The Future of Growth: The New Global Economic Dynamics of ProsperityYuwa Hedrick-Wong |
Future historians may well refer to the decade before the of 2008/09 crisis as a one-off “decade of emerging markets”—a brilliant flash in the pan. The unique convergence of factors which made that decade possible is sorely absent today, namely: a global flood of easy money and cheap credit, subdued inflation which was due in part to China’s supply shock, and rising global risk appetite. To state the obvious, this extraordinary period of widespread growth is now history.
In those pre-crisis days, there were many straight-line extrapolations that projected scenarios of China taking over the U.S. in the near future and emerging markets dominating the global economy. These predictions were lauded as bold and visionary at the time, but now seem silly and foolhardy. Indeed, they now look uncomfortably similar to the confident predictions commonly heard in the 1980s that Japan was on track to become the world’s number one in virtually everything – superior in growth, technology, business models, and competitiveness. What we are seeing now is the end of an era indeed. Where, then, will growth come from in the future?
From the perspective of economic fundamentals, the core ingredients for achieving strong growth will be the same as before: shifting productive resources from low- to high-productivity sectors, improving logistics and infrastructure efficiency, and enhancing market competition while making growth as inclusive as possible.
However, for emerging markets, China included, the bar has been raised; China will have to meet more exacting standards in the future in devising policies and strategies that are effective as well as appropriate in their specific context to ensure that these vital ingredients are working well. Thus, emerging markets will not emerge equally; some will succeed and many, no doubt, will fail. Future growth will therefore come from a diversity of sources.
An economic renaissance in the U.S. will see it securely positioned as the anchor economy of the world for the foreseeable future. Accompanying the central role of the U.S. will be a churn of emerging markets—some rising and others falling—interconnected in an evolving ecosystem that will continue to generate new and exciting business opportunities, provided one knows where to look.
Topics: Economic Outlook