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helpful comments from Sheena Iyengar, Gita Johar and Oded Netzer. However, the authors are
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The Jerome A. Chazen Institute of International Business
Jagdish N. Bhagwati
Fangruo Chen
Sheena Iyengar
Wei Jiang
Gita Johar
Christopher Mayer
Robert Mundell
Hugh Patrick
Stephan Penman
Joseph Stiglitz
This e-newsletter presents the latest thinking in consumer behavior, global finance, trade policy, cross-cultural management and
more. Recent issues have featured editorials by Charles W. Calomiris, the Henry Kaufman Professor of Financial Institutions at
Columbia Business School, an interview with Cynthia Carroll, CEO of Anglo-American, South Africa‘s largest mining company;
and research by Sheena Iyengar, author of The Art of Choosing, a finalist for the Financial Times Business Book of the Year
award and the S.T. Lee Professor of Business at Columbia Business School.
2
Table of Contents
Executive summary 4
Objective 6
Part II: Growth projections and top challenges for individual countries 17
3
Executive Summary
This forward-looking report aims to identify new opportunities for growth in major
economies and to diagnose critical challenges that need to be addressed to avoid
underperformance.
This report is based primarily on a survey, conducted October 12-27, 2010, of business
executives and professionals in 31 major economies who are graduates of Columbia Business
School. The survey asked respondents to project the growth prospects and critical constraints for
the country they currently work in. The sample size by country varied from 5 to 657 respondents.
This report could provide useful information for business leaders on which risks to hedge
against when conducting business in a particular country. Policy makers may also find this
information useful because it could signal where to invest limited political and fiscal resources to
deliver maximum sustainable growth for their country. The key findings from the survey are
summarized below.
Emerging market economies and commodity producers will lead the pack.
The next decade is the decade of emerging market economies. These countries as a group
are projected to grow much faster than developed countries.
While China is likely to remain a fast-growing economy, its annual growth rate is
projected to be around 6% over the next decade rather than the breakneck annual rate of
9-10% a year of the last decade. Over the medium term, India and Nigeria could have
growth rates that will rival or even surpass China‘s.
Australia and Canada are projected to be the best performers among developed countries.
As both countries are major commodity producers, they are well positioned to benefit
from the rapid growth in emerging market economies, which tend to import raw materials
and other commodities.
For developed countries as a whole, government debt, tax rates and regulations, and
government inefficiencies stand out as the top challenges. Interestingly, in spite of
aggressive monetary policy actions in several countries, high inflation is not yet
considered a grave concern.
For emerging market economies as a whole, government inefficiency, corruption, and
poor infrastructure are the most severe constraints that could hinder growth.
Even within a given country group, individual countries face different challenges.
Despite both being star performers, China and India have different growth constraints.
Respondents from China think the most significant barriers to growth are rising labor
costs, corruption, and inflation; it is particularly noteworthy that poor infrastructure is not
4
considered a major problem. India, in comparison, has poor or inadequate infrastructure,
corruption, and government inefficiencies as the most significant constraints to growth,
based on the answers of those surveyed.
5
Objective of the report
While parts of the world are still finding their way out of the global financial crisis of
2007-2009, both business leaders and policy makers must look ahead to identify new
opportunities for growth as well as diagnose and address critical challenges that might lead to
underperformance.
With this objective in mind, this report provides a transparent analysis of both the growth
prospects and the main economic challenges for 31 major economies over the next 10 years. A
major source of data is a survey, conducted during October 12-27, 2010, of business executives
and professionals in these countries who are graduates of Columbia Business School. The
respondents come from diverse backgrounds and have varied levels of experience and areas of
expertise. While generally not professional forecasters, the respondents have on-the-ground
experience, and their responses may be
Table 1: Economies Included in the Survey
indicative of the sentiment of business
Emerging Markets Developed Markets
professionals in the country for which they
Argentina Australia
are surveyed. The survey was designed by
Brazil Belgium
researchers at the Jerome A. Chazen Institute
Chile Canada
of International Business at Columbia
China France
Business School.
