Bloomberg Businessweek - USA (2020-11-16)

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Bloomberg Businessweek November16, 2020

1951 2020 2050

GDPsharesandforecasts,bytypeofsociety*

Free Partlyfreeandnotfree

1 00%

50

0

1951 2020 2050

ContributiontoGDPgrowthbyfreeandunfree

economies*,inpercentagepoints

Freeandmostlyfree Moderatelyfree

Mostlyunfree Growth(%)

6

3

0

1951 2050

GDPsharesandforecasts,bytypeofeconomy*

Freeandmostlyfree Moderatelyfree

Mostly unfree

1 00%

50

0

2020

that,in2000,“free”societies—shorthandfor

functioningdemocracies—accountedfor86%

ofglobaloutput.“Partlyfree”societies(with

incompletepoliticalrightsandcivilliberties)

and“unfree” societies(withdraconian con-

trols)accountedfora combined14%.By2050,

freesocieties’shareissettoshrink toabout

60%,withtheshareofpartlyfreeandunfree

societiesrisingtoalmost40%.

Asineconomics,soalsoingovernance:The

riseofalternativemodelscreatesa challenge

theWesthassofarprovedunabletoaddress.

TheTrumpadministrationhasfocusedglobal

attention on the far-reaching implications

ofChina’sascent.Ratherthanprovidingthe

catalystfora neededrethinkofstatecapacity,

though,thereactionhasbeena combination

ofnationalistchest-thumping,barricadesatthe

border,andanappealtostrongmanrulers.

FACINGTHEFUTURE

There’sstilltime fora Goldilocksscenarioto

unfold.FortheU.S.andEurope,thatwouldmean

advocacyoffreemarketsandfreemindsabroad

is matchedbyinvestments—ineducation,infra-

structure,andresearch—thatwillboostgrowth

potentialathome.ForChina,a moreopensoci-

etyanda returntothemarket-reformpathfol-

lowed so successfully inthe 1990s and early

2000swouldbea win-win,drivingdynamismat

homeandeasingtensionsabroad.ForIndia,it

wouldmeanacceleratingthepro-marketreforms

launched by the Narendra Modi government.

Morelikely,onthecurrentevidence,is thata

self-reinforcingdynamickicksin.Astheygrow,

ChinaandIndiawillbenefitfromtheirmassive

domesticmarkets—providing nationalcham-

pionswithenormouseconomiesofscaleand

actingasa lureforforeigncompaniesandtheir

technology.Rapidgrowthand,forChina,the

near-termprospectofclaimingtheNo.1 spot

intheglobaleconomicrankingswillprovidea

haloeffect,obscuringtheinefficienciesofthe

system.Historyis writtenbythewinners;eco-

nomicruleswillbe,too.

Forthefree-marketeconomies,thedynamic

will operate in the other direction. The

attempttomanagerisksfromtheriseofstate-

dominatedrivalshasalreadyresultedinthe

sacrificeofsomeaspectsofopennessanddyna-

mism.Facinga changingandunfamiliarworld,

votershavebeenmorereceptivetothesiren

songofpopulismthanthefarsightedstrategies

requiredto puttheirown houseinorder. A

turnawayfrommarketdynamismineconom-

ics,andtowardnostalgicnationalisminpoli-

tics,isn’ta recipeforlong-termsuccess.

The end ofthe Cold Warwas theend of

onechapterofhistory.It wasalsothebegin-

ning ofanother. The worldis inthe midst

of a messytransitionas thebalanceof eco-

nomicandpolitical powershifts fromWest

toEast,fromfreemarketstothestate, and

from centristdemocracies tothe extremes

ofauthoritarianismandpopulism.Forbusi-

nesses,investors,andpolicymakers, history

isn’t over. It’s just getting started. <BW>

THE NEW ECONOMY

*FIGURES BASED ON CURRENT CLASSIFICATIONS. DATA: HERITAGE FOUNDATION, FREEDOM HOUSE, BLOOMBERG ECONOMICS