A slowdown in global economic growth and a continuing rise in income inequality are projected for the coming decades.
This is the prediction of the Organisation for Economic Co-operation and Development (OECD) in a new study that looks at what the world could look like by 2060.
“Policy Challenges for the Next 50 Years” says aging populations in many OECD countries and the gradual deceleration from current high rates of growth in the large emerging economies will bring global rises in gross domestic product (GDP) down from an annual average of 3.6 percent in the 2010-2020 period to an estimated 2.4 percent in 2050-2060.
The report adds that unless CO2 emissions are reduced, climate change could curb global GDP by 1.5 percent by 2060 and by nearly 6 percent in South and Southeast Asia.
Without a change in policy, OECD countries would face a further large increase in earnings inequality by 2060, bringing them close to the level seen in the United States today.
“Rising inequalities threaten growth, most notably by blocking economic opportunities,” says the paper.
In the OECD’s scenario, shrinking income gaps between advanced and emerging economies will lower incentives for economic migration into advanced countries.
“A fall in immigration will add to demographic pressures caused by aging populations,” it says. “This double pressure could reduce the labor force compared with the baseline of current trends by 20 percent in the U.S. and by 15 percent in the Euro area by 2060.”
The report also shows shifting patterns of trade and industrial specialization. The share of trade with and among the emerging economies will increase dramatically. Technological catch-up and better skills will help emerging economies develop high value-added manufacturing and services activities.
Innovation and investment in skills will be the predominant drivers of growth.
Faced with such challenges policymakers “will need to inject dynamism into labor and product markets and sustain innovation, productivity and employment,” the report says.
“Widening inequalities will require effective redistributive policies, a strong focus on equality of opportunity and a review of the funding systems of public services and of tax structures.”
The report says rising economic interdependence will require international cooperation in areas such as basic research, intellectual property rights, competition policy, taxation, and climate change mitigation.
Rintaro Tamaki, OECD deputy-secretary general and acting chief economist, said the report highlights three areas: sustaining strong growth, tackling rising income inequality, and reducing climate change costs.
He added: “The study shows we face a globalization paradox—countries will be more integrated than ever before, but it may become increasingly difficult to organize the required international cooperation in a more complex multipolar system.”
Photo: billjacobus1
