A Tale of Three Economies: How advanced, emerging and developing markets view the global economy

Date June 5, 2013
Speaker Bruce STOKES(Director, Global Economic Attitudes Pew Research Center)
Moderator KATASE Hirofumi(Director-General for Trade Policy, Trade Policy Bureau, METI)


Bruce STOKES's PhotoBruce STOKES

Today's presentation will focus on the results of a new economic survey of 39 countries carried out by the Pew Research Center. Based in Washington D.C. in the United States, the Pew Research Center is a think tank organization which carries out survey work along with analysis of demographic as well as sociological issues. The Pew Research Center has been conducting surveys around the world since 2002, which is also when the Global Attitudes Survey was created, and it is increasingly focusing on economic issues.

In this particular survey, 37,000 people were interviewed. Interviews were conducted face-to-face in most of the countries, while they were conducted over telephone in some countries in Western Europe, Japan, and the United States. The margin of error was a normal 3.1%-4.1%, and surveys were conducted in March 2013 and April 2013. The purpose of this survey was to establish a sense of how the general public views the state of their economy six years after the beginning of the Global Financial Crisis of 2008. Findings suggest that people from countries with advanced economies such as Japan, the United States, and those in Europe are generally not as positive about the state of their economy as those from emerging market economies, with the developing economies perhaps not as positive as generally assumed. Special emphasis was placed on Europe in terms of the Global Financial Crisis of 2008, as the rest of the world is heavily influenced by its economic situation. Although the economic crisis in Europe may have stabilized to an extent, public faith in the economic situation is generally extremely low, which in turn raises issues and concerns for the rest of the world.

In this survey, the International Monetary Fund's (IMF) approach of dividing countries into one of the three categories of advanced, emerging, and developing economies was taken. The two reference points of 2007 and 2013 were used in order to compare public opinion both before and after the Global Financial Crisis of 2008. Survey results show a dramatic drop in the sentiment of the economic states of the advanced economy countries such as Japan, Australia, Europe, the United States, and Canada. What is also noticeable is a similar drop in the sentiment of the developing economy countries, although it is worth noting that not all developing countries were included in this survey, which may have a slight effect on results. Only emerging market economy countries have shown no statistically significant change in the public opinion on the state of their economy. Public opinion has generally remained high, and, in certain emerging market countries such as China, public sentiment about the economy is extremely positive.

By comparing a selection of survey results of Asian countries to those of other countries around the world, the Chinese appear to be the most optimistic. 88% of Chinese surveyed in March 2013 think their economy is doing well. Malaysians, Filipinos, and Australians are also generally pleased with the current condition of their economies. In comparison, only 27% of the Japanese surveyed in March 2013 feel that the Japanese economy is doing well. Although this may sound low, in fact, in 2012, only 7% of the Japanese surveyed gave a similar response. In Korea and the United States, the current public opinion on the economy is also generally negative.

One result that stands out is that an overwhelming 75% of Germans believe that their economy is in a good state. This is likely related to the very low 5.4% unemployment rate. This result is even more striking when compared to the median of only 9% who think their economy is doing well in the other seven EU countries surveyed. Looking at the comparison of the overall 2007 and 2013 results of the advanced economy countries surveyed, there has been a significant decrease in positive public opinion about the economy among almost all European countries, with a 61% drop in Spain and a 54% drop in the United Kingdom.

There has been a huge drop in the positive public opinion of the economy in a number of developing Middle Eastern countries, such as Pakistan, Egypt, and Jordan, as well as Ghana, since 2007. This belies the narrative that we have about developing countries. Public sentiment doesn't necessarily reflect actual economic growth.

