1050x300-MS-Enabling and Adapting to Developing Economy Growth

Enabling and Adapting to Developing Economy Growth

Author(s): Michael Spence

Date: Sep 2, 2014

Theme(s): Trade & Investment

Publications: Opinions & Speeches

Academic Council Chair Michael Spence on the need for growth with inclusiveness within the global economy. Part of an IMF series written by Five Nobel Prize winners, as they discuss what they each see as the biggest problem facing the global economy of the future.
There are many pressing challenges in the global economy, but to me, the central defining challenge is accommodating the growth of developing economies and completing the convergence process that began after World War II. This holds the promise not just of massive poverty reduction but also of expanding the opportunity for healthy, productive, and creative lives among the 85 percent of the world’s population that experienced significant economic growth for the first time in the postwar period. This massive expansion of inclusiveness has the potential to be the defining characteristic of the century. But making it happen it is easier said than done.

Inclusiveness will require changes in mind-sets, policy responses, and institutions—international and domestic. The goal is to make the rise of the developing world as comprehensively beneficial as possible, even as major transitions compel shifts in relative prices, dramatic changes in economic structure in both advanced and developing economies, and changes in the distribution of income and wealth.

The convergence process, if successful, will triple the size of the global economy in the next 25 to 30 years—by a much larger multiple if our baseline is the start of the convergence process, 1950, instead of today. Attempting this journey without adjusting the world’s use of natural resources will result either in growth grinding slowly to a halt or, worse, in catastrophic failure after an environmental or ecological tipping point. Environmental sustainability is essential to accommodate the rise of the developing world.

 

This article first appeared in the International Monetary Fund’s Finance & Development publication. To access the entire article, please click here.

The views expressed in this article are the author’s own and do not necessarily reflect Fung Global Institute’s editorial policy.