Economists play a vital role in every country. They analyze, interpret, and forecast national and global economic developments. Some of their evidence-based conclusions influence government policies and people’s spending habits. This is one of the reasons the Milken Institute holds periodical debates. This organization hosts conferences and invites prominent economists who share their insight on local and international matters. In a discussion held in 2014, Professors Ken, John, and Nouriel, predicted the trend of the world economy. An analysis of their projections and incidents over the past five years shows consensus and differences in their forecast.
During the debate, these economists argued that China’s monetary policy would result in an economic downturn. In Professor Ken’s view, the instrument used was political (Milken Institute, 2014), and would have adverse effects in the future. The official figures issued by the government failed to provide a clear reflection of the country’s economic position. Similarly, Nouriel noted that measures adopted by the People’s Bank of China were incomprehensible and failed to consider the implication of the policy on the moral hazard (Milken Institute, 2014). As a result, the probability of a financial crisis increased significantly with the continuous injection of money in both formal and shadow banks. Unlike other lending institutions, shadow banks were unregulated, thus limiting their compliance with the central bank’s resolution process in times of recession. John also added that China’s population policy would significantly affect GDP. The above trends would adversely affect this nation’s economy.
The economists seemed to agree on matters regarding unemployment and taxation in highly developed nations, such as Europe and the United States. For instance, Nouriel predicted a “slightly more progressive taxation for higher-income earners” in such countries (Milken Institute, 2014). This would result from technology, which would replace unskilled human labor with machinery and robots. According to Nouriel, governments would be forced to equip their citizens with skills to create a balance between labor and employment. Funds required to facilitate such training would be raised from taxes imposed on high-income earners. Professor Ken and John also noted that technological advancement would affect employment and taxation trends in various countries.
Furthermore, another issue of concern among economists was the European Central Bank (ECB) and the Eurozone, a monetary union comprising some European Union members who use euros as a common currency in trade. Nouriel predicted a high risk of a deflationary spiral in the Eurozone. He noted that failure of ECB to handle price stability is a serious issue that would expose its members to ultra-deflation within one or two instances of economic shocks (Milken Institute, 2014). Ken also mentioned that despite existing recovery records in the zone, some members were barely making economic progress. In his opinion, Eurozone remained solid at a time when the least benefits were to be reaped. On the other hand, Professor John disagreed with the panel and indicated that the ECB had taken all the necessary measures to facilitate trade in the region.
Many predictions made during the conference conform to recent trends in various geographic areas. An example is an economic slowdown in China. The country recorded a GDP growth rate of 10% and 6% in 2010 and 2017, respectively (Hedrick-Wong, 2018). This trend reflects a significant drop in gross domestic product. According to Hedrick-Wong (2018), China’s one-child policy is one of the leading causes of this downturn. This form of family planning has significantly altered the nation’s demographics, causing an increase in the aging population and reducing the number of productive people. The result is a decline in productivity and GDP in the country.
Predictions made on the Eurozone also appear to match economic trends over the past few years. Several countries in the zone continue to experience an economic crisis. For instance, Italy remains a victim of an economic recession that occurred approximately twenty years ago. In addition, some concerns over Germany’s economic growth in 2019, which appears to improve slowly, are evident. Currently, officials believe that the ECB should take action to control the price stability in the region.
The economists’ forecast on taxation in the United States appears to be inaccurate. In 2017, President Trump proposed a tax cut for every income bracket. For example, tax among high-income earners would be reduced from 39.6% to 35.0% (Loesche, 2017). Similar changes were proposed for people earning less than $91,900 annually. In my opinion, America’s current tax system appears to favor the top 1% of households: individuals earning more than $510,301 every year. The idea of bringing their tax ceiling from 40% to 37% has resulted in significant growth in their wealth. On the other hand, low and middle-income earners enjoy the least benefits from the tax reforms.
As is evident from the analysis, no doubt about the contribution that economists make to governments and their citizens. This can be seen from the predictions made by Professors Ken, John, and Nouriel during the 2014 Milken conference. Many of their forecasts are reflected in current economic trends in various geographic areas. The accuracy of their work proves that their analysis can be used as a resource during a financial crisis. Therefore, governments should consider their perspectives during policy formulation.
Hedrick-Wong, Y. (2018). The reality of China’s economic slowdown. Forbes. Retrieved from https://www.forbes.com/sites/yuwahedrickwong/2018/08/23/the-reality-of-chinas-economic-slowdown/#369e40f4d86d.
Loesche, D. (2017). How Trump’s proposed tax reform could affect income tax. Statista. Retrieved from https://www.statista.com/chart/11296/existing-and-proposed-income-tax-rates-in-the-united-states/.
Milken Institute. (2014, April 29). Leading economists debate where the world is headed. [Video file]. Retrieved from https://www.youtube.com/watch?v=pdd6hBcw3Qg&feature=youtu.be.