Growing competition between global powers, in search of economic security and leadership, has contributed to a highly fragmented global economy. Trends including countries increasingly imposing trade barriers such as tariffs, technological decoupling, and the disruption of capital flows currently show few signs of easing. This is happening against a backdrop of heightened geopolitical tensions and an overall shift towards multipolarity. The economic costs of fragmentation are high, with the International Monetary Fund (IMF) estimating that increased international trade restrictions may shrink global output by up to 7% over the long term, amounting to $7.4 trillion.
Yet this economic splintering is coinciding with a unique opportunity to start building much more productive, inclusive and sustainable economies around the world. Such intelligent economies are anchored in exponential advancements in a wide array of technologies, from digital to energy tech and biotech. The task now facing all stakeholders is to seek out ways to maximize the growth benefits of this innovation momentum, while minimizing the drag of fragmentation. More creative dialogue and cooperation are urgently required to seize this opportunity and avoid falling into a “Tepid Twenties” marked by slow growth and mounting debt challenges, as mentioned by the IMF managing director, Kristalina Georgieva earlier this year.
As leaders from across business, government, civil society, and international organizations gather this week at the 15th Annual Meeting of the New Champions in Dalian, China, the aim is to discuss how these solutions can be found and deployed.
Navigating between sovereignty and interoperability
The technologies driving the next wave of economic activity and growth—including artificial intelligence, quantum computing and biotechnology—have prompted significant shifts in policy given the high-stakes implications of capturing those rapidly growing markets. Moving forward, there is a deep need to balance between the competing imperatives of sovereignty and security on the one hand, and openness and interoperability on the other.
Restricting the flow of key cutting-edge technologies just as these sectors start to flourish has global implications. The IMF recently predicted that a hi-tech decoupling (including energy systems) could result in the loss of 1.2% of global gross domestic product (GDP), and 1.5% of Asian GDP. While recognizing the importance of these technologies at a national level, it remains crucial to preserve a degree of open innovation and collaboration at this crucial juncture. These are precepts that have successfully reduced costs and brought technologies to market in the past. Ensuring interoperability—or the development of systems that can operate in conjunction with one another—rather than creating competing and siloed systems will allow us to unlock the full range of benefits from these innovations. Of course, going beyond interoperability to coordination and cooperation will further scale certain opportunities.
Centering people and planet
The benefits drawn from intelligent economies should be centered around people, as well as the world we inhabit, with technological advancements impacting everything from employment, skills, and wealth distribution, to healthcare, education, and public services. Among the most urgent of these impacts is the need to reskill and upskill the global workforce to meet the demands of the economy of tomorrow.
According to the World Economic Forum’s Future of Jobs Report published last year, technologies are expected to disrupt 44% of workers’ core skills over the coming five-year period and account for a structural labor market churn of 23% of jobs. A combination of public policy and private sector initiatives will thus be needed to ensure that advancements in technology result in a strong net-positive result for workers through productivity gains and new job creation overall.
Similarly, these gains must translate into concrete momentum and the scaling up of efforts to mitigate the impacts of climate change and to secure a nature-positive world. The World Economic Forum is committed to driving this work forward through its initiatives such as the Jobs Consortium and Reskilling Revolution, which aim to transform skills and create good jobs worldwide, and the First Movers Coalition, which leverages corporate climate commitments to drive demand and adoption of emerging climate technologies.
Unlocking the energy tech convergence
Much work remains to be done on achieving the energy transition; global efforts have been hampered by a series of geopolitical and macroeconomic obstacles at a time when action is most needed. An annual investment of $5 trillion in energy transition technologies will be needed to meet the goal of limiting the global average temperature rise to 1.5°C, according to the International Renewable Energy Agency (IRENA). This will require a tripling of renewable power and doubling of energy efficiency simultaneously.
The technological advancements under development today could unlock the momentum needed to realistically hit these targets. These innovations are varied and include smart infrastructure networks, technologies for the capture of CO2, the development of hydrogen fuel cells to replace traditional power generation, scientific breakthroughs in nuclear fusion as a longer-term energy solution, and the scaling of sustainable aviation fuel as part of the greening of the sector, to name a few. These innovations will create new jobs and economic sectors while directly contributing to the global energy transition—a goal towards which all countries need to collectively channel their efforts.
We can only address complex and pressing challenges if we connect the dots across industries and geographies. Finding ways to do this is absolutely necessary to reinvigorate the global economy in this new era.