Hong Kong Germany
Respondents from both major India Greece
emerging markets and major high-income Israel Italy
economies were asked to project the average Lebanon Japan
annual growth rate for their country over the Mexico Netherlands
next 10 years. Respondents were also asked Nigeria Norway
to identify the three most critical challenges Philippines Switzerland
that could derail the growth for their country. Russia United Kingdom
We include only countries for which there is Singapore United States
a relatively high degree of agreement among South Korea
respondents. Thailand
Turkey
The first part of this report contains United Arab Emirates
key findings. The second part provides
additional details for selected individual countries. A set of appendices contains more
information about the survey and the response rate by country.
A companion report (to be released separately) will analyze housing markets in major
economies.
6
Part I: Key findings
New growth leaders: For the last three decades, China has been the fastest-growing major
emerging market economy, lifting hundreds of millions of people out of poverty in a relatively
short time span. While it is projected to be a star performer over the next 10 years (with an
average annual growth rate of 6%), India and Nigeria are projected to surpass China‘s growth
rate. India, with expected growth of 7.5%, ranks first in our sample. Nigeria‘s high levels of
growth in recent years are expected to continue, with a predicted annual growth rate of 7% over
the next 10 years.
Small players become stars: Australia and Canada are predicted to be the fastest-growing
developed countries over the next decade. Australia, which has weathered the economic crisis
relatively well, is tied for first place with Canada among developed countries; both have
projected annual growth of 3.3%. As major commodity producers and exporters, both are well
positioned to benefit from the rapid growth in emerging market economies, which have a
voracious demand for commodities.
Bringing up the rear: Argentina, Lebanon, and Mexico all tie for last place among developing
countries for 10-year growth, with predicted annual rates of 3%. Though impressive when
compared with the high-income country standard, 3% growth would mean these countries will
not catch up to developed countries any time soon. Among developed countries, Japan,
Switzerland, and Italy come in last. Japan‘s anemic growth is expected to continue over the next
10 years, with predicted annual expansion of only 1.5%. Meanwhile, Italy, which is hindered by
debt, government inefficiencies and bureaucracy, and poor infrastructure, is predicted to grow at
a meager annual rate of 1%, the lowest rate in the sample.
Words of caution: The reported growth projection for a country refers to the median response
from all respondents in that country. As the number of respondents is relatively small for some
of the countries, the sampling variation often does not allow us to make precise comparisons
between countries. For example, while the median growth projections suggest that India may
surpass China’s growth rate over the next 10 years, it will take an additional survey with a
larger sample to formally confirm this. On the other hand, we can be more certain when making
comparisons between groups of countries. For example, the survey responses allow us to
conclude, with a high degree of confidence, that the group of emerging market economies is
projected to continue to grow faster than the group of developed countries.
7
Table 2: Growth Projections 2010-2020 (average annual rate)
Emerging markets are predicted to grow much more quickly than the developed countries in
our sample. In fact, the fastest-growing developed countries have growth rates comparable to the
slowest-growing emerging markets. This is consistent with economic theory, which states that
initial level of income matters for subsequent growth rate. Developed countries, with
comparatively abundant capital and skilled labor, must rely on innovation as the primary driver
of growth. Emerging markets, on the other hand, can base their growth partly on catching up –
adopting technologies and manufacturing processes already matured, and combining them with
less expensive labor inputs. Since innovation is inherently more difficult, it is not surprising that
countries with an already high level of income tend to grow more slowly than countries whose
relatively lower income level (and hence lower cost of labor) provides more room to catch up
quickly. This relationship between medium-run growth and GDP per capita provides a useful
benchmark of growth for a country.
8
Figure 1: Income and Opportunities
Lower-income countries, with more opportunities for growth, are predicted to grow faster over the next decade than
higher-income countries.
8
India
Predicted Annual GDP Growth 2010-2020 (Percent)
7 Nigeria
6 China
Chile Singapore
5 Philippines
Turkey
Russia
South U.A.E.
4
Korea Hong Kong
Mexico
3 Lebanon
Spain U.S.A.
Norway
Argentina
2
Emerging Market Economies
Japan
Trend Line
0
7 8 9 10 11
Income per capita (log scale)
Income per capita is for the year 2007, obtained from the International Monetary Fund's World
Economic Outlook, and is PPP adjusted. Note: not all points were labeled for clarity.
