Introduction:
- In 2024, MGI delved into the defining components of the new era sweeping our world.
- We analysed the changing geometry of global trade and provided a reality check on the physical challenges of the energy transition.
- We examined global productivity growth, the imperative to raise investment, and opportunities to close the productivity gap between large and small businesses.
- We also explored the evolving future of work, the race to deploy AI and adjust skills, and the challenges of tight labour markets.
- Building on our research on economic empowerment, we mapped out a broad “affordability agenda” that could alleviate some of the burden for low-income households.
- Finally, we identified industries likely to become arenas of competition that drive economies, well-being, and prosperity around the globe.
- The following five core themes encapsulate some of our key findings over the past year.
1. Global connections:
Exploring how flows of goods, services, people, capital, and ideas shape economies
- The geometry of global trade is changing.
- Our analysis of the geopolitical distance of trade found wide variation:
- From 2017 to 2023, China, Germany, and the United States reduced the geopolitical distance of their trade by 4 to 10% each.
- Over the same period, Brazil and India have traded more broadly across the geopolitical spectrum.
2. Resources of the world:
Building, powering, and feeding the world sustainably
- Creating a low-emissions energy system while expanding energy access globally requires solving “the hard stuff.”
- Today, about 10% of the technologies needed to meet global commitments to reduce emissions by 2050 have been deployed.
- For the remaining 90%, we identified “the hard stuff” linked to the development and deployment of low-emissions technologies and the infrastructure and supply chains they need to operate and accelerate deployment.
- Abating about half of the energy-related emissions depends on addressing the most demanding physical challenges, such as managing variable renewables like wind and solar in a low-emissions power system and developing new low-emissions processes to produce industrial materials such as steel and cement.
3. Productivity and Prosperity:
Creating and harnessing the world’s assets most productively
- Investing in productivity growth can spur the economic growth that supports higher living standards.
- Productivity in the median economy has jumped sixfold in the past quarter century, but there is variation:
- 30 emerging economies, home to 3.6 billion people, are in the “fast lane” of improvement – if they maintained their pace, they would converge to advanced-economy productivity levels within roughly the next quarter century.
- “Middle lane” economies would take more than a 100 years, while “slow lane” ones would never converge.
- At the same time, advanced-economy productivity has slowed by about one percentage point since the global financial crisis.
- Investment in areas such as digitisation, automation, and artificial intelligence could fuel new waves of productivity growth in advanced and emerging economies, which is the best way to continue improving well-being and prosperity around the globe.
4. Human potential:
Maximising and achieving the potential of human talent
- Charting the challenge of tight labour markets in advanced economies reveals a long-term trend.
- Labour markets in advanced economies today are among the tightest in two decades, a long-term trend that may continue as workforces age.
- We estimate that GDP in 2023 could have been 0.5 to 1.5% higher across the world’s eight largest economies if employers had been able to fill their excess job vacancies.
- Companies and economies need to find new ways to expand the workforce if productivity is to continue to grow, with steps like more flexible work, tailored migration programmes, and initiatives to keep seniors at work longer and attract more women into the workforce.
5. Technology and markets of the future:
Exploring the next big arenas of value and competition
- The next big arenas of competition that will drive economic growth in the new era include AI software and services, cybersecurity, air mobility, obesity drugs, and industrial and consumer biotechnology.
- Companies in these arenas exhibit three characteristics that escalate competition: cutting-edge technologies, large investments, and large, growing markets.