Does Growth Have a Future?

MILAN – What can we expect as the world’s economy emerges from its most serious downturn in almost a century? The short answer is a “new normal,” with slower growth, a de-risked and more stable core financial system, and a set of additional challenges (energy, climate, and demographic imbalances, to name a few) with varying time horizons that will test our collective capacity to improve management and oversight of the global economy.

Lower growth is the best guess for the medium term. It seems most likely, but no one really knows. The financial crisis, morphing quickly into a global economic downturn, resulted not just from a failure to react to growing instability, risk, and imbalance, but also from a widespread pre-crisis inability to ”see” the rising systemic risk.

These defining characteristics will condition the responses and the results in coming years. There are countervailing forces. The high-growth countries (China and India) are large and getting larger relative to the rest. That alone will tend to elevate global growth compared to the world where industrial countries, and the US in particular, were in the growth driving seat.