Given their high GDP per capita, rich countries might be expected to have relatively low
levels of growth. Most European countries fall even below a benchmark trend line: only Spain
and Norway are above it. In contrast, Singapore, Hong Kong, and the United Arab Emirates,
which already have high GDP per capita, are all projected to expand at rates above the trend line.
In fact, Singapore stands out with exceptional annualized growth of 5% predicted over the next
decade, though respondents from that country fear rising labor costs, inflation, and crises in other
countries. Respondents from the United States look beyond the current crisis and project that the
country will again become a growth leader among high-income countries over the medium term:
growth is predicted to be above the benchmark, at an annual rate of 2.7%.
Among middle-income countries, Russia, Turkey, and Chile are expected to have
impressive growth rates. With each country predicted to grow around 4.5% a year for the next
decade, these countries are expected to catch up with richer countries considerably faster than
9
Mexico and Argentina, which have predicted growth of only 3%. The Philippines is also
predicted to grow slowly compared with countries that have similar levels of initial income. The
Philippines‘s 5% annual growth rate is respectable in an absolute sense. However, while its
income level is somewhere between India and China, it is projected to grow much more slowly
than either country.
Relative to the trend line that links the projected 10-year growth with the initial income,
both India and China are positive outliers. The Chinese income level is twice as high as India‘s,
and so it is not too surprising that China‘s growth is projected to be somewhat lower. Even when
taking into account these countries‘ starting positions, respondents think these two countries will
continue to be exceptional success stories over the next decade.
Predicted growth over the next year and next decade tend to be similar for most countries. One benchmark line is the
45 degree line. Countries above this line are expected to speed growth over the next decade, whereas countries
below it are expected to slow down. Another interesting relationship is the (dashed) trend line. This line illustrates
that countries with slower growth in 2011 are pedicted to speed up over the next decade, and countries with faster
growth in 2011 are expected to slow down.
9
Predicted Annual GDP Growth 2010-2020 (Percent)
India
7 Nigeria
China
Philippines
5 South Singapore
U.A.E. Korea
Brazil
Canada
3 Spain U. S. A.
Greece Australia
Germany
1 Italy Emerging Market
Economies
Developed
Countries
-1 45° Line
Trend Line
-3
-3 -1 1 3 5 7 9
Predicted GDP Growth 2011 (Percent)
Note: not all points were labeled for clarity.
10
Comparing 10-year growth predictions with one-year predictions helps us better
understand how respondents think their countries will evolve over the next decade. In general,
respondents may base their 10-year predictions partly on their 1-year predictions. However,
respondents also appear to see a ―reversion to the normal state.‖ In other words, the distance
between the best and the worst performers over the next decade is thought to be smaller than
over the next year. Greece illustrates this well: respondents, mindful of its debt crisis, predict a
decline in GDP of 2% in 2011. They think the country will eventually return to growth, with a
predicted annual rate of 2% over the next decade.
The ―reversion to the normal state‖ also implies that the best performers in the short run
are projected to grow a bit less spectacularly over the medium run. China‘s growth drops from 8%
to 6%, for example. In India, expansion drops slightly from 8% to 7.5%. Singapore‘s astonishing
7% predicted GDP growth in 2011 is expected to decrease to an annualized rate of 5% over the
next decade. Nigeria breaks from this trend: growth is expected to increase over the next 10
years from its 2011 predicted rate. Nigeria, along with a number of other sub-Saharan countries,
has shown encouraging signs of renaissance in an impoverished region that had been left behind
in previous decades of world development.
Growth predictions give a sense of how well countries are expected to do over the next
decade, but they do not tell us why a country may do well or what factors may hinder its progress.
To help answer this, we asked respondents, ―Over the next ten years, what do you think the
greatest challenges to economic growth will be for your country?‖ Respondents could choose up
to 3 challenges from a list of 14 options. We also allowed respondents to provide a write-in
response. The written responses we received differed greatly both between countries and often
within a country, indicating the diverse set of challenges that countries face. Despite this
diversity, there was a tendency for respondents in developed countries to mention lack of
innovation or an aging population as top challenges to growth in their written responses.
