The good news is that the world is richer than ever, with $600 trillion in wealth. The bad news is that it is out of financial balance.
Since 2000, asset values have risen much faster than GDP; that’s a boon for those who have assets to begin with but doesn’t do much for those who are just getting started and need broad-based income gains. Only about a quarter of the wealth generated came from investment, the remainder was mostly on paper. Moreover, debt has soared, with every dollar in investment generating $1.90 in debt. Wealth inequality is entrenched, with the top 1% in major economies accounting for at least 20% of wealth. And, finally, international financial imbalances are growing, contributing to today’s touchy trade and political environment.
The size and shape of the imbalance differ from place to place. But there are two commonalities. First, rapid productivity growth is the most effective counterweight to today’s tilted profile. And second, artificial intelligence (AI) can help—up to a point. For AI to fulfill its potential, countries must not only position themselves to benefit from its capabilities in technological and business terms, but also macro-economically. Otherwise, it would be like eating a heaping bowl of carbohydrates to fuel a workout—and then skipping the gym. The results won’t be pretty.
