From Global to Fragmented: A Competitiveness Outlook for 2012 and Beyond Stéphane Garelli, Professor, IMD

STEPHANE GARELLIHELSINKI, 16 FEBRUARY 2012

STEPHANE GARELLIPROFESSOR AT IMD AND AT THE UNIVERSITY OF LAUSANNE, SWITZERLAND,

DIRECTOR WORLD COMPETITIVENESS CENTER

A COMPETITIVENESS OUTLOOK FOR 2012, AND BEYOND.

FROM GLOBAL TO FRAGMENTED…

HELSINKI16 FEBRUARY

2012

SITRA -THE FINNISHINNOVATION

FUND

L

http://www.aarstiderne.com/upload/2001120413421001-copyright.jpg


« THE TROUBLE WITH OUR TIMES

PAUL VALERY, 1871 - 1945

IS NOT WHAT IT USED TO BE.. »

IS THAT THE FUTURE


AN INCREDIBLE DECADE…

20022012


GOVERNMENTS

CASH

+ $2.120BN

COMPANIES

APPLE = $76BN

A TWO TIER ECONOMY

2011 47.7%

1960 28.4%

GOVERNMENT SPENDING, % OF GDP

“advanced economies”


WORKING WITH GOVERNMENTS?...

OUR ECONOMY GROWS

AT NIGHT…

WHEN THE GOVERNMENT

IS SLEEPING!AN INDIAN SAYING


DO WE RISKA DOUBLE

DIP?


BUT, I AM YOUR BROKER…

ARE YOU WORRIED?


Q4Q3

THE WORLD ECONOMYANNUAL % CHANGE (12 month period)

8.2

1.5

1.4

4.2

4.8RUSSIA

POLAND

HUNGARY

CZECH. REP

TURKEY

9.3

2.1

4.8

7.7

4.5

4.2VENEZUELA

MEXICO

COLOMBIA

CHILE

BRAZIL

ARGENTINA

-0.21.9

1.6

2.5

2.80.8

1.10.8

4.6

1.3

0.8

1.4EURO AREA

UK

CH

SWEDEN

SPAIN

NL

ITALY

AUSTRIA

GERMANY

FRANCE

BELGIUM

DENMARK

8.94.3

6.96.4

5.83.13.63.43.43.5

2.50.1

JAPAN

AUSTRALIA

THAILAND

TAIWAN

KOREA

SINGAPORE

SOUTH AFRICA

MALAYSIA

INDONESIA

INDIA

HONG KONG

CHINA

Q41.6%

2.7%

NOSE DIVINGOR

LEVELLING-OFF?(compared to previous quarter)

+ 5.6%

+ 0.8%

+ 3.6%

+0.6%

+2.0%

+ 1.2%

2.8%


THE WORLD ECONOMIC WEATHER MAP

STORMY

HEAT WAVE

MIX

ED

OVERCAST

UNCERTAIN

WINDY

OVERCAST

NOT IN SYNC ANYMORE

UNCERTAIN

IMPROVING


THE RECESSION HAS DIFFRACTED THE ECONOMY

UNITEDGLOBALECONOMY

INFLATION

GROWTH

SURPLUS

TRADE EXCEDENT

SEVERAL PARALLEL BUSINESS MODELS


105

110

115

100100 = Pre Recession

95 = Recession

RECOVERY 10 YEARS’A

GO

A WEAK RECOVERY?

NOW


IS THE ECONOMY MELTING?34

countries

BUDGET DEFICITS

$2,700bn (5.9% of GDP)

2012

TOTAL DEBT

$29,000bn


1 $ = 1 sec.

$1Billion 40 YEARS

COUNTING MONEY…

$29,000Billion 1,160,000 YEARS


2012

IIN SEARCH OF MONEY…

PUBLIC BORROWING NEEDS

$10,500bn


HOW TO FIND MONEY?

$10,500bn


PLEASE WAITYOUR DOLLARSARE PRINTED!

