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European Affairs
The Future of the Global Economy: Towards a Long Boom?
OECD. 1999. 197 pp.
Reviewed by Peter S. Rashish
The title of this book is seductive, offering the vision of uncommon plenitude and prosperity for years to come. But the question mark at the end is instructive: while surging stock markets and new technologies have created a turn-of-the-millennium euphoria among many in the advanced economies of the US and Europe, there are also suspicions that good things cannot last forever. This volume, which assembles the views of economists and futurologists, offers an assessment of what will be needed from policymakers, business, and individuals if a long boom – which is defined as four percent world annual GDP growth over several decades – has any chance of taking hold. It is recommended reading for anyone who has been seeking a one-stop-shop for understanding the elusive phenomenon of globalization.
As one would expect from a work of this nature, the text is not without its share of neologisms and other inventive uses of language ("servicization," "wetware," "action-iterative"). Fortunately, these do not prevent three basic conditions for a long boom from emerging from the various authors' contributions. First, sustained economic growth above historical averages can only come about through a significant increase in productivity, the amount of goods and services produced per hour of work. Second, the ability to spread knowledge around the globe, particularly individuals' willingness and capacity to embrace new technologies, will be crucial to growth. Third, there can be no long boom without an appreciable increase in the economic performance of developing countries.
None of these conditions is guaranteed. On the first issue, despite new production processes rich in technology, so far the expected miracle rates of productivity growth have failed to materialize. As far as the practical adoption of new knowledge is concerned, the reactions in Europe to genetically modified organisms or hormones in beef show that there may be limits to individuals' willingness to make new technologies and inventions part of their daily life. And the financial crises in Asia, Russia, and Latin America, coupled with protectionist policies in richer countries, are troubling signs for emerging economies.
In a vein that some will find counterintuitive (to use a word favored by several of the book's authors), this work does not suggest that the formula for a long boom must include a global adoption of the measures used by the United States to achieve its recent success story. While fiscal prudence and economic restructuring are strongly encouraged, what is called the "Growth Leader" scenario – US success drives the rest of the world – is put forward as only one of several paths to future growth. An equally compelling case is made that "Growth Clusters" – the competition of various centers of innovation – will provide the impetus to prosperity. Silicon Valley and Northern Virginia will be crucial, but in this interconnected, multipolar world so will Canary Wharf in London, Paris, Milan, Singapore, Bangalore and Taiwan as well as the distinctive models of business, social, and personal interaction that they represent.
While the focus in this volume is the next 30 or 40 years, there are also a number of implications for more immediate policy concerns. Whether the long boom is driven by the universal spread of the high-risk/high-reward US model, or competing clusters of growth (where the European Union's consensus model of political economy would still thrive), the authors make the case that there is no escaping bringing areas like competition policy, investment, and intellectual property protection fully into multilateral institutions. This means that any new round of trade negotiations in the World Trade Organization would go beyond what the United States currently advocates.
But a long boom would also require major changes on the part of the European Union. As part of the authors' insistence on boosting growth in developing countries, they point to the effect of the EU's agricultural policies on exports from Asia, Africa, and Latin America as a major stumbling block. Both sides of the Atlantic will have to bend on strongly-held principles if the greater good of a long boom is to emerge.