Monday, December 12, 2011

What Can Be Done to Restart Growth

by Virgil R. Carter

In today’s “go-slow” economy, confronted with uncertainty, it takes vision and innovation to create growth.  “Growth Under Pressure:  What Business Can Do To Restart Growth”, is an article by Richard Dobbs, James Manyika and Charles Roxburg, published by McKinsey and Company.  Although aimed at the for-profit private sector and public sector, leaders in non-profit organizations may learn from the author’s proposals.  They identify five primary areas of opportunity for new growth in today’s economy:

·         Bring private capital to public works:  In many developed economies, degraded infrastructure now drags down the global economy’s long-term growth and competitiveness.  The American Society of Civil Engineers, for example, estimates in the United States $2.2 trillion is needed to be spent over the next five years to bring its existing infrastructure up to what ASCE calls a good condition.  Since government doesn’t have the money, a creative alternative is to create a new round of privatization and creation of jobs.  Private companies and consortia could take over the operation of new facilities and provide the investment to upgrade old ones. 

·          Strengthen Internet ecosystems:  In a study by MGI, in mature economies over the past 15 years, the Internet has accounted for 10 percent of DGP growth, which accelerated to 21 percent in the past five years.  An expansion of broadband access and performance is needed to cope with rising demand and innovation.  To encourage this, “policy makers must ensure the Internet’s openness and competitiveness, invest to develop and retain the human capital needed to drive Internet innovation, and ensure availability of capital so that fledgling innovative businesses can grow.  If conditions are right, private-sector innovation and jobs will follow”.

·         Meet the resource-productivity imperative:  The steady decline in real resource prices enjoyed throughout the 20th century has now reversed course.  Three billion new middle-class consumers into the global economy has boosted demand for key resources and increased the risk of price spikes that could curtail global growth.  Expanding resource supply alone will not suffice to meet this new demand.  Resource productivity—increasing output for every unit of resource input—is also required.  Increased investment in resource systems is required by both public and private sectors.  “Green” investment is one such resource investment supporting the development of new jobs and industries.

·          Close the skills gap:  Many advanced economies are grappling with a severe mismatch between the skills developed by their education and training systems and those required in sectors where job growth will be strongest.  On current trends, the U.S. will produce twice as many graduates in the social sciences and business as in science, technology, engineering and mathematics.  It’s estimated that the country may face a shortfall of almost two million technical and analytical workers.  These needs may be filled by a combination of young and older workers, “with removed barriers preventing older workers from staying in the workforce longer”.  “Ultimately, the only reliable way to encourage students to develop skills in these growth areas is for companies to make these careers more attractive and market them better in schools and university campuses”.

·          Build public-private partnerships:  Governments need their own productivity revolution.  According to the authors, “to reap these and other rewards, however, cash-strapped governments—and their citizens—will need to be more open-minded about private involvement in the delivery of public services”.  “The case for public-private cooperation may be easiest to make at the city level, where most future global growth will occur”.  “A majority of successful cities are already notable for a high degree of collaboration between the private and public sectors”.

The authors conclude, saying, “With a few notable exceptions, business leader have been slow to raise these issues…It’s time for the private sector to take the lead in making the case for driving growth through innovation and investment.”  For a full copy of the article, go here:

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