To get a sense of optimism about the future, the survey also asked people whether they think their national economies would improve over the next 12 months. In advanced economy countries, only 24% feel that the economy will improve over the coming 12 months, whereas the public in emerging and developing countries is relatively optimistic. In Japan, 40% presume the economy will improve over the next 12 months, which is interesting as only 27% think that it is doing well today. This is one of the higher positive findings in Asia. It is higher than the rate for Germany, for example, and is certainly higher than that for the European Union (EU) overall, and almost as high as the rate for the United States. Only 33% of Americans believe the economy is doing well, but 44% expect it to improve in the next year, which is potentially a good sign in terms of future consumer spending. Note that 80% of Chinese people think that the economy is going to get better. The Xi government has very high expectations to fulfill.

Another noteworthy point is that while two-thirds of Australians consider the economy as good today, only one-third feel that it will improve over the next year, which may explain why the Gillard government is in trouble. Australians' worries seem to outweigh their current assessment of the economy when considering the candidates to vote for in September 2013.

Again, note that while 75% of Germans think the economy is doing well, only 27% presume it will improve, which is a slight problem for the Merkel government.

Emerging markets are, again, very upbeat, especially in China, Brazil, and Malaysia. In fact, the Chinese see no boundaries for their economy.

Among the surveyed developing economies, the sentiment is mixed. There are high expectations in Africa, reflecting the fact that the economies are growing and that the public anticipates the commodity boom to continue. On the other hand, in a number of Middle Eastern economies, for example, Jordan, the Palestinian territories, and Lebanon, people are fairly pessimistic about the future, with politics likely weighing heavily on their minds.

We asked people about their personal finances, and, in almost every country in the world, sentiment about personal finances is better than that about the national economy. We don't know the reason for this. It may simply be that people don't want to admit their poor personal finances to a stranger, or it could be that, when asked about the national economy, people reflect what they have read in the newspapers, but, when asked about their personal finances, they reflect what is really happening in their lives. This is interesting, because if a person's financial situation is believed to be improved, more money may be spent to buy a new car or a house, which are major purchases that actually drive national economic recovery.

In the case of the United States, the figures are very close: 43% are positive that their personal finances will improve, and 44% feel that the national economy will improve. This is probably good for the world economy. Koreans are fairly likely to believe that their personal financial situation will improve, and the Australians are slightly below them. In comparison, the Greek and Japanese survey results indicate that they generally do not feel that their personal financial situation will improve over the next 12 months. In fact, a higher percentage of people feel that it will worsen rather than improve in this time span. This in turn may not bode well for consumer spending in the near future in Japan.

In the case of emerging markets, people are very upbeat about the state of their personal financial situation. In particular, the Brazilians appear to be extremely optimistic about this improving over the next 12 months. Over half of all Indonesians surveyed echoed the same belief. The percentage of those in emerging market countries who believe that their personal financial situation will worsen over the next 12 months is generally extremely low.

In developing countries, opinions on changes in the personal financial situation over the next 12 months reflected significant division. There appears to be a strong belief in African and Latin American nations that this situation will improve. The same can also be said of the Philippines. However, in Lebanon, Egypt, Jordan, and the Palestinian territories, people are not optimistic about future changes in their personal finances. In fact, a larger percentage of people surveyed felt that their financial situation was likely to worsen within the next year. This is not a good sign for the near term future of the economy in the Middle East.

Another section of the survey focused on people's sense of personal deprivation. The aim of this was to investigate how the recent economic crisis affected people's ability to pay for items like food, medical care, and clothing. One question posed to respondents was whether there was ever a time over the past year when they couldn't afford to buy food for their family. The lowest percentage of people who experienced this was found in Japan. It is worth bearing in mind that cultural issues may have affected the results of this part of the survey; it may be difficult to admit to this level of financial hardship. In terms of absolute deprivation, the Japanese have coped well. In comparison, about one-quarter of all respondents in the United States answered that they have had trouble paying for food over the last year. This is a somewhat embarrassing statistic, considering the overall great wealth of the United States.