For developed countries as a whole, government debt, tax rates and regulations,
government inefficiencies, and economic crises or recessions in other countries stand out as the
top challenges. Not surprisingly, corruption is not considered a rampant problem. Interestingly,
in spite of the aggressive monetary policies undertaken by many developed countries, high
inflation is not considered by respondents to be a grave concern (Figure 3). In comparison, for
emerging market economies, government inefficiency, corruption, and poor infrastructure are the
most commonly mentioned constraints that could derail growth prospects (Figure 4). With
different challenges to growth facing developed and developing countries, different policies will
be needed to improve economic performance.
Even within a given country group, different countries face different critical constraints
to economic growth. We can illustrate this point by comparing China and India, two star
11
performers in the emerging market group. For China, the most important constraints to growth
are rising labor costs, corruption, and inflation. It is particularly noteworthy that poor
infrastructure is not considered a major problem. Except for its corruption problem, China looks
quite different from other emerging market economies. In contrast, respondents from India list
poor or inadequate infrastructure, corruption, and government inefficiencies as the top three
challenges. Rising labor costs are not yet a major concern. Instead, respondents are more
concerned with lack of education or training in the workforce.
Government debt
Tax rates and regulations
Government inefficiencies and bureaucracy
Economic crises or recessions in other economies
Labor regulations or disputes
Lack of education or training of labor force
Unpredictability of government policies
Rising labor costs
Poor or inadequate infrastructure
Political instability
Access to finance
Corruption
Inflation
Kidnapping, robbery, theft, and other crimes
0 10 20 30 40 50
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
The percentages are calculated by weighting each country equally – that is, we average first across
individuals in a country to get the percentages for each country, then average across the countries.
Percentages do not add up to 100 because respondents could choose up to three challenges.
In most developed countries, a top challenge to growth over the next 10 years is
government debt. For Japan, Belgium, France, the United Kingdom, and the United States, it is
the primary concern for most respondents. In contrast, due to Australia‘s low debt-to-GDP ratio,
few respondents indicate debt as a top challenge. Not surprisingly, no respondent from Norway,
which has a large sovereign wealth fund from petroleum earnings, reports debt as a key concern.
It is noteworthy that in Germany, despite a fairly high debt-to-GDP ratio, respondents have other
concerns such as tax rates and regulations, and crises in other countries: only 20% indicate debt
as a top challenge to growth.
Among developed countries, tax rates and regulations are often seen as a primary
challenge. Perhaps fearful of servicing the debt, respondents in Greece actually mention tax rates
and regulations more frequently than debt as a prime challenge. And over half of respondents
from Norway, the United Kingdom, and Belgium are worried about tax rates and regulations. On
12
the other hand, only 11% of Australians list tax rates and regulations as a top challenge, the
lowest percentage among developed countries in our sample.
While there are many developed countries where crises in other economies are reported
relatively infrequently, this challenge is the top vote-getter in Australia, Canada, Switzerland,
and the Netherlands. In the United States, by contrast, the number is only 16.7%. This contrast
illustrates a tendency for smaller, export-dependent economies to show greater concern for the
well-being of other economies. In larger countries such as the United States, on the other hand,
those surveyed focus more on home-grown challenges to growth.
0 10 20 30 40 50
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
The percentages are calculated by weighting each country equally – that is, we average first across
individuals in a country to get the percentages for each country, then average across the countries.
Percentages do not add up to 100 because respondents could choose up to three challenges.
On average, government inefficiencies and bureaucracy are the most frequently reported
top challenges to growth in emerging markets. Respondents from East Asian economies tend to
think their governments are run fairly well in comparison with other emerging market economies:
only 4 economies (out of 17) have fewer than 30% of respondents mention bureaucracy as a top
13
challenge, including China (29.2%), Hong Kong (16.7%), and Singapore (0%). The other
country where bureaucracy is not frequently reported as a top challenge is Turkey, fetching just
under 20% of the vote. Corruption is the second biggest concern for this group of countries. In
most developed countries, by contrast, corruption is not reported as a challenge at all. Among
emerging markets, more than half of respondents in Russia, Nigeria, the Philippines, and India
cite corruption as a top barrier to expansion. These countries also report being plagued by
government inefficiencies and bureaucracy. The twin challenges of bureaucracy and corruption
can feed on each other: one way of circumventing overly bureaucratic rules is through bribery;
corrupt officials, on the other hand, have an incentive to increase the amount of red tape so that
they can increase the bribery payments they receive. Respondents in emerging economies do not
all think that corruption is a top challenge, though: Argentina (16.7%), Hong Kong (0%),
Singapore (0%), Turkey (16.7%), and the United Arab Emirates (0%) provide exceptions.
