. Banks, for example, lend money to companies and consumers. As businesses have access to credit, they might finance a new production facility, buy a new fleet of trucks, or start a new product line or service. The spending and business investments, in turn, have positive effects on the companies involved. However, the growth also extends to those doing business with the companies, including in the above example, the bank employees and the truck manufacturer.

Key Takeaways

Tax Cuts and Tax Rebates

Tax cuts and tax rebates are designed to put more money back into the pockets of consumers. Ideally, these consumers spend a portion of that money at various businesses, which increases the businesses' revenues, cash flows, and profits. Having more cash means companies have the resources to procure capital, improve technology, grow, and expand. All of these actions increase productivity, which grows the economy. Tax cuts and rebates, proponents argue, allow consumers to stimulate the economy themselves by imbuing it with more money.

As with any stimulus used to spur economic growth, it's often difficult to pinpoint how much growth was created by the stimulus and how much was generated by other factors and market forces.

Stimulating the Economy With Deregulation

Deregulation is the relaxing of rules and regulations imposed on an industry or business. It became a centerpiece of economics in the United States under the Reagan administration in the 1980s, when the federal government deregulated several industries, most notably financial institutions. Many economists credit Reagan's deregulation with the robust economic growth that characterized the U.S. during most of the 1980s and 1990s.

Proponents of deregulation argue tight regulations constrain businesses and prevent them from growing and operating to their full capabilities. This, in turn, slows production and hiring, which inhibits GDP growth. However, economists who favor regulations blame deregulation and a lack of government oversight for the numerous economic bubbles that expanded and subsequently burst during the 1990s and early 2000s.

Many economists cite that there was a lack of regulatory oversight leading up to the financial crisis of 2008. Subprime mortgages, which are high-risk mortgages to borrowers with less-than-perfect credit, began to default in 2007. The mortgage industry collapsed, leading to a recession and subsequent bailouts of several banks by the U.S. government. New regulations were implemented in the years to follow that imposed increased capital requirements for banks, meaning they need more cash on hand to cover potential losses from bad loans.

Using Infrastructure to Spur Economic Growth

Infrastructure spending occurs when a local, state, or federal government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. Infrastructure includes roads, bridges, ports, and sewer systems. Economists who favor infrastructure spending as an economic catalyst argue that having top-notch infrastructure increases productivity by enabling businesses to operate as efficiently as possible. For example, when roads and bridges are abundant and in working order, trucks spend less time sitting in traffic, and they don't have to take circuitous routes to traverse waterways.

Additionally, infrastructure spending creates jobs as workers must be hired to complete the green-lighted projects. It is also capable of spawning new economic growth. For example, the construction of a new highway might lead to other investments such as gas stations and retail stores opening to cater to motorists.

What Are the 4 Factors of Economic Growth?

Economic growth has four phases -expansion, peak, contraction, and trough. Expansion is when employment, production, and more see an increase and ultimately reach a peak. After that peak, the economy typically goes through a contraction and reaches a trough.

What Makes a Strong Economy?

There is no singular answer to what makes an economy strong. Several factors working together contribute to strong economies. Efficiency and resources are among those contributing factors. An example would be an efficient manufacturing strategy that can more quickly turn resources into products that can be shipped and sold.

What Are 2 Measures of Economic Growth?

Two common measures for economic growth are gross domestic product (GDP) and gross national product (GNP). While GDP measures all output produced within a nation, GNP also includes investment income from overseas and removes investment income earned by foreign investors.

The Bottom Line

Multiple factors working together typically are what impact economic growth, which often is reflected in GDP growth and GNP growth. There are numerous strategies governments might use to try and stimulate economic growth, such as tax breaks or tax rebates, deregulation, and investment in infrastructure.

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What Are Ways Economic Growth Can Be Achieved?

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Discover what drives economic growth and a few of the methods used by leaders and economists to increase economic activity in an economy.