Valedictory Address at the IIF International Research Conference & Award Summit (IIF-IRCAS), Delhi / India, December 2, 2023 by Prof. Hubert Fromlet, Linnaeus University/Sweden
After many years of fruitful relations with the Indian Institute of Finance (IIF), it is real honor and pleasure for me to have another speech for teachers and students at the very successful academic institution of the IIF. I am speaking also in honor of the late professor J.D. Agarwal, the founder of the IIF.
In many respects, the world has entered a period of disorder. We are confronted with wars, radicalism, political turmoil, protectionism, poverty, suffering refugees, egoism, political extremism and populism, lagging and economically weak and unstable countries – and all this simultaneously. But I also feel happy about India’s progress in the past few decades – and wish this important catching-up country all the best for the future.
Below, I will sum up six factors of hope and ten factors of concerns (without ranking) that currently occupy my reflections a lot. Obviously, it is easier these days to put together the factors of concerns – but hope and (future) opportunities should not be neglected either. This latter conclusion is important for both financial markets and the corporate sector. We hereby touch briefly on behavioral finance and behavioral economics. Positive or encouraging psychological contributions may play an important role in bad times to develop turning points in the right direction; of course based on fairly realistic expectations.
Factors of concern
¤ The war in the Ukraine.
The Russian war in the Ukraine still goes on as a psychological (human) and financial burden, mainly for the U.S. and Europe.
¤ China’s economic and financial development.
China’s economy and the financial development remains a conundrum that creates uncertainty and concerns because of lagging transparency.
¤ China’s political development.
President Xi Jinping’s autocratic leadership style does not provide China with good predictability – neither when it comes to the economy nor to politics (e.g. vis à vis the U.S., Taiwan)
¤ The U.S. after the next presidential election.
The unpredictable Donald Trump as a possible new president scares me a lot.
¤ The political development of the EU.
The EU will have elections in its member countries in 2024 – with good chances for the extreme right as a big concern for EU unity.
¤ The economic development and reforms in the EU.
Further nationalism in the EU would impede reforms and growth.
¤ Insufficient reforms in emerging markets.
Most emerging countries still need a lot of reforms. An open question may be to what extent China’s growing political influence in many emerging countries impact on market reforms.
¤ Energy and water shortage in rich and less favored countries.
Global water shortage worries me a lot – but also uncertain and uneven global energy supply.
¤ Further increasing protectionism.
Here we have a risk of further reduced global trade expansion and economic growth.
¤ Last but not least: turmoil on global financial markets.
Negative surprises on global financial markets may “always” be on the cards. As an obvious potential risk, I may particularly mention all the (hidden) financial imbalances in China but also potentially bursting financial bubbles elsewhere.
Factors of hope
¤ Politics – bad political leaders may be replaced sooner or later.
At least in working democracies, one may hope that bad political leaders some day will be replaced by more competent successors.
¤ Increasing global insight of climate improvement needs.
This is a factor where improvement is visible (but still too little).
¤ Global insight that education is a growth-driving need.
There is a growing insight around the world that the creation of new human capital is a main factor for stronger potential growth.
¤ Emerging markets receive growing political attention.
Here, we can currently watch an important development that does not look perfect but will gradually improve self-confidence of many emerging countries, particularly in the so-called South.
¤ Gender equality is improving globally (but still too slowly).
Progress happens in many countries. More still can be done. Nice to see that we in 2023 got another female Nobel Prize Winner with Claudia Goldin.
¤ AI means a lot of hope – but also unpredictable risks.
AI is currently expanding very quickly – creating a lot of new opportunities, particularly in medical research and diagnosis. However, AI risks should not be neglected one single day.
Altogether, 2024 will be an extremely important political year with lots of economic implications and consequences.
Affiliate Professor at the School of Business and Economics, Linnaeus University