The New Global Economy – Project Syndicate

The New Global Economy (re-blogged)

Ten years ago, rich countries dominated the world economy, accounting for two-thirds of global GDP. Since then, their share has fallen to just over half. In ten years, it could decline to a mere 40%, with emerging markets producing most global output.

The pace of this shift in economic power is unprecedented, and raises as many questions as it does hopes. What will happen after globalization and (often) good policies have enabled virtually all developing countries to catch up with their richer peers? And how will incumbent powers respond to the new players that economic convergence is bringing to the fore – and to their demands for a greater say in global economic governance?

At the same time, while the path of productivity growth is shaping the nature of today’s new global economy, its key drivers, innovation and trade, are under threat. Cash-rich but gun-shy Western companies are skimping on research and development; emerging economies are rethinking their reliance on export-led growth; and rich and poor governments alike are tempted to intervene to shape the future.