The marsh­mal­low test

The Pak Banker - - OPINION - Jef­frey d. Sachs

THE world econ­omy is ex­pe­ri­enc­ing a tur­bu­lent start to 2016. Stock mar­kets are plum­met­ing; emerg­ing economies are reel­ing in re­sponse to the sharp de­cline in com­modi­ties prices; refugee in­flows are fur­ther desta­bi­liz­ing Europe; China's growth has slowed markedly in re­sponse to a cap­i­tal-flow re­ver­sal and an over­val­ued cur­rency; and the US is in political paral­y­sis. A few cen­tral bankers strug­gle to keep the world econ­omy upright.

To es­cape this mess, four prin­ci­ples should guide the way. First, global eco­nomic progress de­pends on high global sav­ing and in­vest­ment. Se­cond, sav­ing and in­vest­ment flows should be viewed as global, not na­tional. Third, full em­ploy­ment de­pends on high in­vest­ment rates that match high sav­ing rates. Fourth, high pri­vate in­vest­ments by busi­ness de­pend on high pub­lic in­vest­ments in in­fra­struc­ture and hu­man cap­i­tal. Let's con­sider each.

First, our global goal should be eco­nomic progress, mean­ing bet­ter liv­ing con­di­tions world­wide. In­deed, that goal has been en­shrined in the new Sus­tain­able De­vel­op­ment Goals adopted last Septem­ber by all 193 mem­bers of the United Na­tions. Progress de­pends on a high rate of global in­vest­ment: Build­ing the skills, tech­nol­ogy, and phys­i­cal cap­i­tal stock to pro­pel stan­dards of liv­ing higher. In eco­nomic de­vel­op­ment, as in life, there's no

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