Shifting Economic Power
Recently, the Economics Club of Norfolk hosted Senator Paul Sarbanes to give a speech about life after the passage of the Sarbanes-Oxley Act of 2002. Many people think his last name is Oxley, but that is what happens when you co-sponsor a bill in the U.S. Senate! Before he presented his lecture, he came to my table to discuss Robert W. Fogel's article in the summer 2007 issue of Daedalus, "Capitalism and democracy in 2040." Fogel, who received a Nobel Prize in Economics in 1993, analyzes the shifts in economic power around the world. A good FISO leader should understand these economic shifts and successfully adjust to them.
Fogel explains that "ever since World War II, the countries that have dominated the world economy"—principally the U.S. and European countries—"have shared a broad commitment to liberal and democratic values.” In comparing the Gross Domestic Products (GDPs) of nations in 2000 to their projected GDPs in 2040, the article forecasts a shift in economic power. “The most striking feature is the relative decline in economic power of the EU15 [15 countries in the European Union in 2000], implied by its stagnate population and its modest growth in GDP.” Not only do the demographic factors predict this, but the political and cultural factors reinforce this trend.
It’s the relative rate of forecasted market growth of different economies which is the most startling. Based on reasonable assumptions, the US will grow its GDP at 3.8% while the projected growth in the EU 15 is 1.2%, China is 8.4% and of the entire world is 5.0%. Fogel argues that China will "go from a poor country in 2000 to a superrich country in 2040, although it will not have overtaken the United States.” Where will the growth come from? Fogel believes that education is a key, noting that college-educated workers are 3 times as productive as workers with less than a ninth-grade education, and high-school graduates are 1.8 times as productive.
Fogel's article reminds us of the importance of two of the FISO Factor's catalytic agents: perspective and global citizenship. The world is changing—and China's emergence as a market-oriented economic and political power, together with an increasingly globalized economic environment, will make the 21st century quite different than the 20th. A FISO leader must have the vision to anticipate this and adapt to it.
Each and every one of us must continue to evolve to contribute to our home country's GDP. Popular culture provides us a fun, inspiring example of perspective and successful adaptation to a changing world. Tony Bennett, after an amazing and successful singing career, felt he was no longer contributing to the contemporary music scene. He turned to his sons for help, and they told him he needed to reach younger audiences. The Bennetts crafted a plan that remained true to his style yet reached new markets like MTV and the Late Show with David Letterman. Tony Bennett reflected later in an AARP article that the plan worked, saying “I realized that young people had never heard those songs. Cole Porter, Gershwin – they were like, 'Who wrote that?' To them, it was different. If you're different, you stand out."
Bennett reinvented himself and created a new industry with Duet recordings and continues his performance at age 81. He is a role model for people of many ages. He entered the youth market just as you can enter international markets. Capitalism and democracy provide the vehicle for growth. But, it takes individuals to rev up the engine.
