Arturo Bris is Professor of Finance at IMD, where he also directed the Advanced Strategic Management programme from 2009 to 2014. Since 2014 he is the Director of the IMD World Competitiveness Center, which each year publishes the eponymous Rankings. In 2017, 63 countries were ranked, with Hong Kong, Switzerland, Singapore, the United States and the Netherlands taking the first five places. He is a specialist of global competitiveness, financial development and regulation, and macroeconomics. Most recently, he has been researching the relationship between income inequality, social mobility and competitiveness. He is also developing a competitiveness-based investment portfolio that tracks the best and worst economies.
“It is clear that technology will continue to drive development. With the caveat that as many people as possible should benefit from it.”
Only one thing is clear from observing the various economies across the globe, and that’s the fact that technology has been—and will continue to be—the chief vector of growth. Implicit in this are the dangers of exclusion, which we’re already seeing wherever social inequalities are widening.
In his opening remarks to the latest FHH Forum on The Changing Game of Global Competition, IMD World Competitiveness Center Director Arturo Bris asked the audience a simple question: which economy out of China, the US, Nigeria, Colombia, Brazil or Turkey has experienced uninterrupted growth in all years but one since the 1960s? The unexpected answer is: Colombia! Bris continued: “A few years ago, everyone was talking about the BRICS countries (Ed: Brazil, Russia, India, China and South Africa) and their tremendous contribution to the global economy in the post-subprime era. We don’t hear about them any more, because now it’s the MINT countries (Ed: Mexico, Indonesia, Nigeria and Turkey) that are in the ascendant. If we look at China, which has supplanted Japan as the world’s second largest economy, we see that it struggles to reach 18th place in our global competitiveness ranking because it sorely lacks some of the basic ingredients needed to ensure prosperity.”
The lesson here is that there’s no magic recipe for a given economy to develop its competitive capacities in the international arena. The ranking Arturo Bris referred to—which by the way puts Switzerland in second place, after Hong Kong—shows wide disparities between leading countries in terms of geography, politics, economic direction, and labor models. Would a better analysis be gained from taking a historical approach? It’s worth exploring. We can see that global GDP per capita tripled over the two millennia up to the beginning of the 19th century. In the 20th century, though, the multiplication factor really took off, settling at 21—and then, of course, these last two decades have seen a level of wealth production that defies all comprehension. In Bris’s view, the driver of this tremendous onward march is called technology. As a corollary, this throws up the nagging question: is such exponential growth tenable over the long term?
Beyond the crises
“Today we’re seeing growth rates that definitely appear to be running out of steam,” Bris points out. The picture is no rosier as far as people’s incomes are concerned, with developed economies experiencing the same wage levels that we had about 20 years ago. Ultimately, the only ones coming out of it well are businesses, which have never before posted such high profits—and that’s despite the downward trend of the markets. All this does is increase the gap between labor and capital, a gap that technology is widening even further. Simply put, businesses are earning more while workers are earning less. Which is why it’s vital to harness technology to increase prosperity and raise wages. That’s the challenge.”
Up to this point, measures advocated to try and curb growing inequality have carried little weight. Both taxation and protectionist legislation have proved relatively ineffective. So we’re left with the initiatives underway around job creation, employment subsidies, the minimum wage, and increasing productivity. All these avenues, if they are to deliver on their promise, must integrate technology as the best vector for success. “After all, Europe has survived every defeatist prediction, every crisis,” Bris sums up. “Even the crisis we face now in relation to Brexit isn’t going to undermine it at a fundamental level. We could also make the same observations with regard to the United States, which is currently threatened by overvalued financial markets, or China, which has to deal with a private debt that represents 150% of its GDP. With that in mind, we must consider the digital revolution that’s underway to be the best medium for supporting the economy, an indispensable vector of growth.”
Click on the video to view the speaker’s interview at the Forum.
See which experts and personalities are invited to the Forum.