March 2016

 

  • The data, in particular the sharp retrenchment in global capital and trade flows, shows that the world is facing a growing risk of “economic derailment”. In contrast to the recent rally in the financial markets, global growth continues to lose momentum, with weak pricing pressures signalling poor world demand. This is prompting warnings from some analysts of a world of triple zeros: zero inflation (in high-income countries), zero productivity growth and zero per-capita GDP growth.
  •  Official GDP figures paint a bleak outlook, but it is almost certain that the digital economy makes countries richer and faster growing than acknowledged by the official statistics. In the UK, a government commissioned report estimates that, if the hidden benefits of digital services were fully taken into account, the average annual growth rate of the past ten years would have registered 0.4 – 0.7 percentage points higher.
  •  Not only is GDP growth slightly higher than we think, but also we can happily live with less of it (at least in the rich world). The reasons are twofold: (1) technology is driving down the cost of most goods and services (with the notable exception of health and education); (2) many positive developments that improve living standards (such as energy efficiency, electric vehicles, solar energy, biking rather than driving and so on) subtract from GDP growth by ultimately reducing costs. As shown by the example of Japan stagnating over the past 20 years, GDP growth does not necessarily equate to prosperity, and prosperity does not always equate to wellbeing.

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