Global Agenda Council on New Growth Models 2013
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Today, emerging and advanced economies are facing the same challenge: growth. But the underpinnings of this challenge differ greatly for both.
In Asia, and particularly in China and India, awareness is mounting that historical growth paths will not meet their needs because they do not scale up in a world economy triple its current size, as it is projected to be by 2050. These growing economies will need to invent new growth patterns to reach advanced-country levels of development at a time when incentives related to sustainability are becoming internalized in national priorities.
Perceptions are rapidly falling in line with the reality that sustainability must become a central ingredient for growth as the old model simply will not suffice. This is not just a global issue, but a national challenge to long-term growth. “The emergence of sustainability as a critical element in growth strategies in the world’s future largest economies is an extraordinarily positive development, because national needs, goals and priorities remain much more powerful incentives than international agreements.”
With regard to the advanced economies, the vision of sustainable growth includes lessons from past mistakes. The International Monetary Fund (IMF) stated in its World Economic Outlook, released ahead of its twice-yearly meeting to be held in Tokyo in October 2012, that global growth in advanced economies is too weak and that the global economic slowdown is worsening. The IMF warned European and US policy-makers that failure to address their economic challenges could prolong the slump.
This new reality compels public policy-makers, businesses and experts to better understand the implication of economic growth for their societies and for the ecology. They must now search for new, sustainable models of growth that take into account ecological footprints and societal fairness.
- In its recently published World Economic Outlook, the IMF downgraded the global growth forecast for 2013. It believes that economic output will expand by 3.6% in 2013, down from its July estimate of 3.9%.
- Global GDP, currently standing at about US$ 60 trillion, will grow to at least US$ 180 trillion by 2050.
- Leading financial institutions have underestimated the impact austerity has on growth. Global policy-makers are worried about the United States: if all projected tax raises and spending cuts take effect, the United States economy could “take a hit equal to 4% of GDP, enough to seriously harm the world economy”.
"Over the next few decades, almost all of the world’s growth in energy consumption, urbanization, automobile usage, airline travel and carbon emissions will come from emerging economies. By mid-century, the number of people living in what will be (by then) high-income economies will rise to 4.5 billion, from one billion today. Global GDP, which currently stands at about US$ 60 trillion, will at least triple in the next 30 years."
A. Michael Spence, Senior Fellow of the Hoover Institution, Stanford University, USA
"I don't think there's doom and gloom completely, in the world, at all. The world is recovering. If you look at total retail sales overall, I think you're seeing growth... the issue is it's uneven.”
Victor K. Fung, Chairperson, Li & Fung, Hong Kong SAR
“Revolution is needed to bring about sustainable economic growth that can both protect the environment and raise living standards”.
Ban Ki-moon, Secretary-General, United Nations, New York
Asia’s New Growth Model
The Growth Report: Strategies for Sustained Growth and Inclusive Development
China’s Rebalancing Act
Skidelsky, Robert and Skidelsky, Edward. How Much Is Enough?. New York: Other Press, 2012
Holistic growth encompasses the economic, social, environmental and ethical dimensions. Historically, the economies of Europe and the United States thrived through innovation. Today, the advanced economies need to continue to focus on innovation, and on entrepreneurship and creativity to improve their ability to compete with emerging economies. They need serious investment in human capital through education and jobs retraining, as well as in infrastructure. Facing the combined weight of high debt, low growth, unemployment and inequality, the high-income countries will need to search for new policy responses and new models of growth.
By 2025, Brazil, China, India, Indonesia, South Korea and the Russian Federation will account for more than 50% of the world’s growth. Population expansion and fast growth in emerging economies will drive increasing demand for the basic resources of water, energy and food. Moreover, the rise of emerging markets is reinforcing expectations and aspirations for a better life among the world’s newest consumers. By 2050, India and China alone will account for 2.5 billion people with incomes matching those in advanced economies. Alternative approaches to growth will be essential to face the emerging markets’ growth dilemma: raising people out of poverty without further endangering the planet.
Taking the above into account, the Global Agenda Council on New Growth Models aims to:
- develop new sustainable models of growth
- deepen current understanding of the role of emerging markets in redefining existing growth models
- look into innovative approaches to growth for Europe and the United States.
Research Analyst: Ethan Huntington, Senior Associate, Global Agenda Councils, ethan.huntington@weforum.org
Council Manager: Lyuba Nazaruk, Associate Director, Communications Strategy and Transformation, Resources and Management Processes, lyuba.narauk@weforum.org
Forum Lead: Martina Gmür, Senior Director, Head, Global Agenda Councils, martina.gmur@weforum.org
