The challenges of a global economy
By Mark Spelman
Head of European Strategy, Accenture


Mark Spelman: Global opportunities carry global risks


The global economy is set for growth during the next 12 months, most experts agreed at the recent World Economic Forum in Davos, but they also warned of risks further ahead. So what are the opportunities and challenges facing the world?

If you look back 20 years, the world was a much simpler place. The world economy was dominated by the US, Europe and Japan.

Developing economies accounted for a relatively small slice of global economic activity and wealth.

It was essentially a 'bi-polar world', where rich and poor countries were neatly divided.

What a difference two decades can make. Today those old certainties have gone, with global economic power becoming increasingly dispersed and developing countries contributing to an ever-larger share of the world's trade and investment.

The figures tell their own story.

Since 1990, the developing world's share of the global economy has leapt from 39% to 49% - a shift epitomised by China overtaking the UK in 2006 as the world's fourth-largest economy.

Driving forces - and battlegrounds

So, what we are seeing today is the emergence of a world characterised by multiple centres of economic power and activity - the 'multi-polar world'.

There are three powerful trends that are reshaping the global landscape:
Increasing power of information and communications technologies.
Rising economic openness between countries.
Expanding size and reach of multinationals as they seek out new markets and workforces.
These trends are summed up as globalisation.

But we are now seeing globalisation with a difference. It is not the developed world moving in to seize opportunities in emerging countries.

Instead, it is a two-way process in which developing economies are changing from passive recipients to active shapers of globalisation.

In such a world, the name of the game is rising economic interdependence - and this game is being played out on five key battlegrounds.

1. Winning talent

Talent has become a global resource, fought over by multiple competitors.

As Western economies grapple with older and shrinking workforces, the balance of global labour supply is shifting to developing economies with rapid population growth.

2. The flow of capital

Developed economies have traditionally been the source of foreign direct investment, often into emerging economies.

But this dynamic is being thrown into reverse. Who would have thought a few years ago that Corus - formerly British Steel and Koninklijke Hoogovens - would be fought over by acquirers from India and Brazil?

3. The battle for commodities

Strong economic growth over the past three years has increased demand for natural resources - in particular for oil and gas.

Since 2000, the developing world has accounted for 85% of the rise in global demand for energy.

4. The emerging consumers

Emerging economies used to focus on supplying low-cost goods and services to the developed world.

But now these economies are becoming important consumer markets in their own right.

5. The new map of innovation



The US, Japan and Europe are losing their monopoly on research and development and the creation of new products and services.

Emerging markets are catching up fast - fuelled by investment in skills, the growth of emerging industries, and rapid take-up of new technologies.

New world - new risks

The multi-polar world is creating new opportunities for businesses, opening up new marketplaces, new locations and new ways of doing business.

But companies need to be aware that as potential rewards multiply, so do the risks. Here are just a few of them.
The global economy has grown strongly, but the risk of more volatility has increased. Globalisation has highlighted local differences and tensions rather than removing them. The moves by some Latin American countries to nationalise their energy industries represent a warning-shot to multinationals that local politics can still undermine global ambitions. While acting globally, companies need to think and feel locally, and remain sensitive to local cultures and conditions.
Multinationals have to attract and retain talent in many countries while the global skills pool is growing, many of the areas of fastest expansion are those with the greatest health risks, for example through the continued rise of HIV/Aids. Companies tapping into emerging workforces need to be aware of the long-term risks this presents. They also need to take account of the longer-term effect of rising demand for talent: companies in India are already seeing intense competition for skilled people and rising staff costs and turnover.
In the interdependent, multi-polar world, doing business is still about balancing risk and reward. Rewards for the successful companies will be significant but they will need to adapt to a broader range of economic, political, environmental and technological risks.

The stakes have risen on both sides of the equation.

If companies are to exploit the new opportunities, they need to understand the new risks that come with them.