Robert B. Zoellick: 'Multiple Reserve Currencies'
Over the past year, emerging markets such as China, India, and Brazil have continued to drive economic growth, while the developed world, namely the United States and parts of Europe, have remained mired in debt and unemployment. In the lead-up to the World Economic Forum in Davos, NEWSWEEK's R. M. Schneiderman interviewed World Bank president Robert B. Zoellick about the future of the global economy. Excerpts:
What is the biggest challenge facing the developing world in 2011?
The biggest challenge is the risk of a big boost in food prices. Food accounts for a large and increasingly volatile share of family budgets for poor and urban families, and when prices of staples soar, the most vulnerable bear the brunt. We need to increase food productivity and production in developing countries, especially in sub-Saharan Africa and with small-holder farmers. The second problem is the volatility of food prices, often because of events outside poor countries' control.
Will we see bubbles in any of the major emerging markets?
The major emerging markets are starting to level off to avoid overheating or bubbles in some sectors. In some countries, this adjustment will prove a challenge. The good news is that most seem alert to the dangers. Looking ahead, we need to recognize there is no longer a "Third World." Developing countries vary enormously. Yet they can learn from one another, invest in one another, trade with one another, and --integrate with one another.
Would a return to the gold standard be beneficial?
I think gold is already being viewed as an alternative monetary asset because holders of money perceive uncertain prospects in all countries and currencies other than China, and the renminbi is not free for exchange and investment. The antidote is for major economies to pursue sustainable, pro-growth policies based on structural reforms, open trade, and sound money. …