The New Global Economy’s (Relative) Winners

Jul 11, 2012 Dani Rodrik

The world economy faces considerable uncertainty in the short term. But, regardless of how the immediate challenges are resolved, a difficult longer-term phase is at hand, and it will be substantially less hospitable to economic growth than possibly any other period since the end of World War II.

CAMBRIDGE – The world economy faces considerable uncertainty in the short term. Will the eurozone manage to sort out its problems and avert a breakup? Will the United States engineer a path to renewed growth? Will China find a way to reverse its economic slowdown?

The answers to these questions will determine how the global economy evolves over the next few years. But, regardless of how these immediate challenges are resolved, it is clear that the world economy is entering a difficult new longer-term phase as well – one that will be substantially less hospitable to economic growth than possibly any other period since the end of World War II.

Regardless of how they handle their current difficulties, Europe and America will emerge with high debt, low growth rates, and contentious domestic politics. Even in the best-case scenario, in which the euro remains intact, Europe will be bogged down with the demanding task of rebuilding its frayed union. And, in the US, ideological polarization between Democrats and Republicans will continue to paralyze economic policy.

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Zsolt Hermann Jul 18, 2012

I think the key to the question the article tries to answer is in the understanding what a global, interdependent world means.
Can we talk about individual nations, countries succeeding, or losing independently from others in an integral, interdependent system?
Today we exist in such a tightly interlocked network that our fate is totally tied together.
The three characteristics mentioned in the article do not work in this system.
Due to the excessive overproduction/over consumption economic, that fully relies on credit, everybody, individuals and nations alike are already in debt or are heading that way.
Our finances, economies and other human institutions are so much interdependent, globalization is so deep that there is no country that would not be dependent on world economy, nobody is capable of being independent, sustaining itself today.
Regarding "democracies" we also learn that western style democracy is also basically serving a small dominant minority, probably in a less obvious way than other governing structures, but still causing the same or even bigger social inequality than other structures inevitably leading to tensions, breaking points within society.
As many times mentioned these days, we are all sitting on the same boat. Either we all figure out what caused this global crisis and how we all need to change, working together, each element supporting the others and the whole system corresponding to the laws of integral systems, or we are all going to sink deeper into crisis until the intolerable suffering will force us to start changing ourselves.
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Moctar Aboubacar Jul 12, 2012

This point looks like it could use a little more support. What specifically about recent changes in the global economy makes democracy a critical factor in determining which countries will do relatively better down the road?

Are distributive conflicts that much more intense? And if so, are democratic processes currently showing good results in curbing these conflicts and civil disorder?

Are the spaces of discussion that strong democracies provide crucial... in overcoming turbulence and shocks?

I have a hard time seeing on one hand, countries with democratic traditions using them to overcome the current financial crisis, and also, that same space managing to play a crucial role in recovery from crises. In the South Korean case it seems that the rapid recovery from crisis 15 years ago was done in large part at the expense of principles of consultation and cooperation. I wish nothing more than to be convinced.
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Paul A. Myers Jul 11, 2012

I disagree with the "three characteristics" hypothesis. Rather the relative winners tomorrow will be those countries that are able to borrow today publicly and privately to fund infrastructure and social investments in tomorrow's international comparative advantages for their countries. These countries will come out of this slow growth period with tremendously strengthened international trade advantages that can power strong domestic growth.

Today is a time when shrewd countries will place down large investments on tomorrow's opportunities.

Which countries "see" their opportunities and how they invest in them will be fascinating to watch.

Yes, countries mired down in high levels of public consumption will wallow around and fall behind. One can guess who they will be. But who will win? Much harder to discern.
- Daniel Samsic Jul 12, 2012
  
  Interesting point, I totally agree with Mr. Myers:
  
  'Today is a time when shrewd countries will place down large investments on tomorrow's opportunities.
  Which countries "see" their opportunities and how they invest in them will be fascinating to watch.'
  
  By risking a lot of boo-ing from the P-S audience because all the economists have learned in the university the principle of the "big bang for the buck" NOW, not tomorrow or next generation, by contrary, a "sustainable development" (sorry to use this cliché hated by the economists) is based on another principle: "a half buck for the bang now and a half buck tomorrow or next generation".
  
  The good news is that addressing the long-term "sustainable" problems would actually help to solve the short-term economic problems.
  Indeed... 'Which countries "see" their opportunities and how they invest in them will be fascinating to watch'.
  See:
  http://world-at-a-crossroads.blogspot.ca/
  
  Thanks.
  ds
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