Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

2603

Global economy needs more than just handshakes, says Newton’s Nick Clay

RELATED TOPICS​

Two weeks on from the fanfare of the G20 summit in London and the feel good factor that ignited a relief rally in global markets, the cold light of reality will now test the markets’ re

Two weeks on from the fanfare of the G20 summit in London and the feel good factor that ignited a relief rally in global markets, the cold light of reality will now test the markets’ resolve, according to Nick Clay, manager of the Newton Managed Fund.

Clay says the summit’s agenda was nothing if not ambitious, with the leaders of around 90 per cent of the world’s economy agreeing, on the face of it at least, to bail out developing countries, stimulate world trade (‘naming and shaming’ countries that erect trade barriers) and regulate financial firms more stringently.

The first such summit, which was held in Washington DC in November of last year, had similar ambitions, but Clay says within weeks of reaching agreement to guard against trade tariffs and other protectionist measures, many began to renege on their summit promises. In all, 17 of the 20 signatory states at November’s G20 summit had already undertaken protectionist measures before this month’s meeting of minds.

According to the OECD, mature economies can expect to see their output fall by four per cent in 2009 – the biggest synchronised downturn since the 1930s. This alone casts significant doubt over this month’s optimism that the leading nations had side-stepped the catastrophic protectionism that helped to extend the Great Depression of the 1930s.

Clay says: ‘The fact that the world now faces a synchronised recession of a scale not seen since the 1930s suggests that world leaders have learned rather less from history than the overwhelmingly positive coverage of the G20 summit would suggest. It also ignores the fact that rising unemployment plays a far greater role in shaping domestic policy than promises made at overseas summits.

‘There’s a direct correlation between unemployment and outbreaks of ‘economic patriotism’. Only two months ago the French President, Nicolas Sarkozy, suggested that French auto manufacturers stay home – a classic example of the myopia which afflicts politicians during economic downturns.

‘This is because unemployment is a double-edged sword. It breeds discontent among the electorate while leading to fresh cuts in consumer spending and corporate earnings. This tends to leave politicians worrying about their own employment and quickly results in damaging, populist policies such as protectionism.

‘With the latest estimates from the OECD forecasting that many mature economies will yet see double-digit unemployment figures, it seems that President Obama probably best summed up the prospects of a co-ordinated G20 policy response when he conceded that there were ‘no guarantees’ that current G20 measures would reverse the biggest global downturn in more than half a century.’

Newton Managed Fund is a sub-fund of BNY Mellon Investment Funds.

Latest News

Irish domiciled funds surpassed EUR4.3 trillion AuM (Assets under Management) at end-March 2024, a 15..
New analysis by London-based Nickel Digital Asset Management reveals 38 listed companies with a combined..
Bloomberg has announced that for the first time, its proprietary Bloomberg Second Measure (BSM) transaction..

Related Articles

Global ESG Investing
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of climate change and ESG factors in state policymaking...
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of..
Trends
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100 million deals announced this month alone...
The trend to buyout among the UK’s smaller defined benefit (DB) schemes continues with a slew of new sub GBP100..
Different flavours
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led, multi-boutique global asset manager with over USD20 billion under management, recently undertook a survey with 204 UK investment professionals, seeking insights into their perceptions and attitudes towards boutique asset managers...
In what is believed to be the first survey of its kind in the UK market, Nedgroup Investments, the investment-led,..
UK map
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be worth billions of pounds in the coming years...
UK local government pension schemes (LGPS) are leading the charge on investment in private markets issuing tenders set to be..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by