Crucial Changes in Global Economy Unrecognized, Says Conference Speaker

We are at a structural pivot point not only in the Canadian economy, but also in the global economy, says speaker Kevin Lynch.
Speaking to the Aftermarket Conference for Executives, Lynch, an economist with BMO, said that there are big challenges ahead for Canada and Canadian business.
“Think about the last twenty years alone. The top dozen countries twenty years ago and today, the amazing change is China. It was barely in the top 12 twenty years ago, it is now catching up quickly to the Unities States. Japan is now the third largest economy. What you are seeing is not just the rise in China; you are seeing a shift to Asia.
“I’m not sure as Canadians that we have our minds around what it means today and tomorrow as much as we should.”
Lynch says there are four uncertainties to contend with the in the global economy.
–Coordination uncertainty from a lack of clarity in international coordination, more diverse circumstances, less consensus.
–Policy uncertainty from a lack of credible policy to deal with deficit in advanced economics and inflation in emerging economies.
–Imbalance uncertainty from slow adjustment to less saving, more spending in China, and less borrowing and more saving in the U.S.
–Geo-political uncertainties: Middle East and Japan

“Fundamentally our problem is that the Americans spend too much and save too little and the Chinese save too much and spend too little and nothing we do will make any difference if that doesn’t change.”
In this environment, Lynch says Canada must innovate to compete.
“Canada, in the global economy, needs to improve its productivity–it is now about 75% of the U.S. level–and this will come through innovation.”

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