Jézabel Coupé-Soubeyran is an economist and lecturer at the University of Paris 1 Panthéon-Sorbonne. She is coordinating a book by CEPII, the French Center for Research and Expertise in International Economics, which will be published on Wednesday, September 25, by La Découverte. A forward-looking book entitled The World Economy 2025.
franceinfo : When we look at the glass half full, we read in the introduction: “The global economy continues to resist”. This bodes rather well for the coming year.
Jezebel Coupé-Soubeyran: So indeed, we can see the glass as half full, the glass as half empty. We have in fact a global economy which, over the past year, has held up, driven essentially by the emerging Asian economies, and also benefiting from the extremely expansionist American budgetary policy. What explains this holding up is the fact that energy prices, food prices which had soared are no longer soaring, with inflation which is below 2% now.
But we should not cry victory either because one of the main messages of the overview that constitutes the first chapter of the book is to say “beware” of the challenges that are there: the climate crisis, geopolitical tensions and supply shocks, that is to say everything that disrupts global supply. When energy prices explode, it disrupts producers, global supply. The climate crisis will also considerably disrupt global supply, with strong impacts.
Today, there will be multiple supply shocks, caused in particular by geopolitics and the ecological crisis.
Exactly, that’s what we’re highlighting. The ecological crisis is climate change and beyond that, it’s all the ecological disruption. All of this creates enormous challenges, because we have to make economies and productive systems resilient, make them resilient to geopolitical tensions, protect them from dependencies that are still too strong and that are inherited from a time when globalization was seen as the right organization for the world economy.
We also need to make our production systems resilient to the impacts of the climate crisis. So there are supply shocks that are going to multiply, and that is going to greatly complicate the situation of economic policies, because here, it is no longer a question of making a small fine-tuning of the economic situation. It is really a question of putting the supply in a position to resist. The United States, for example, has understood this. They are in a modern supply policy. They are in a massive investment in Europe.
We still have the impression that economies – not just the United States – have organized themselves in a protectionist production mode. We are no longer in the unbridled globalization that we had a few years ago. And in Europe in particular, we have developed a policy based on industrial sovereignty, in terms of supply, particularly for critical materials. Is that something that will remain a priori?
What our authors explain in the book is the situation of very great dependence of Europe in the field of strategic raw materials. This includes metals and everything that is necessary to manufacture our computers, our mobile phones, etc. And Europe must indeed succeed in reducing this dependence.
But she started to do it. For critical materials, conductors, she pursued a rather proactive policy.
It is starting to do so. But in terms of voluntarism, we do not yet have the investment capacity that the United States has deployed. And so Europe is still constrained in terms of these investments. If we make the connection with Mario Draghi’s report, which calls for more investment so as not to fall behind China and the United States.
In a period of budgetary constraints and while Germany is in trouble…
Exactly, what the Draghi report points out is this situation of dependence in Europe in many sectors, and therefore this necessary search for sovereignty, for less dependence which must go through massive investments. But we must give ourselves the means.
Can we do it? ? We have seen the current debates in France on budgetary constraints.
A lot will depend on Germany and the very difficult situation Germany is in at the moment. There is an excellent chapter in the book that shows that Germany is in a situation of suffering. Its economic model is struggling and it is really not just temporary fatigue. Germany suffers from enormous dependencies in terms of energy and trade. It intends to focus its industrial policy on the ecological transition.
It will have to make massive investments if it remains entrenched in its budgetary orthodoxy, which it also imposes on its European partners, it will not be able to do so. And deep down, this difficult situation for Germany is perhaps somewhere an opportunity for Europe, because Germany will finally be able to realize the need for sharing budgetary resources. A common loan is one of the options in the Draghi report. It is a bit like the path to budgetary union that is opening up whereas it was completely blocked.
We have seen that the global economy is very dependent on geopolitics, and there is a presidential election in the United States in November. Victory of Kamala Harris or victory of Trump, what can it change for the global economy?
What this can change is what will happen at the level of international trade. There is a chapter in the book that highlights the difficulties of the World Trade Organization, which shows that the multilateralism that prevailed a few decades ago is really on a knife edge. And if Trump came to power and launched the trade war that he promised, then that would really be the final blow for multilateralism. And it would be the affirmation of protectionism all over the world, because there will inevitably be reprisals.
On the other hand, would Kamala Harris be continuity in terms of economic policy?
Yes, it’s more continuity. When the chapter on multilateralism was written, Kamala Harris was not yet in the race. And so the fear was really to see Trump arrive. There, perhaps the situation changes a little.