Focusing on the economic sentiment in Europe from 2007-2013, since 2009, the percentage of Germans who believe that the state of their economy is good has consistently risen. As mentioned before, this is possibly due to the favorable unemployment rate as opposed to the economic growth rate. The percentage of those sharing similar positive sentiment in the rest of Europe is drastically lower than the 75% of Germany, with only 9% in France and 4% in Spain in comparison. When asked if they felt the state of their economy would improve, Europeans, including even the Germans, generally responded negatively. A more disturbing finding of surveys taken in Europe was that the majority of respondents from all European countries believe that children in their societies will be worse off financially in the future than their parents. It will be interesting to see how such current attitudes could affect spending habits in the future.

A series of questions asking what people feel are the most significant concerns regarding the economy in their country was also included in the survey. Results indicate that, in advanced and developing economies, unemployment is considered to be the biggest problem. Interestingly, in emerging market economies, the biggest concern appears to be that of inflation. Another interesting finding was that debt was relatively not a major concern across all economies. In Japan, the biggest concerns were revealed to be unemployment and public debt. However, the percentage of those concerned about unemployment in Japan is significantly below that of the EU median. Australians seem unconcerned about any one category in particular, with the Chinese showing concern over rising costs and the wealth gap between the rich and the poor. The main concerns in the United States match those of Japan. Germany was the only country surveyed where the largest concern was that of the wealth gap between the rich and the poor. This reflects the effects of the reform of its labor markets. Also, only 31% of Germans expressed concern about inflation. This is the lowest percentage of any of the surveyed European countries. This raises interesting possibilities for conversation with German elites about their maneuverability in monetary policy. It would appear that there is more room for change in this respect than is being acknowledged in elite public discussion in Germany.

Questions were also posed as to what people felt should be the highest priority in terms of tackling economic issues in their respective countries. Findings suggest that people in advanced and developing countries feel that unemployment is the most important issue to be tackled to improve the economic situation. This sentiment is strongly reflected in Japan and the EU. It was also noted that young Japanese tend to prioritize public debt as a priority issue more than the older generations. In emerging market countries, unemployment and inflation are both considered the two most important issues that must be addressed.

In looking at economic inequality, there is a global trend of people perceiving this to be a major issue, along with a belief that inequality is on the rise. Young Japanese don't tend to see inequality as a major problem. This bodes well for the future in Japan. On a similar note, people from surveyed countries almost unanimously stated their belief that the economic system is unfair. This piece of data is troubling, yet is a reflection of how the current economic system in many countries operates and that it needs to be changed.

Questions and Answers

Q1: Regarding the methodology of your survey in the developing countries, were people of various income groups surveyed?

The surveys were carried out in the relevant local languages in each country so as to prevent biased results. Surveys were carefully planned to reflect the demographic profile of each country, including factors such as the level of education and gender. Samples in large countries such as China were nationally-represented.

Q2: With the level of disparity in mind, what kind of people did you survey in China?

The population sampled in China reflects the demographic profile of the country. However, there were some questions which couldn't be asked in China, such as those relating to the Chinese government and religion. In comparison to limitations in place 10 years ago, however, topics such as pollution and corruption were allowed to be asked. This is a great step forward in terms of removing survey limitations in China.

Q3: What have you learned, through this survey, about Americans? Do you see any differences between Democratic Party-supporting Americans and Republican Party-supporting Americans?

This particular data has not been looked at. From previous Pew surveys, Republicans are more likely to show concern over debt than Democrats, who tend to show more concern about unemployment. Republicans appear far more willing to cut spending than are Democrats, who seem more willing to spend money to stimulate the economy. Republicans are, in general, more distrustful of the government. In fact, over half of all Americans think that the federal government is a threat to their civil liberties.

Q4: How about the attitude toward China and Japan?

A couple of years ago, a Pew survey was conducted in the United States, where people were asked with which regions would they like to increase trade. 58% of the respondents expressed a desire to increase trade with Japan, which is a major improvement since the 1980s. No one has really asked any questions about the Trans-Pacific Partnership (TPP) in the United States, and the average American actually knows nothing about it, whereas in Japan, most people have heard of it. The trade deficit between the United States and Japan hasn't changed, but Americans generally only talk about the China problem, because the deficit with China keeps growing.