14
Table 3: A Crisis of Confidence
We asked respondents, ―In your opinion, how confident are people in the country in the ability of the government to
adopt the right policies over the next decade to deal with these challenges?‖ They were asked to rate this confidence on a
scale from 1 to 6, with 1 being ―very unconfident‖ and 6 being ―very confident.‖ We also asked respondents to rate their
government‘s handling of the 2007-2010 economic crisis on a scale from 1 to 6, with 1 being ―very incompetent‖ and 6
being ―very competent.‖ A score of 4 (basically competent) or above for a country‘s handling of challenges indicates that
the public believes the government is competent in this regard, whereas a score of 3 (basically incompetent) or below
indicates incompetence. We split countries into two groups, based on whether their average challenges score was above or
below 3.5. We also split countries into developed or emerging markets. Table 3 reports the average scores for each country
across these four subgroups (the sample size by country can be found in Table A.1).
15
Rising to the occasion: The average score for public opinion across all countries on ability
to handle challenges over the medium term is 3.5, while the score for handling of the crisis is
noticeably higher, at 4.1. In particular, countries receiving a score of ―incompetent‖ for their
ability to handle challenges tend to receive noticeably higher scores for crisis handling. Spain
and Greece, with debt worries in the former and a full-fledged debt crisis in the latter, are
exceptions. While not conclusive, higher scores for crisis handling suggest that individuals tend
to think their governments did a good job of managing the crisis, given their overall ability to
handle economic challenges.
Winners among the wealthy: The U.A.E., Singapore, and Hong Kong are all growth
outliers among rich economies when we take into account GDP per capita. Singapore, as noted
earlier, has impressive predicted growth of 5% on average over the next decade, which is very
high when compared with other wealthy countries. The high growth predictions respondents
gave these countries are likely tied to the belief that the government can handle challenges to
growth: each country received a score of ―confident‖ on public faith in the ability of the
government to handle challenges to growth. Singapore, the country with the fasted growth in this
group, also has the highest score on this measure, at 5.3 — between ―confident‖ (5) and ―very
confident‖ (6).
Misplaced optimism? India and Nigeria have the highest predicted growth over the next 10
years. Both countries also have serious impediments to further development: well over half of
respondents in each country indicated both corruption and inadequate infrastructure as top
challenges to progress over the next decade. Respondents do not have much faith in the ability of
their governments to handle these issues, with India receiving a score of 3.1 (―basically
confident‖) and Nigeria a score of only 2 (―unconfident‖), the second lowest in the sample. This
presents a bit of a paradox. Perhaps the respondents think that the relative unsophistication of
these countries is enough to give them a high growth potential and that their governments are not
expected to add much to the growth momentum.
16
Part II: Growth Projections and Top Challenges for Selected Countries
This section provides a brief context and analysis for each country that received 10 or more responses.
Advanced Economies:
Australia
(18 Respondents. Coefficient of variation for 10-year growth estimate: .14)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Respondents from Australia, a country that appears to be emerging from the global
economic downturn relatively unscathed, are impressed with the government‘s management of
the crisis. They give it an average score of 5.2, between ―competent‖ (5) and the highest score of
―very competent‖ (6) — the highest among developed countries. Average predicted growth is 3.5%
in 2011 and 3.3% over the next 10 years. This rate is impressive, especially when compared to
other high-income countries. One sign that the country is weathering the crisis is that
respondents think Australia‘s growth will actually slow over the next 10 years, contrary to the
beliefs of most rich countries. ―Crises in other countries‖ comes in as the most frequently
reported barrier to expansion over the next 10 years, cited by two-thirds of respondents. This
may reflect a sense that the worst of the crisis has not yet hit Australia or could be due to the
country‘s dependence on exports of natural resources. Rising labor costs are also a top concern,
cited by half of respondents.
