Global Turning Points The Challenges for Business and Society in the 21st Century

We have documented in previous chapters the key economic, sociodemographic, political, and geopolitical global turning points. Taken as a whole, these points of inflexion define the ways in which the twentyfirst century is so tantalizingly mercurial, uncertain, and complex when compared to the twentieth. Table 13.1 summarizes the turning points as well as the key drivers and consequences.

As far as the economy and business are concerned, the key turning points into the twenty-first century have to do with the rise of the emerging economies. By the end of the second decade of the new century, more than half of global output will be accounted for by emerging and developing countries. These economies are also positioning themselves as big exporters of commodities, manufactured goods, and services. This turning point is driven by differentials in growth rates for both GDP and population. A second, related turning point has to do with the fact that emerging and developing countries have come to own more than half of total foreign exchange reserves in the world, a shift fueled by their large current account surpluses. They are also blessed by historically low levels of external debt, which implies that they enjoy an unprecedented capacity to invest abroad. Emerging and developing countries have actually become a key source for the funding needs of developed economies.

These two turning points hold important consequences, including a redistribution of geo-economic power, shifts in the location and characteristics of consumer markets, a rising potential for systemic global financial disruptions as far as current account imbalances persist, and, on a more optimistic note, a reduction in poverty, assuming that the emerging economies allocate their increasingly abundant financial resources in a fruitful way.

The rise of the emerging economies has come hand in hand with the appearance of large and capable emerging-market multinationals in a variety of industries. A third of the largest firms in the world, 29 percent of the total number of multinational firms, and 29 percent of new foreign direct investment flows originate from emerging and developing economies. These firms are expanding throughout the world in search of markets, inputs, and strategic assets, especially technology and brands. Emerging-market multinationals have provoked a fundamental reshaping of competition in global industries and the formation of new hubs of decision making in the leading cities of the emerging world, from São Paulo to Dubai, Mumbai, and Shanghai.