Only 45% of Americans want to increase trade with China, hence Japan is in a much better position. Americans are increasingly worried about Chinese ownership of U.S. debt and China's military presence. Among the elites, the issue of cyber attacks is a huge concern, and China is the biggest worry.

What is interesting in relation to this is that, until very recently, American businesses would only privately voice their suspicions of cyber attacks from China because they were worried about the impact on their stock prices and the opinions of their board of directors. Companies are now much more open about this issue, which makes it easier for the White House to deal with it.

At any rate, Americans certainly view Japan much more positively compared to China and compared to how they viewed Japan in the past.

With regard to the TPP, the elites and very high-ranking government officials have always wanted Japan to join the TPP for strategic—not just economic—reasons. They see the TPP as a new commitment in the alliance between the United States and Japan, which carries all sorts of implications. In addition to rice and cars, the TPP includes cooperation on science and technology, and behind all of this, of course, is China.

Q5: What are the perceptions of globalization among the people you surveyed? Do people think that inequality, unemployment, etc. all stem from globalization and that globalization is bad? As you mentioned at the outset, the TPP is a bilateral agreement, not a global agreement, so is there a trend of moving away from globalization?

Unfortunately, this particular data wasn't surveyed. Previous surveys have asked people whether they thought that trade was good for their country. In almost every country, people overwhelmingly have said that, in theory, trade is good for their country. However, follow-up questions in the United States have revealed that many people don't believe that trade creates jobs, raises incomes, or lowers prices. In fact, only one-third of Americans believe that trade lowers prices. Even on the very fundamental premise of basic economics, people don't necessarily support trade.

It would be beneficial to ask such follow-up questions in other countries, and it is likely that we'll find the same differential, although perhaps not as intense. People believe in globalization in theory, but, in practice, they are very skeptical. I am unsure whether or not this will lead to deglobalization. There is a huge debate in the elite circles about whether we are threatened by deglobalization, for example, there is much discussion on deglobalization in finance.

However, deglobalization in trade volumes is certainly unseen, but it would be useful to have a debate among the elites as to whether we have reached the limits of globalization. In other words, we may have pushed the envelope as far as we can for this period of time because issues are emerging, not the least of which is the rising concern about inequality. Since inequality is potentially politically destabilizing, it is surely a legitimate issue with which everyone needs to be concerned.

Q6: How much is the Pew Research Center spending, and is there any possibility of working with your Japanese counterparts in the future? How do you address the issue of culture when you implement the survey?

Regarding your first question, we are more than happy to entertain partnerships with other organizations. Our goal is to expand this survey. One of the goals of the Pew Research Institute is to survey more Asian countries more often, in other words, to expand the Asian survey from four or five countries a year to nine or 10 countries a year, because obviously Asia is where economic growth will be in the future.

Concerning culture, at least some of our survey results are probably cultural. The Japanese tend to be, in both good and bad times, more pessimistic than other people; even in the boom years, Japanese were not nearly as optimistic as the Chinese are today. This must be a cultural issue. The French, for example, are depressed for a good reason, but they will tell you that they are always depressed, whereas Americans tend to be very optimistic by nature. This is a cultural artifact that has to be wrestled with in public opinion as well as in policy circles. There are different mindsets about how to tackle problems, and it's very difficult to get at that issue in these kinds of surveys.

Pew intends to ask some more cultural questions in the future, although it will focus more on political culture. We will ask about nationalism, xenophobia, and isolationism in order to get a sense of whether people are looking inward as a result of this crisis. This relates to your question about globalization, and it obviously has political ramifications. We all need to worry about this going forward, especially in places like Europe where the people there are most worried about political polarization, that is, the pulling apart and fragmentation of the political systems. They are concerned that there will be nonfunctioning political systems with very small parties holding very extreme views, which would obviously not be a very positive thing for the future.

*This summary was compiled by RIETI Editorial staff.