Tag Archives: Economic

World’s economic perspectives for 2010-2040

Map of developping countries, without least ad...
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The old economic order is shifting. As the global economy recovers some emerging markets are likely to grow faster than traditional economic powers. At the industry level, these shifts are even more apparent with accelerating capital flows, fundamental demographic changes, and the rise of state capitalism reshaping the world map for many sectors.

PwC’s Macro Consulting team has developed a tool to map future clusters across the world. As a result, they have highlighted the geographical locations that will host the largest clusters in five industries:

• Pharmaceuticals;
• Automobile assembly;
• Asset management;
• Filmed entertainment; and
• Tertiary education.

Key findings:

• The large increase in the share of world GDP represented by Asia over the next 30 years, helped by the expected rapid growth of economies such as China and India, should aid the development of dominant clusters in the region. This is likely to be especially apparent in industries that can benefit from large economies of scale. The top locations within Asia of some of these clusters have not yet come to light.

• In the pharmaceutical industry the cluster In Shanghai will grow to become one of the world’s most significant. However, the current leading clusters in New York and London to remain the largest. The increased affluence and aging populations in emerging markets will benefit centres such as Shanghai through boosting demand for healthcare.

• Growing automotive assembly clusters around Tianjin, Nanjing and Sao Paulo may rise to be amongst the world’s largest by 2040. The growth of the middle classes in China, India and South America will add hundreds of millions of potential car owners to the world market between now and 2040. This will require an enormous increase In production capacity in these regions.

• In asset management the existing large clusters in New York, London and Boston will be joined by Singapore, which May become the leading cluster in the Asian region. Tighter regulation and higher taxes are currently working against clusters in the United States and Europe but the key factor will be the increase in public and private capital available in Asia – which will fuel growth in asset management in the region.

• In the filmed entertainment sector Hollywood will retain its position up to 2040. However, it will face growing competition from rising film production clusters around Mumbai and Shanghai which are increasingly moving into mainstream productions.

• New York, London and Boston will remain the principal tertiary education clusters over the next 30 years due to the depth of quality universities they currently host, as well as offering environments in which these clusters can flourish. Many emerging and developing nations are investing heavily in tertiary education clusters, which are likely to improve significantly over the next 30 years. However, they will not surpass the existing top tertiary clusters in this timeframe.

For more details, click here.

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Reforming the public sector in a crisis: Göran Persson’s views on the Swedish Great Depression and crisis opportunities

NYC: National Debt Clock
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In the early 1990s, Sweden suffered its deepest recession since the Great Depression. Although the Swedish crisis was homegrown, its causes and effects resemble the events unfolding in the world today. After years of strong domestic growth driven by easy credit and high leverage, a real-estate bubble burst, leading to the collapse and partial nationalization of the banking sector. Domestic demand plunged as the household savings ratio soared by 13%. In three years, public debt doubled, unemployment tripled, and the government budget deficit increased tenfold, to more than 10% of GDP, the largest in any OECD country at the time.

Göran Persson was appointed finance minister after the 1994 elections, and became prime minister two years later. In order to regain the confidence of international lenders (and so pave the way for stability and sustainable growth) he knew that Sweden had to reduce its budget deficit dramatically. It took four years for the Swedish government to balance its budget. By 2006 the country had almost halved its public debt.

Persson recently spoke about what it takes to improve the way the public sector works and here are some of the lessons learned that he shared with McKinsey Quarterly:

  • First, as Persson says, you must make it clear that you are responsible for the process and that you are prepared to put your position at stake.
  • Second, the consolidation program must be designed so that the burdens are shared fairly. Public support for tough policies would quickly deteriorate if they were not perceived as fair.
  • Third, the consolidation program has to be designed as a comprehensive package: by presenting the measures together, it becomes clear to all interest groups that they are not the only ones being asked to make sacrifices. Also, by starting with the most difficult measures, you demonstrate your resolve and increase the chances of achieving the early results, which will be important for getting the continued support that is critical for sustaining the effort.
  • Transparency is the fourth lesson: never play down the effects of the program’s measures, be completely honest when you communicate with financial markets, clarify assumptions and calculations.

When talking about crisis opportunities, Persson admitted that the cuts in government consumption became a driver of improved efficiency, since public authorities were forced to do the same job on unchanged or reduced budgets and he mentions three of the strategies pursued:

1) One strategy aiming to improve productivity, service quality, and freedom of choice involved the liberalization of telecommunications, mail, railways, and other infrastructure industries. It also involved allowing privately run providers to compete with public ones in providing tax-financed services for the school system, health care, child care, and care for the elderly.

2) Another measure was to introduce information technology to broad layers of the population through a tax-deduction scheme that allowed workers to obtain a home computer under a favorable leasing agreement with their employers. The penetration of IT in Sweden during these years outpaced every other country in the world, which made it possible for authorities like the Tax Agency to go online at an early stage. More and more of the communication between Swedish public agencies and citizens now takes place on the Web, and many Swedes do their annual tax submissions over the Internet, allowing for a very efficient processing of taxes.

3) A third strategy was to give people with basic schooling the chance to complete a secondary education that would qualify them for university studies. More than 10% of the workforce seized this opportunity between 1997 and 2002. When the business cycle turned up again, they became a very good resource on the labor market, not least in the public sector. This education scheme served a dual purpose: it eased the pain of unemployment and increased Sweden’s long-term competitiveness by lifting the average competence level of the workforce.

Göran Persson also commented on his experience with trying to get the civil servants on board and making them partners in the initiative, changes in the way government worked and the way it developed and delivered its services, and influencing change at ministries that were not making good on their efficiency targets.