17
France
(23 Respondents. Coefficient of variation for 10-year growth estimate: .41)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
In light of the widespread protests in October 2010 over raising the retirement age from
60 to 62, it is understandable that 65% of respondents in France see labor regulations or disputes
as a top challenge to growth. While debt is reported more frequently, at 74%, more respondents
from France cite labor regulations as a prime challenge than any other country in our sample.
Only Spain (56%) and Chile (40%) can compare. France‘s debt has increased as a percentage of
GDP since the crisis, and, like many developed countries, spending on entitlement programs as a
percentage of GDP is projected to balloon as its population ages. Respondents think the public is
―somewhat unconfident‖ in the government‘s ability to handle challenges to growth and give the
country a score of 2.9. Nonetheless, France is predicted to perform on par with most European
countries over the next decade, with predicted annual growth of 2%.
18
Germany
(10 Respondents. Coefficient of variation for 10-year growth estimate: .34)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Germany, in many ways, represents a typical developed country among our sample.
Along with most of Europe, average annual growth over the next 10 years is predicted to be 2%.
The most frequently reported top challenges include government inefficiency and bureaucracy,
tax rates and regulations, and economic crises or recessions in other economies. Respondents
give Germany a score of 3.8 for opinion on ability to handle barriers to growth, putting it roughly
in the middle among developed countries. It differs in several interesting ways, however. Despite
having a debt-to-GDP ratio above Spain‘s and just below that of the United States, only 20% of
respondents report debt as a primary challenge to growth – a lower percentage than reported by
either country. It is understandable that 40% of respondents are concerned about crises in other
countries. As the second largest exporter in the world (and the largest until 2009 when it was
displaced by China), Germany‘s economy is highly dependent on demand for its exports from
other countries. Debt woes of less-stable EU countries and a possible German-financed rescue
effort reinforce worries about crises in other countries.
19
Italy
(17 Respondents. Coefficient of variation for 10-year growth estimate: .34)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years
Italy is one first-world country that has many third-world problems. Though Italy has a
high level of debt to GDP, even when compared to other developed countries, respondents more
frequently report being concerned with infrastructure, government inefficiencies, and
bureaucracy. With 65% of respondents worried about infrastructure, Italy stands out among
developed countries: in every other developed country, fewer than 20% of respondents report
infrastructure as a top challenge. Corruption is also cited as a chief problem (41%), which further
makes Italy an outlier compared with other developed countries. Unfortunately, respondents are
not optimistic that the government will solve the country‘s challenges to growth: Italy receives a
score of 2.4 on ability to handle challenges, low for a developed country, and annual growth is
predicted to be 1% over the next decade, the lowest in our sample.
20
Japan
(18 Respondents)
4
GDP Growth Rate
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
-2
-4
Note: GDP Data from the International Monetary Fund's World Economic Outlook
Database, October 2010
-6
Japan was once a growth miracle, a shining example admired by other economies in Asia
and elsewhere in the world. It was the country that was thought most likely to surpass the United
States in innovation and economic vitality. To be sure, Japan has already reached a high-income
status and remains wealthy. But it is no longer considered a major growth engine for the world
that will displace the United States any time soon. Indeed, Japan is a worthy case to be studied
by countries that are currently considered as growth leaders.
21
Japan
(18 Respondents. Coefficient of variation for 10-year growth estimate: .46)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
22
Netherlands
(19 Respondents. Coefficient of variation for 10-year growth estimate: .57)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Exports from the Netherlands took a hit during the crisis, falling nearly 25% in 2009.
Perhaps because of its relatively small size and high dependence on exports, especially to other
European countries, respondents report economic crises or recessions in other economies most
frequently as a top challenge to growth. Respondents also cite rising labor costs as a chief
problem, making the country an outlier among developed nations. Those surveyed think the
public has confidence in the government‘s ability to handle its challenges to growth, with a score
of 4.3 on this measure, the fourth highest among developed countries. Respondents are also
cautiously optimistic about growth, predicting growth of 2% on average each year for the next
decade.
