According to Prof. Soto, the real issue not about the New Normal but it’s about creating institutions to deal with a new normal, whatever this may be. For the MENA region, the new normal may be determined by the of combination of commodity price shocks, capital inflows, internal problems such as unemployment or growth stagnation. All of this needs policies and needs institutions that are capable of making those policies work.
In his presentation, Prof. Soto elaborated on these institutions for the new normal. They will have to address issues such as inflation targeting, monetary policy and exchange rate, fiscal rules, sovereign wealth funds. There should also be a role for fiscal councils overseeing what the government is doing and adding transparency and information to the markets. Additionally, institutions will have to bring a sense social justice because those who are not in positions of power needs to be represented and institutions can add more social responsibility than has been the norm in most emerging economies.
For Prof. Soto, there is the perception that we’re at the beginning of a new Industrial Revolution and things that were science fiction ten years ago are now a reality which is becoming more and more important. Things like artificial intelligence, machine learning, and big data, all these things might change the way in which firms work, the way in which firms relate to one another and particularly change the way in which the labor market will work.
In this process, a number of positions will disappear and countries will have to address the issues of retaining their labour force and train and prepare this labour force for the future. However, Mr. Soto concludes, we are not dealing with this in a proper way yet.