ECONOMIC GROWTH

 

The globalization of financial transactions and the rapid increase in the volume of the money supply in global financial markets will create a new global vulnerability to periodic financial crises. Notwithstanding this concern, it is anticipated that accelerating global trade, the growing integration of capital markets, and efficiencies gained from the increasing use of information technology will lead to a real growth in per capita income of about 2 percent annually.

Global economic influence and power will spread from the current G-7 countries of North America, Europe, and Japan to a more multipolar global economic system in which Brazil, India, China, and South Korea will become economic centers. Output from non-OECD countries will rise from 45 percent to about 60 percent of global GDP by 2015. Nevertheless, the inclusion of these countries—the “have-nots”—in the global economy will be marred and slow-paced. The division between the “haves” and “have-nots” could spark a backlash against globalization, reversing the trends of openness to foreign investment and trade that have been driving global economic growth. Those countries with active internal conflicts will tend to fall further behind. In virtually all countries, the disparities within societies will increase. The wealthy and well-educated will get richer, while the poor will get relatively poorer with the middle classes dividing toward one or the other group.

All states will become more vulnerable to the shocks and disruptions that are a major downside of global economic integration. The world economy is highly dependent on the United States. A major U.S. stock market correction could have a significant impact on the world economy. So could a major disruption in global energy markets arising from political instability in the Persian Gulf. Finally, weak domestic financial institutions in emerging countries could trigger a major financial crisis, crippling future financial flows. The strength of financial institutions in many countries has not kept pace with the volume of financial flows.