Professor, Economics and Public Policy, Harvard University
Global Economy Stabilising?
In the long run it is good for the developing countries if developed countries keep advancing because eventually the benefits will transfer to the developing nations, says Rogoff.
Where do you see the oil stabilising and what is the long term impact on the global economy?
I have no idea where oil prices are stabilising. Particularly, I don’t understand the future prices. I think the prices are well below USD 50 at the moment and I have trouble making sense of that unless you believe that somehow the new technologies make oil really cheap to produce at the margin. I tend to believe that even if that’s true, there will start to be an environmental push back in the United States. The shell releases methane, which is worse than CO2. There is also a lot of water used up, so I have a lot of trouble understanding the environment. In the short run, oils are very volatile and anyone who works in the oil industry or is a major oil exporter like the UAE, they’ve lived with this before. If you’re in the business, you’ll get used to it and it’s just normal.
When do you see the global economy stabilising?
I think the US is doing positively well and Europe is growing solidly, we heard from the President of the European Central Bank recently. Obviously the troubles of emerging markets about a growth slowdown were largely tracking in most of the countries. We’re not talking about a recession, although Russia and Brazil, which are two of the ten biggest economies in the world, are in serious recessions – both of them have much deeper problems. The thing we don’t know is China because the data are no good. It’s such a big economy – they’re so diverse and very non-transparent. I tend to believe China will possibly get worse before it gets better but that’s sad. Over the longer term, China will stabilise and start growing again.
Do you think the shift they wanted to make towards renewables at Cop 21 in Paris last year could also be a factor in the forecast features of the low oil price?
Honestly I don’t think that. If we’re talking about 2040 then yes, but not 2020. There is no way the renewables can begin to have an impact at that point. And frankly the low oil price puts incredible pressure on the efforts to fight the CO2 emissions because everything people will try to do is going to be very tempting not to do it. It is much easier to conserve energy when the prices are high. Oddly enough, there was this big climate agreement but the price movement dominates it and so I think it’s a concern. But I don’t think it is the cause of the price change, not at all.
If we talk about the geopolitical situation around the world – to what extent is that impacted by the economy and to what extent does it impact the economy?
The low oil prices for countries that don’t have big reserves can be destabilising – look at Venezuela. On the other hand the destabilising can be a factor in the global economy. I don’t think it’s the big thing going on in the global economy. Of course I’m concerned like everyone about the Middle-East. I too want to see growth and diversification and instability is not going to help. Even in places like Paris it has hurt tourism, sales and the economy but of course geopolitical instability is not good for the economy and weak economy is not good for stability.
Do you think the technology is going to increase the gap between the advanced and developing countries?
It’s good for the developing countries over the long run if the advanced countries keep advancing because everything that happens will eventually come to the developing countries. If the US completely comes to a standstill it’s good in one sense because then emerging markets will become more powerful relative to the US. But from an economic point of view you want your trading partners to do well, you want them to buy your goods and to have good technologies that you can use. So I think it’s necessarily not a bad thing.