What is your outlook for the global economy in 2011?
When we think about the outlook for the global economy in the coming year, I think
the story that we've been witnessing over the last 12 months is going to be a bit
more of the same: very solid growth and the countries with large demographics - I
think China, India, Brazil, these will continue to be the engines of growth
economically for years to come. Growth rates might bounce around a little
bit but in effect we think that we will continue to see high single digits growth
rates in these countries, perhaps at the lower end for Brazil and at the higher end
for China. Secondly, countries that have lagged in
product consumption historically will see first a strong growth in several African
countries and many companies are starting to take notice of that, in fact, … in
Africa.
The next set of economies that are dependent on these economies for growth
are the resource-rich economies such as Australia, the Middle East, Russia who
will also see good growth rates as commodities reflate and continue to fuel
economic growth in places like China and India.
Beyond that, in the developed world, we actually see very strong signs of life in
America where we are seeing companies across the board acting decisively,
acting strategically, making investments, and driving quite impressive growth.
The US has been quite encouraging and we're going to see a stronger US in the
coming year and that has been the story, frankly, over the last six or nine months.
The picture for Europe is somewhat more mixed.
What we see here is Germany really stepping up as an engine of growth not
only in Europe but in the world with extremely strong manufacturing
capabilities of supplying the great appetite for capital goods and for
engineering products in developing countries.
The other important feature of course in Europe is to perform to the periphery
countries which continue to be of concern. I think that sovereign debt will be
problematic in various ways, will require interventions in a number of the periphery
countries where of course the greatest concern should be focused on the stability
of Spain. Apart from that the UK is showing signs of
life, perhaps demonstrating that fiscal prudence can be combined with economic
growth in what is perhaps the most bold experiment in controlling financial
deficits and fiscal deficits in the government level in a really quite
decisive way. So overall, Europe will continue to be
a bit of a mixed picture with some economies doing quite well and others are struggling
under the burden of debt that has been accumulated over the last 10 years.
How can organizations develop resilience in this new world of risk?
Organizations develop resilience first by understanding the risk that they incur
themselves so that's a way to be resilient than to know exactly what kind of
strategies you're embarking on, what kind of risks you're taking, the areas where
you need to be watchful. It is very clear that there are a couple
of major forces driving the way major companies, especially - particularly
global companies, need to be thinking about the world.
First, I think that global portfolios of businesses are really important especially
given the… picture of growth that we see around the world.
So for European and North American companies, in particular, finding ways to
participate in the arch of growth in the major economies in terms of drivers of
growth in the world will be quite important.
The second way for companies or organizations to build resilience
is really to be coherent in what they do and how they develop products and how they
play in certain markets and how they try to attract and build their customers
and being coherent across business, across products.
The most important way in which to acquire resilience, in our view, is to focus on
what companies are really good at doing what we call "capabilities due on
strategy." By this we mean that we think that
companies that are coherent in terms of understanding how particularly they add
customer value, the capability systems that they build in order to sustain that
basic customer promise couples with consistent and coherent products
and services are the ones that win and never has this been more important than today.
What should be the role of business in developing countries?
In terms of the role of businesses in developing countries, there is an
overriding issue which is that in spite of impressive economic growth in a number of
these countries, there continue to be pressing social issues.
If you think about what businesses need in any country, they need a well-educated
workforce, they need a productive workforce, and they need a healthy
workforce. And so I think businesses in developing
countries will be a great engine of pressure on governments to provide these
things. The social infrastructure of these
countries is good for business and business plays an important role and will
continue to play an important role not just in furthering shareholder value but
also in improving the environment in which they operate.
Increasingly European and North American companies have to build positions in the
large emerging economies and the way for them to build sustainability
and participate in this arch of growth as we call it is to really demonstrate that they
understand the… in those countries and be part of the socio-economic fabric of those
countries, that they demonstrate a commitment to those countries for the long
term and not just coming to try to make a quick buck.
Because frankly long run sustainability for multinationals operating in the higher
growth economies will depend on them being seen as genuine partners in economic
development, not just companies that seek to explore it, growth opportunities in
these environments.
What norms does an interdependent yet diverse world need to share?
All has undoubtedly become much more interdependent over the last decades
and with this comes the need for countries to adopt similar norms around for instance
sound governments - whether it is in the private sector or it is the public sector,
sound governance has become paramount and the lack of governance in one major
economy can wreak havoc on the economies of various other countries.
The most important norm that we need to be concerned with is to align the short
and the long run concerns of institutions with the overriding objective of stability.
What we see in this crisis is that globalization has been very good for
millions of people around the world.
On balance, in spite of the distortions that globalization has created, it has
driven tremendous growth around the world.
But what we also see in this crisis is that globalization has created great
interdependencies across economies and so the very forces that have led to
tremendous economic well being for many people are also the ones that can bring
the entire system down with profound consequences, again, for the same millions
of people who were affected positively. Having sound regulatory institutions
and institutions that endure and serve the greater good also will lessen the global
risk from an economic standpoint. And let's remember that any institution,
whether it's public or private - with banks for instance in the last few years -
that does not play or does not adhere to those norms pose an incredible amount of
risk on the global economy. It is insufficient to merely consider what
is good in the short run for shareholders. Indeed one might argue that the purposes
of systemic stability and of institutional longevity are in fact one and the same.