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Hank Paulson on the Shocks of the New Economy

This issue of Bloomberg Businessweek is focused on the huge challenges facing the world.

Hank Paulson on the Shocks of the New Economy
Hank Paulson, chairman and founder of the Paulson Institute and former U.S. Treasury secretary, listens during the Bloomberg Global Business Forum in New York, U.S. (Photographer: Tiffany Hagler-Geard/Bloomberg)

(Bloomberg Businessweek) -- Perhaps you’ve noticed: The world isn’t in especially great shape. Which is exactly what makes the second annual Bloomberg New Economy Forum this November so important. Our challenges are vast; it’s easy to feel dispirited. Yet there’s no time like the present for capable leaders—especially those in emerging economies—to come together, find actionable solutions, and inspire the world. This issue of Bloomberg Businessweek is dedicated to those ideals.

The New Economy Forum is timely, first, because wealth and power continue to shift to the rising economies of Asia, the Middle East, Africa, and Latin America. Indeed, the World Bank projects that in 2020 the emerging economies will grow at 4.6% on average, compared with just 1.5% for developed economies.

The forum is well-timed for another reason. It’s being held in Beijing against a backdrop of growing tension and fundamental change in U.S.-China relations. The next century’s geopolitical landscape hinges on how this suddenly fragile relationship evolves.

As corporations, governments, and leaders of civil society seek to navigate the New Economy, a better understanding of these key shifts and shocks will be essential. More than ever, challenges around the world are interconnected and require joint solutions.

Hank Paulson on the Shocks of the New Economy

Take technology. U.S.-China competition, such as the races for dominance in 5G and artificial intelligence, is a global challenge. Many in the U.S. are so concerned about the national security implications of technological interdependence that they argue for decoupling. Such a move could have far-reaching effects, Balkanizing the world and stifling growth. Efforts to exclude one another’s technologies from national supply chains would contribute to what I’ve described as an economic iron curtain that fundamentally breaks the global innovation ecosystem.

Or look at global governance. Existing institutions, pacts, and agreements need to be updated to reflect today’s realities. One clear example is the World Trade Organization, where successful economies like China, South Korea, and Singapore are still able to claim developing country status. This disadvantages not only other developed economies, but also the developing nations that truly need differential treatment.

And then there’s climate change, the most formidable economic and social risk facing mankind. Avoiding disaster will require a truly global effort, yet China—the world’s largest carbon emitter—will play an especially significant role, since its emissions exceed those of the U.S. and European Union combined. Moreover, China’s green finance initiatives and the prospects of a national carbon market could provide major breakthroughs in the battle to reduce carbon emissions. If they’re successful, similar initiatives could be applied elsewhere.

Finally, consider global growth and income disparity. The recent slowdown in trade combined with rising pressure on cross-national supply chains has made it increasingly difficult for multinational businesses to plan for the future with enough confidence to make long-term investments. Increasing income disparity, driven by automation and globalization, is also fueling a populist backlash around the world. These issues demand adjustments to our economic policies so the benefits of growth can be spread more broadly.

These are some of the central challenges we face in a world filled with increasing uncertainty and risk. A critical goal for business and policy leaders, therefore, should be to better understand these issues and to develop strategies for mitigating their impact.

The forum aims not just to curate that discussion, but also to drive new solutions and joint action. By bringing together the best minds from business and government, and from developed and emerging nations alike, real, measurable progress can be made toward addressing the challenges of, and transition to, the New Economy.
 
Paulson co-chairs the Bloomberg New Economy Forum advisory board.

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

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