Europe 'must accept its economic decline or risk isolationist turmoil'
EUROPE must choose between "growing old gracefully" and isolationism which would cause major economic turmoil and even war over the next decade, an economist told a conference in Trinity College Dublin.
Stephen King, HSBC chief economist and economic adviser to the British government, said China, India and other emerging economies were set to become even more powerful by 2020 while Europe's working population would shrink and become less important as the population ages.
"Europe can grow old gracefully and accept the economic baton has been passed on or we can say we don't like this happening and disengage," he said.
Disengagement could lead to "major economic calamity or at the extreme, war".
China, India, Russia and Saudi Arabia's appetite for bonds over the past decade keep bond prices high and yields low, he said. This meant that interest rates were artificially low for a long period. Inflation was low as many of the same countries produced cheap goods that pushed down prices. These factors contributed to the present recession, he added.
He urged his audience not to be complacent about globalisation, saying that the West had lost control of the process. It was wrong to suppose it would have only benign effects. Globalisation increased equality between nations but increased inequality within countries.