Entries in growth (3)


Analysis: where are the lifeboats if global growth starts to sink?

A recent article in the UK Telegraph focuses on the issue of the slowing global economy and asks, what options are left if the current shallow recovery fails?

The author points out that many international organizations have been reassessing and revising downward their estimates for near-term growth; the United Nations is the latest, cutting its 2015 forecast down to 2.8%. That is "only slightly above the 2.5% rate that used to be regarded as a recession for the international system as a whole." And several major economies, including China, are facing headwinds this summer.

I encourage you to look at the detailed data and analysis for yourself, but the message seems clear: the global economy has a thin margin protecting it against any economic shock. And with governments and central banks still addressing the aftermath of the 2008 recession, there are few easy options left.

Which should lead us to expand our efforts to look for new ways to build economic growth.

Image source: The Telegraph

-- Bruno Roche


Technology, time horizons, and global growth

A recent article by Gillian Tett in the Financial Times profiles the contrarian views of a UK fiscal policymaker  regarding innovation, technology and growth. Contrary to the conventional wisdom, that is, as captured by McKinsey and others that promote unfettered innovation as the ultimate solution to the challenges facing worldwide economic expansion.

Andrew Haldane, chief economist for the Bank of England, sees things differently. In a speech entitled "Growing Fast and Slow," Haldane examines the past 250+ years and concludes that innovation is only part of the reason for the rapid growth the globe has experienced in that time. There are additional factors that are critical: rising levels of human capital (educated people), social capital (trust), and a shift in cultural attitudes towards the future (from a focus on short-term gains to planning for the long term).

Further, while innovation can enable greater growth, Haldane worries about the current direction that digital technologies are taking us. He warns that the digital revolution is increasing income inequality, and may be reducing our time horizons--making us less capable of the patience required to make the investments needed to achieve sustainable long-term growth.

Fast thought could make for slow growth."

--Andrew Haldane

Haldane ends his speech with a warning about the cross-winds associated with increasing innovation on the one hand and decreasing social development on the other. If we are not careful, global growth could end up "suspended between the mundane and the miraculous."

We appreciate an analysis that accounts for human capital, social capital, and considers the merits of a long-term perspective. What do you think about Mr. Haldane's observations?

-- Clara Shen


Entrepreneurship and growth

Growth is change. If organizations and cultures often resist change, this can impact the prospects for corporate growth initiatives. A recent BCG paper on "Organizing for Growth" examines this dilemma from the perspective of leadership and makes recommendations to improve the odds of success.

We enjoyed the authors' attention to the roles internal entrepreneurship and culture play in generating growth. New growth can require leaders with a different style--leaders who are more adaptive and agile--to the ones running the core business. Yet it is not enough to parachute new entrepreneur into a system that might impede their progress.

Culture is not an afterthought, and it is not easily changed. The BCG recommendations include meshing new approaches into existing practices, paying particular attention to organizational design in the process. Easier said than done? The authors' agree that it's hard work, but worth the effort. What do you think?

Image source: BCG

-- Bruno Roche