TREASURY SECURITIES$1,670bn

1. CALLTHE

CENTRAL BANK


FEDERAL DEBT

$15,100bn

$375bn $280bn

$282bn $212bn

AND NOW SUB-SOVEREIGN DEBT…


2. CALLYOUR BANK

Source: Thomson Reuters, Boston Consulting Group, December 2011

DEBT MATURING IN 2012

$720bn

FROM LENDER TO BORROWER…

CAPITAL SHORTFALL

€195bn

€354bn7%


3. CALLA WEALTHY

FRIEND

EMERGING MARKETS

$6’400bnFOREIGN CURRENCY RESERVES

$1,154bn

EURO TREASURY BONDS

US TREASURY BONDS

590bn€


WHO HAS THE MONEY?

FOREIGN CURRENCY RESERVES

EMERGING MARKETS: $5,584bn

$1137bn

$1356bn

$143bn $289bn

$3201bn

$401bn

$311bn

$320bn

$352bn

$516bn

$484bn


STILL A DOLLAR’S WORLD

FOREIGN-EXCHANGE TRANSACTIONS 84%

BANK DEPOSITS 58%

FOREIGN CURRENCY HOLDINGS 62% ( 27%)

2012

1.31

0.90

2002

US$ vs EURO


HENNY YOUNGMAN1906 -1998

THINGS COULD BE WORSE…

I COULD BEONE OF

MY CREDITORS!”

WILL EMERGING MARKETS INVEST?


1999

+$236bn

4. CALLFOR

AUSTERITY

2011

-$1,299bn

GOVERNMENT SPENDING

> 50% of GDP


GEORGE W. BUSH1946 -

THERE IS A LOTOF NUMBERS

IN IT…

CLEARLYIT MUST BEA BUDGET!


40%

30%

TAX REVENUES as a % GDP

5. CALLFOR

TAXES

2011: THE LOWEST FISCAL REVENUES IN 40 YEARS!

23%


THOMAS JEFFERSON1743 - 1826

A GOVERNMENT

BIG ENOUGHTO GIVE YOU EVERYTHING

YOU WANT

IS STRONG ENOUGHTO TAKE

EVERYTHINGYOU HAVE


WHAT ELSE? HOPE

THAT THE CONSUMERWAKES UP…

BANKS

FRIENDS

TAXES

AUSTERITY

CENTRAL


A REPLACEMENT ECONOMY

NEW NEWER

A FIRST BUY ECONOMY

NOTHING

SOMETHING

I CANWAIT…

LET ME HAVE IT NOW!

TWO TYPES OF CONSUMERS…


AND THE NOBEL PRIZE GOES

TO MRS JONES

FEAR…

MATURED

ECONOMIES

FOR KEEPING HER

SAVINGS

AT HOME


TWO TYPES OF ECONOMY

I NEED IT!

EMERGING MARKETS

I WANT IT!

ADVANCED MARKETS


STEVE JOBS1955-2011

“PEOPLE DON’T KNOW

WHAT THEY WANT…

UNTIL YOU SHOWIT

TO THEM!


GOOD NEWS

HOMES AREFULL

OF PRODUCTS…

BAD NEWS

MOSTARE NOT

PAID !

MATURED

ECONOMIES


THE EXPLOSION OF CREDIT…

140%46%

60%

AS A % OF GDP

17% – 20% GROWTH RATE 360%

EMERGING

ECONOMIES


3%

5%

10%

2%

INFLATION ON THE RADAR SCREEN…


INFLATION IS PAYING

$15 FOR A HAIRCUT

WHICH USED TO COST

$10

WHEN YOU HAD HAIR…

WHAT IS INFLATION?


INFLATION: THE BIG TEMPTATION…

REDUCE THE VALUE OF DEBT

BOOST CONSUMPTION

“INFLATION IS TAXATION

WITHOUT LEGISLATION”

MILTON FRIEDMAN1912 -2006


THE NEW PARADIGM…

2012


THE NEXTBUSINESSMODELS?


