Perhaps it is good that the upcoming G-7 summit will be held in Biarritz, an elegant coastal city in southwestern France, later this month. The languid beach views might encourage cooler heads to prevail when one of the meeting’s key objectives: to strengthen globalization “through more fair and equitable trade, tax, and development policies.”
Worries have been mounting about a global trade war and what that would mean for economies. Yet our research shows that fear of tariffs obscure the greater structural shifts at play the greater structural shifts at play in markets all over the world.
For one thing, an explosion of growth in the developing world has led to a similarly explosive demand for goods from advanced countries. Currently, developing economies account for almost 40 % of global consumption; by the year 2030, that figure will likely top 50 %.
In 2017, advanced countries exported over USD 4 trillion dollars’ worth of goods to developing nations—a pace that shows no sign of slowing, according to our report Globalization in transition: Globalization in transition: The future of trade and value chains. Governments that retreat into policies of protectionism do so at their own peril.
As developing economies (led by China and India) play catch-up with richer nations, inequality has declined overall. But the wealth and income gap continues to grow in many advanced economies. And, in G-7 economies and across many (but not all) advanced economies, wealth and income inequality in general has been rising since the 1980s.
With advanced economies gobbling up a greater share of the global wealth, more executives than ever are expressing profound pessimism regarding the world economy. According to our latest survey on economic conditions, for the first time since 2011, when we began this survey series, a majority of business leaders in every region except for India and Latin America expect the economy to worsen in the next six months.
A growing share of respondents also predicted that the level of trade will decrease between their home countries and the rest of the world in the next year. The stated ambition of the politicians attending August’s G-7 summit is, of course, to begin to change that. We shall see.