How (and Why) You Should Prepare for a World of Very Slow Economic Growth
By Shlomo Maital
It is becoming more and more clear that in the next 50 years, the world economy (and probably, the economy in which you live and work) will grow more slowly than in the past. What was perceived as a temporary correction, due to the global financial crash of 2008, is now becoming chronic.
A study by McKinsey Global Research, “Global Growth: Can Productivity Save the Day in an Aging World” (available from McKinsey’s website) notes that “GDP growth was exceptionally brisk over the past 50 years, fueled by rapid growth in the number of workers and in their productivity.” But now, employment growth, which averaged 1.7 per cent yearly between 1964 and 2014, is set to drop to just 0.3 per cent a year.
And productivity growth is slowing too. “Even if productivity were to grow at the (rapid) 1.8 per cent annual rate of the past 50 years, GDP growth would decline by 40 per cent in the next 50 years – slower than the past five years of recovery from recession”. But productivity growth has declined and does not look like it will recover much. China’s economy is slowing. Europe and America grow slowly. Japan has slow growth. Looks like it’s chronic.
What can be done? “Catching up to best practice”, says McKinsey. In other words, if we all benchmarked the world and defined and captured ‘best practice’, productivity growth could nearly make up for the declining growth in workers.
Here are McKinsey’s 10 key “enablers of growth”. Can each of us look at this list closely, and figure out, what is my role? How can I become really skilled, expert, at one or more of these enablers? If McKinsey is right, and if you can, you will be in great demand – and create value for the world.
Here is the list. Which of thee suits you? What must you do, in order to become a true enabler?
- Remove barriers to competition in service sectors. 2. Focus on public and regulated sector efficiency. 3. Invest in physical and digital infrastructure. 4. Foster R&D demand and investment. 5. Exploit data to identify transformational improvement opportunities. 6. Improve eduation and skill matching and labor market flexibility. 7. Open up economies to cross-border economic flows. 8. Boost labor force participation among women, young people, and older people. 9. Harness the power of new actors through digital platforms and open data. 10. Craft regulatory environment, incentivizing productivity and innovation.