23
United Kingdom
(36 Respondents. Coefficient of variation for 10-year growth estimate: .24)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Like many developed countries, debt, tax rates, and regulations are reported as top
challenges to growth in the United Kingdom. While only 22% of respondents view inflation as a
primary problem, this percentage is higher than any other developed country. In November 2010,
the Bank of England predicted that it will continue to exceed its 2% inflation target by about a
full percentage point in 2011. Respondents think the public is essentially neutral about the
government‘s ability to handle barriers to growth over the next decade: the United Kingdom
receives a score of 3.7 on this measure, between ―somewhat unconfident‖ (3) and ―somewhat
confident‖ (4).
24
United States
(657 Respondents)
4
GDP Growth Rate
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
-2
Note: GDP Data from the International Monetary Fund's World Economic Outlook
Database, October 2010
-4
Following the Volcker recession, the United States showed impressive growth for the rest
of the 1980s. Again, during the dot-com boom, the American economy grew rapidly for nearly a
decade. After the bubble burst, however, growth took a turn for the worse; even when the
economy recovered, growth remained slow compared with boom years in previous decades. As
the United States continues to recover from its 2007-2009 recession, its growth trajectory
remains unclear. While it seems unlikely that the United States will match the 90s boom, it
remains to be seen whether the economy will return to moderate levels of growth, perhaps in the
range of 2-4%, or experience its own ―lost decade.‖
25
United States
(657 Respondents. Coefficient of variation for 10-year growth estimate: .28)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Average annual growth for the next decade is projected to be a respectable 2.7% for the
United States. This number is low compared to growth of 5% or above for several emerging
market economies, but a 2.7% average growth rate places the United States fourth among the 14
developed countries in this report. Respondents, who are likely concerned about massive federal
deficits since the crisis, most frequently mention public debt as a top challenge to growth.
Another primary concern is lack of education or training of the labor force, reported by nearly 30%
of respondents. In a country whose growth relies largely on innovation, this suggests worry that
continued technological development will slow without a highly skilled labor force.
26
Emerging Market Economies
Brazil
(17 Respondents. Coefficient of variation for 10-year growth estimate: .24)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Over 70% of respondents in Brazil report poor infrastructure as a top challenge for the
economy. The country‘s investment in infrastructure, as a percentage of GDP, has been in
decline for decades. Media reports suggest that air transport in particular will need to be
improved in preparation for the country‘s hosting of the 2014 World Cup and 2016 Olympics.
Respondents also cite lack of education or training of the labor force as a top concern. Brazil is
in a club with Turkey and Chile in this regard: about 60% of respondents in each country think a
skilled workforce is essential for further progress. While respondents think the public is
somewhat confident on the country‘s ability to handle these barriers to expansion, assigning a
score of 3.9 on this barometer, they predict annual growth of 4% over the next decade, placing
Brazil in the middle of the pack among emerging market economies.
27
Chile
(10 Respondents. Coefficient of variation for 10-year growth estimate: .15)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
28
China
(24 Respondents)
14
12
GDP Growth Rate
10
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Note: GDP Data from the International Monetary Fund's World Economic Outlook
Database, October 2010
With three simultaneous transitions from central planning to market economy, from
agriculture to industrialization, and from extreme isolation to the ―world factory,‖ China has
been a growth miracle in the last three decades. The country has maintained high rates of growth
in this time, often in excess of 10%. Compounded over decades, this growth has lifted hundreds
of millions of people out of poverty and has made China an integral part of the global economy.
The Chinese economy cooled off during the financial crisis but did not fall much below 10%
growth. Whether the country will continue its impressive expansion over the next decade is of
worldwide interest.
