Game Changers for Growth

New information and communications technologies were game changers that boosted the potential growth rate of the US economy in the 1990’s. New research suggests that shale energy and big-data analytics will be game changers with similar benefits for the US economy’s potential growth over the next several years.

BERKELEY – The recent G-20 meeting of finance ministers in Saint Petersburg confirmed that the debate between growth and austerity is over – at least for now. With protracted recession in Europe and slowdowns in emerging markets, concern about budget deficits has given way to apprehension about growth. In July, the International Monetary Fund revised its global growth forecast downward for the second time this year.

Both Japan and the United States stand out as bright spots in the subdued global outlook, but for different reasons. In Japan, Prime Minister Shinzo Abe has unleashed a combination of aggressive monetary and fiscal expansion along with promised reforms of the labor market, corporate governance, regulation, and trade.

In response to rapid and bold stimulus measures, Japan’s economy is expected to grow at a rate of around 3% this year – one of the highest rates among advanced economies – and the Nikkei index rose 80% in the six-month period ending in May of this year. Now Abe has signaled his intention to move forward with tough structural reforms. If he delivers, his policies will be game changers for Japan.

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