Brewing up a model to refresh the economy
- By Ni Tao
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E-mail Shanghai Daily, March 26, 2015
Lao Tzu, an ancient Chinese sage, once famously said that administering a state is comparable to preparing a fish stew.
His point was that governing a state demands the same qualities of patience, balance and moderation required in making a tasty meal.
About 2,500 years later, a modern-day financial official adapted Lao Tzu's aphorism, with her own take.
At a recent lecture commemorating the 30th anniversary of the founding of Fudan University's School of Management, Christine Lagarde, managing director of the IMF, used tea making as a metaphor to illustrate what she thinks are the necessary ingredients for developing a better economy in 2015 and beyond.
"We're still feeling that bitter aftertaste (more than six years after the global financial crisis), a sour taste that you feel when the tea has brewed for too long," said Lagarde, referring to the lingering legacies of the crisis.
Describing herself as a "tea addict," she observed that it takes a set of factors to get the world economy back on track — "ingredients," "discipline," "timing" and "focus" — exactly the elements required to brew a good, strong cup of tea.
Lagarde says that the world economy has been weighed down a "little bit" by low growth, high debt and high unemployment, which combined to exert pressure on the IMF to lower its forecasts for global economic growth to 3.5 percent for 2015 and 3.7 percent for 2016.
And a host of risks threaten to cast a pall of uncertainty over the economic future. According to Lagarde, the US monetary tightening, the scheduled volume or pace of which was not yet defined, might trigger excessive volatility in global financial markets.
Other risks abound.
A stronger US dollar doesn't augur well for countries that have borrowed heavily in dollar-denominated loans, which portend debt crises; the "low-low" situation plaguing the eurozone and Japan, meaning low inflation and low growth; geopolitical risks such as conflicts and disasters. They can all affect a nation's economic prospects, and warrant a strong policy "recipe".
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