Where will future economic growth come from?

Concern and uncertainty have plagued economics since the global crisis. Where might future growth come from? Can that growth be inclusive and sustainable, accounting for externalities? Are the traditional models of the economics profession still fit for purpose? As participants at the World Economic Forum Annual Meeting 2015 in Davos reflect on these questions, the Global Strategic Foresight Community provides some perspectives.

What will get economies growing again?

“Consider this astounding factoid,” says Peter Schwartz: “95% of all scientists who have ever lived are active today.” Schwartz suggests that while we might not yet know exactly what will drive economies in the 21st century, we shouldn’t worry – new things will come along. “The history of scientific and technological application shows long lead times between research and application,” he says. And from biotech to energy and environmental technology, today “no good idea goes unfunded”.

Also focused on technology, Stefan Hajkowicz points to the growth in creative services, particularly in emerging markets where more people are going online: “Virtual goods can be produced and distributed at a low cost compared with other industries – often all that is required to successfully become part of the global economy is an internet connection and a good idea.”

Julius Gatune identifies another way in which technology will keep boosting growth: putting informal economic activities on a firmer footing. “Mobile money applications such as Kenya’s MPESA and Bharti Airtel’s micro-insurance products are helping people make a living in the informal economy by providing them with access to the financial services necessary to scale up and shield themselves from economic shocks.”

Daizo Motoyoshi argues that cultural change could reverse decades of stagnation in Japan. “A small group of large Japanese corporations are transforming their business practices” and could ultimately “serve as role models for how the private sector can catalyze growth in other economies struggling with similar issues”.

Or should we be looking further afield for future sources of growth? “From the edge of space to low-Earth orbit, the location of the International Space Station, and further out to geo-synchronous orbit, home to a valuable ring of satellites”, the space economy is already generating $300 billion a year. Thomas E Cremins shows how growing public-private partnership in space will “have broad and far-reaching effects on the global economy, creating opportunities for billions of people”.

How can we account for externalities?

There is growing appreciation that growth must be sustainable and inclusive. While many worry that technology is widening inequality, the aforementioned pieces by Hajkowicz and Gatune point out that ICT is lowering barriers of entry in creative services and opening new opportunities in the informal economy.

Francisco Sagasti argues for addressing inequality through innovations in social institutions. “Institutional innovations could include new wealth and income redistribution schemes to equalize opportunity; technical, management, information and financial support for self-generated livelihoods; alternative currency schemes based on the allocation of time; [and] initiatives to explore and take advantage of the new realms of human faculties that cyberspace and virtual reality have created”.

Jean-Claude Burgelman focuses on incorporating environmental externalities by seeing the environment as “a global common good and as a potential driver for economic growth”. He calls for public-private collaboration on “green growth” on a scale rivaling the 1930s New Deal and 1940s Marshall Plan, which “together paved the way for much of the economic growth achieved during the remainder of the 20th century”.

Herbert Oberhänsli addresses the world’s unsustainable use of water, calling for an effort to devise “new mechanisms, whether price or non-price, to bring withdrawals back into line with sustainable supply”.

Could the economics profession be transformed?

The global crisis has called into question the relationship between the economics profession and society. Rafael Ramírez asks if economists will adapt and remain close to power, or if the crisis will be seen as an “emperor’s new clothes” moment for the profession – and, if so, what next? “Could ‘citizen scientists’ include economics to help the local citizenry directly engage in economic decisions? Could machines and engineers take over a lot of what economists do now?”

Ultimately, the question is: what future economic context do we desire? Grappling with the diverse questions raised by these pieces – from the status of the economics profession to how we govern space – will help shape how we get there.

Read more about the launch of the Global Strategic Foresight Community here.

Authors: Kristel Van der Elst, Senior Director, Head of Strategic Foresight, World Economic Forum; and Trudi Lang, Director, Strategic Foresight, World Economic Forum

Image: Labourers work at the construction site of a commercial estate in the southern Indian city of Chennai February 1, 2011. REUTERS/Babu