The role of Global Value Chains
The production and service networks contributed to job creation and economic development across regions and countries. Today, as trade flows and cross-border investments undergo transformation, global value chains are once again on the cusp of major change.
The question we are striving to answer is how the next generation of global supply chains will shift trade, jobs, income, profits and wealth within the context of global rebalancing, and impact resources. We focus on external factors over which companies do not have control over, and factors such as policy shocks that can significantly impact their operations.
Asia: Towards A New Growth Order
by A. Michael Spence, Academic Council Chairman
The global economy will probably triple in size in the next quarter-century. The good news is that hundreds of millions of people will be lifted out of poverty, and many will move into the middle class. The bad news is that we will need three planet earths to support them.
The challenge is not merely an environmental one. As the global financial crisis demonstrated, it is a fundamental shift in the way we view the interaction among the real economy, finance, governance and sustainability, especially in light of powerful social and technological forces.
The unprecedented dynamic nature of the global economy’s transformation is ushering in a new growth order, and Asia – predicted to house 60 per cent of the world’s population by the middle of the 21st century, two thirds of whom may be in the middle class – is at the helm of this critical development.
What is clear is that no one single constituency will get there on its own. Business leaders, policymakers, and civil society all have important roles to play in managing the global economy in an inclusive way.
A core challenge is to identify common interests among diverse stakeholders, and efficient means to align social and private priorities. Building institutions, trust, and the ability to interact constructively in this framework is the work of a generation.
It also demands new thinking. (read more)
Resource productivity
Are you ready for the resource revolution?
by Stefan Heck and Matt Rogers
McKinsey Quarterly
Meeting increasing global demand requires dramatically improving resource productivity. Yet technological advances mean companies have an extraordinary opportunity not only to meet that challenge but to spark the next industrial revolution as well.
Just 20 to 40 percent of the transmission and distribution capacity in the United States is in use at a given time, and only about 40 percent of the capacity of power plants. The heat-rate efficiency of the average coal-fired power plant has not significantly improved in more than 50 years—an extreme version of conditions in many industries over the past century. Automotive fuel-efficiency improvement, for example, has consistently lagged behind economy-wide productivity growth.
“integrate tomorrow’s new technologies, customers and ways of working with the realities of today’s legacy business environment.” ( read more )
How Trade Really Adds Up
Forget calculus, algebra and simple arithmetic. When it comes to calculating trade, you need a whole new understanding of value to make the mathematics work in a world where a US$425 export notionally from China is, in fact, worth only US$21 to the country.
Fail to figure out how and you end up with a badly distorted picture of trade realities. (read more) …..
Global Supply Chains: Why They Emerged, Why They Matter, and Where They Are Going
Global supply chains have transformed the world. They revolutionised development options facing poor nations – now they can join supply chains rather than having to invest decades in building their own.
Offshoring of labour-intensive manufacturing stages and the attendant international mobility of technology launched era-defining growth in emerging markets – a change that fosters and is fostered by domestic policy reform. Historic income gaps are narrowing as the North de-industrialises and the South industrialises — a reversal-of-fortunes that constitutes perhaps the most momentous global economic change in the last 100 years. Global supply chains, however, are themselves rapidly evolving. The change is in part due to their own impact (income and wage convergence) and in part due to rapid technological innovations in communication technology, computer integrated manufacturing, 3D printing, etc. (read more)