MARKET PROSPECTS FOR 2050s

A GENERATION AWAY…


2191

446719

750

514220102050

THE WORLD TODAY, AND TOMORROW…Population in millions

1022

344731

590

4164EUROPENORTH AMER.

LATIN AMER. AFRICA ASIA

http://images.google.ch/imgres?imgurl=nrc.kvalito.no/grafikk/UN-logo.png&imgrefurl=http://nrc.kvalito.no/view.asp?anr=1177&hl=fr&h=209&w=247&start=19&prev=/images?q=UN+logo&svnum=10&hl=fr&lr=&ie=UTF-8&oe=UTF-8


A NEW SOUTH – SOUTH BLOCK….

56% CHINESE EXPORTS = EMERGING ECONOMIES

SIZE

PROJECTSRAW

MATERIALS

MONEY

BRANDS

HI TECH


NEW PRIORITIES FOR NEW MONEY

GOVERNMENT BONDS

CURRENCY VOLATILITY?

INFRASTRUCTURE

REAL ESTATE BUBBLE?

PURCHASE OF ASSETS

POLITICAL SENSITIVITY?

NATIONAL CHAMPIONS

STATE CAPITALISM?

http://www.crwflags.com/fotw/images/u/us.gif

http://images.google.ch/imgres?imgurl=www.southampton.gov.uk/buseuro/images/euroflag.gif&imgrefurl=http://www.southampton.gov.uk/buseuro/europe/eurpoint.htm&h=186&w=277&prev=/images?q=flag+europe&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8




BACK TO THE FUTURE…

STOCK MARKET CAPITALIZATION

80%

60%

35%

SOVEREIGNFUNDS

$4,755bn

SIZE

19OUT OF THE

LARGESTMULTINATIONALS

TRADING COMPANIES UTILITY COMPANIES

BEFORE

STATE-BACKED COMPANIES


A WORLD OF EMERGING GLOBAL BRANDS


THE SOURCES OF POWER?…

BRAND POWER

WORKPOWER

PURCHASINGPOWER


THECHALLENGE

OFRE -INDUSTRIALISATON

MATURED

ECONOMIES


THE BIG MISTAKE…

JEFF IMMELTCEO, GE

FROM

TECHNOLOGY EXPORTS

TO

SERVICE CONSUMPTION


2010

100% OF

SHIP CONTAINERS COMINGARE FULL

AN AWKWARD SITUATION

2010

45%OF

SHIP CONTAINERS LEAVING

ARE EMPTY

PORT ELIZABETH, NJ, USA

OF CHINESE EXPORTS TO THE USARE US COMPANY PRODUCTS50%


DESIGNED INCALIFORNIA

ASSEMBLED INCHINA

THE OTHER SIDE OF AN iPad…


GLOBALISATION…


INDUSTRY AS % OF GDP

1990

2011

16.0% 17.7% 28.2%

11.2% 11.4% 20.4%

DE-INDUSTRIALIZATION?

5.7mo US FACTORY JOBS LOST IN 10 YEARS?


MARKET CAPITALIZATION

$40.6bn$190bn $376bn

EMPLOYMENT

287,000 164,000 64,000

SUCCESS AND JOBS…


THE SOCIAL CONSEQUENCE…

TOTAL UNEMPLOYMENT

22.8%

10.4%

8.6%

8.9%

3.0%

7.6% 5.8%

8.3%

20%

YOUTH UNEMPLOYMENT

48.7%

21.3%

18.5%

19.9%

7.1%

40%

20%

10%


STAYING AFLOAT…

EXPORT! -9.6%

-4.4%

-8.4%

-3.7%

CURRENT ACCOUNT BALANCE

% GDP


RE –SHORING…

20%

APPLIANCES

29%

ELECTRONICS

21%

FURNITURES

71%

TOYS

IMPORTS OF CHINA% US MARKET

3 MILLIONJOBS?


CHARLES DICKENS1812 - 1870

“INDUSTRY IS THE KEYSTONE OF PROSPERITY…

AND THESOUL

OF BUSINESS”

