Imbalanced growth and possible stagflation

Comments on Olivier Blanchard “When it comes to the commodity crunch”, 12/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/oil-inflation-commodities-IMF-Blanchard-pd20110412-FTSM4?OpenDocument&src=sph

A couple of comments.

First, on balanced or imbalanced growth.

The article starts with the following:

"The world economic recovery is gaining strength, but it remains unbalanced.

Three numbers tell the story – we expect the world economy to grow at about 4.5 per cent a year in both 2011 and 2012, but with advanced economies growing at only 2.5 per cent, while emerging and developing economies grow at a much higher 6.5 per cent."

Although Olivier Blanchard clearly has a point here, but some of the message masks the trend in the past two decades or so, that is a converging trend characterised by much higher growth in emerging economies especially the larger ones like China and India on the one hand, and the lower growth of most industrialised economies, even in the event of over consumption in some of the latter countries.

So, the unbalanced growth will continue and has been normal and will continue to be normal for some time to come, although Olivier Blanchard means the below potential low growth in industrialised economies.

Secondly, on effects of high commodity prices on different economies, Olivier Blanchard may have ignored the effects of higher prices of exports from emerging to advanced economies as a result of the high commodity prices.

I see that in conjunction with the direct effects of commodity prices will be the main sources of stagflation in some industrialised economies, should that occur over the few years to come.