23Bloomberg Businessweek � Trade November 4, 2019crisis, shows up among the
most vulnerable.○ Climate Calamity
Inward-looking leaders are
poorly equipped to con-
front another systemic risk:
climate change. The conse-
quence of temperatures 1C
above preindustrial levels
is already evident. Extreme
weather events—whether
historic floods in Thailand
or Category 5 hurricanes
battering the U.S.—are wreak-
ing havoc on housing, infra-
structure, and supply chains.
Insurance losses have risen
fivefold since the 1980s.
As temperatures continue
to move higher, the economic
impacts will be wide-ranging.
Uncertainty about climate
risks creates a disincentive for
businesses to invest. Higher
temperatures reduce labor
productivity. Climate adap-
tion diverts resources away
from more productive uses.
The transition to a low- carbon
economy brings opportuni-
ties, but a trade-off between
emissions and growth may
be unavoidable. Putting a
dollar value on the economic
impact is tough. The United
Nations Intergovernmental
Panel on Climate Change esti-
mates the cost is from 0.2% to
2% of global GDP a year. Even
at the lower end of that range,
the costs will be measured in
hundreds of billions of dollars
a year. At the upper end,
they’re in the trillions.To measure the risk from
climate change, we use the
Notre Dame Global Adaptation
Initiative vulnerability index
from the University of Notre
Dame in Indiana. In the index,
low- and middle-income
countries, with high tempera-
tures, reliance on agriculture,
vulnerable populations, and
limited resources for adapting,
are the most exposed. Among
major economies, India and
Vietnam show up among the
most vulnerable.○ Driving Development
Even as disruptive forces
loom, low- and middle-income
countries face a challenge in
putting the traditional drivers
of growth into place. We track
traditional drivers of develop-
ment across four pillars:
� Increases in the labor force
provide a basis for growth. We
employ projections of the rise
in the working-age population
through 2030.
� Expansion in the capi-
tal stock, efficiently allocated,
raises labor productivity. We
use measures of investment as
a share of GDP and as proxies
for the quality of that invest-
ment, gross government debt
as a share of GDP, and a mea-
sure of investment freedom
from the Heritage Foundation.
� Policies that increase
productivity unleash the
economy’s potential. We
incorporate a set of mea-
sures to capture education,
macroeconomic stability,China
Australia
U.K.
Germany
South Korea
Canada
U.S.
France
Japan
Italy
Indonesia
South Africa
Turkey
India
Mexico
Saudi Arabia
Vietnam
Russia
Brazil
Argentina
Nigeria70
69
69
68
68
67
67
64
63
57
57
57
57
56
54
54
54
45
44
39
37Development
Drivers (higher
index scores
are better)⊲23Bloomberg Businessweek � Trade November 4, 2019
crisis,showsupamongthe
mostvulnerable.
○ClimateCalamity
Inward-lookingleadersare
poorlyequippedtocon-
frontanothersystemicrisk:
climatechange.Theconse-
quenceoftemperatures1C
abovepreindustriallevels
is alreadyevident.Extreme
weatherevents—whether
historicfloodsinThailand
orCategory5 hurricanes
batteringtheU.S.—arewreak-
inghavoconhousing,infra-
structure,andsupplychains.
Insurancelosseshaverisen
fivefoldsincethe1980s.
Astemperaturescontinue
tomovehigher,theeconomic
impactswillbewide-ranging.
Uncertaintyaboutclimate
riskscreatesa disincentivefor
businessestoinvest.Higher
temperaturesreducelabor
productivity.Climateadap-
tiondivertsresourcesaway
frommoreproductiveuses.
Thetransitiontoa low-carbon
economybringsopportuni-
ties,buta trade-offbetween
emissionsandgrowthmay
beunavoidable.Puttinga
dollarvalueontheeconomic
impactis tough.TheUnited
NationsIntergovernmental
PanelonClimateChangeesti-
matesthecostis from0.2%to
2%ofglobalGDPa year.Even
atthelowerendofthatrange,
thecostswillbemeasuredin
hundredsofbillionsofdollars
a year. At the upper end,
they’re in the trillions.
To measure the risk from
climate change, we use the
Notre Dame Global Adaptation
Initiative vulnerability index
from the University of Notre
Dame in Indiana. In the index,
low- and middle-income
countries, with high tempera-
tures, reliance on agriculture,
vulnerable populations, and
limited resources for adapting,
are the most exposed. Among
major economies, India and
Vietnam show up among the
most vulnerable.○ Driving Development
Even as disruptive forces
loom, low- and middle-income
countries face a challenge in
putting the traditional drivers
of growth into place. We track
traditional drivers of develop-
ment across four pillars:
� Increases in the labor force
provide a basis for growth.We
employ projections of therise
in the working-age population
through 2030.
� Expansion in the capi-
tal stock, efficiently allocated,
raises labor productivity.We
use measures of investmentas
a share of GDP and as proxies
for the quality of that invest-
ment, gross government debt
as a share of GDP, and a mea-
sure of investment freedom
from the Heritage Foundation.
�Policiesthatincrease
productivity unleash the
economy’s potential. We
incorporate a set of mea-
sures to capture education,
macroeconomic stability,China
Australia
U.K.
Germany
South Korea
Canada
U.S.
France
Japan
Italy
Indonesia
South Africa
Turkey
India
Mexico
Saudi Arabia
Vietnam
Russia
Brazil
Argentina
Nigeria70
69
69
68
68
67
67
64
63
57
57
57
57
56
54
54
54
45
44
39
37Development
Drivers (higher
index scores
are better)⊲