REDISCOVERING THE “MADE IN”


NEW FRONTIERS


EMERGING LESS POOR $2 – $10 a day

EMERGING MIDDLE CLASS> $10 a day

MONEY

SUCCESS

CONSUMPTION

THE $2500 CAR MICROFINANCE MOBILE MONEY$35 TABLET

TWO GROWTH ENGINES

NEW

BUSINESS

MODEL


- 1.2bn PEOPLE = NO SAFE WATER

- 80% DISEASES COME FROM WATER

TATA SWACH PURIFIER

$16.1

SAFE WATER…


CUP OF COFFEE

259 lt.

1 KG BEEF

14,120 lt.

1 KG CHICKEN

3,550 lt.

1 KG RICE

3,093lt.1 KG STEEL

235 lt.

WATER IN EVERYTHING…


ECOLOGICAL FOOTPRINT

A DOG

MEDIUM-SIZED

0.84 HECTARES

SOURCE: Robert and BrendaVALE, Victoria University, of Wellington, New Zealand

LAW OF UNEXPECTED CONSEQUENCES…

164 Kg OF MEAT

95 Kg OF CEREALS

ANNUALTOYOTA LAND CRUISER4.6-LITRE

0.41 HECTARES

10,000 Km


AGEING AND WELLNESS…

MEDIAN AGE OF THE WORLD

28

2011

YEARS40

2050

YEARS

LIFE EXPECTANCYINCREASES

5 HOURS PER DAY


COMPETING WITHMINDSET


THOMAS JEFFERSON, 1743 - 1826

NOTHING CAN STOP

THE ONE…

WITH THERIGHT

MENTAL ATTITUDE!

HELP

WRONG


WHAT DO CHINESE WANT?

"WORK HARD AND GET RICH!"

68% OF CHINESE IN A POLL CONDUCTED BY GALLUP,


WHAT ABOUT OUR CHILDREN?



WHAT ABOUT THE GENERATION AFTER?



ADJUST TO CHANGES IN SOCIETY

MARK TWAIN, 1835 - 1910

NEVER DO WRONG

ESPECIALLYWHEN SOMEBODY

ISLOOKING!


GOOD NEWS FOR LEADERS…

ANY LEADERSHIP EXPERIENCE?

YES, I HAVE 6 PEOPLE FOLLOWING ME ON TWITTER


“THE PERSON WHO SAYS

IT CANNOT BE DONE

SHOULD NOT INTERRUPT

THE PERSON DOING IT!”

A CHINESE PROVERB

THE IMPOSSIBLE MIGHT BE POSSIBLE


1803 - 1882

ON ONE HAND…


AND ON THE OTHER…

FLYING BACK HOME

EXCELLENCE IN IMPLEMENTATION


MONTAIGNE, 1533 - 1592

TIMING IS EVERYTHING

IT IS VERY WRONGTO BE RIGHT

BEFORE EVERYONEELSE!

NEWTON - AppleAUGUST 1993

LAKER AIRWAYSAUGUST 1978

NOT IF IT IS RIGHT

BUT WHEN IT IS RIGHT


« LOGIC WILL GET YOU

FROM A TO B…

ALBERT EINSTEIN, 1879 - 1955

IMAGINATIONWILL TAKE YOUEVERYWHERE »

A DIFFERENT MINDSET


WHY NOT?MINDSET

JEAN-BAPTISTE CHARCOT1867 - 1936

POURQUOI –PAS?« -WHY NOT- »

A MINDSET FOR SUCCESS…

WHY NOT NOW?

WHY NOT ME?

IMAGINATIO

N

ENERGY

COMMITTMENT

From Global to Fragmented: A Competitiveness Outlook for 2012 and Beyond Stéphane Garelli, Professor, IMD

News & Politics

work hard

safe water

chinese

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