29
China
(24 Respondents. Coefficient of variation for 10-year growth estimate: .22)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Partly because of its past success, which can make new growth opportunities harder to
come by, China‘s predicted growth falls from 8% in 2011 to an average annual rate of 6% over
the next decade. Rising labor costs are by far the most frequently reported challenge to growth:
two thirds of respondents list this as a primary concern. Though China‘s inflation is not high in
absolute terms, it has been steadily increasing since 2009, with food prices rising 10% in October
2010 relative to the year before. Respondents‘ answers may indicate concern over whether this
trend will continue or that a governmental crackdown on inflation will be at the expense of GDP
growth. The country makes an impressive showing on public confidence in ability to handle
challenges to growth over the next decade, receiving a score of 4 (―confident‖), tied for third
highest among emerging market economies.
30
Hong Kong
(12 Respondents. Coefficient of variation for 10-year growth estimate: .30)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Three quarters of respondents from Hong Kong think crises or recessions in other
economies are a serious challenge to growth, reflecting Hong Kong‘s high degrees of trade and
financial openness. The next most frequently cited challenge to growth is inflation, reported by
42% of respondents. Given the Hong Kong currency board‘s tie to the U.S. dollar, concern over
inflation may reflect fear of quantitative easing in the United States. Those surveyed think public
opinion is favorable concerning the ability of the government to handle challenges to growth,
giving a score of 4 (―basically confident‖) on this measure. Respondents are also optimistic
about sustained growth of the territory, predicting an annualized increase of 3.5% over the next
decade.
31
India
(10 Respondents)
10
GDP Growth Rate
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Note: GDP Data from the International Monetary Fund's World Economic Outlook
Database, October 2010
In the decades following India‘s independence, the country‘s economy grew relatively
slowly. Growth eventually picked up, however, especially in the past two decades. Growth has
been just shy 10% in 2006 and 2007. While economic expansion slowed in 2008 and 2009, the
country‘s growth is predicted to increase to nearly 10% in 2010, according to the IMF‘s World
Economic Outlook. Having been a success story for the past two decades, it remains to be seen
whether the country will continue its impressive recent growth or return to less favorable rates
seen in decades past.
32
India
(10 Respondents. Coefficient of variation for 10-year growth estimate: .13)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
33
Lebanon
(10 Respondents. Coefficient of variation for 10-year growth estimate: .51)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
In the wake of the assassination of former Prime Minister Rafic Hariri in 2005 and
subsequent assassinations of other high-profile leaders, respondents from Lebanon
overwhelmingly indicate political instability as a top challenge to growth. Because its
infrastructure has been weakened by its 1975-1990 civil war and conflicts with Israel,
respondents also cite inadequate infrastructure as a top challenge to growth. Though Lebanon has
endured the economic downturn well, largely due to conservative lending practices by its banks
that resulted in an inflow of capital at the height of the crisis, those surveyed think the public
lacks confidence in the ability of the government to handle these challenges and predict that the
country will grow at only 3% annually over the next decade. This is a significant drop from 2011
growth of 4%, suggesting long-term concern over the country‘s growth potential.
34
Mexico
(29 Respondents. Coefficient of variation for 10-year growth estimate: .31)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Respondents from Mexico most frequently report concern over kidnappings, robbery,
theft, and other crimes as top challenges to growth. These crimes are destabilizing and can
discourage investment and tourism, but it is surprising that they are viewed as more problematic
to economic progress than lack of education or training of the labor force, which ties with
corruption as the next most worrisome issue. Respondents are not very optimistic about growth
in the country, with annual growth predicted at 3% over the next decade, tied for lowest among
developing countries.
35
Philippines
(13 Respondents. Coefficient of variation for 10-year growth estimate: .23)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
In spite of a number of favorable fundamentals, the Philippines has not been able to
replicate the economic success of some of its neighbors in east and southeast Asia. Government
inefficiencies and bureaucracy are reported as a top challenge to growth by nearly 80% of
respondents in the Philippines, the highest percentage in any country in our sample. Corruption
is the second most critical challenge to growth. Infrastructure is another worry, reported by more
than 60% of respondents.
36
Russia
(11 Respondents. Coefficient of variation for 10-year growth estimate: .22)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
In spite of its vast natural resources, a well-educated labor force, and relatively
sophisticated science and technological capabilities, Russia has not had spectacular growth.
Corruption is its top challenge to growth, cited by over 80% of respondents. In addition,
respondents to our survey mention poor or inadequate infrastructure as a top problem almost as
frequently as corruption. Another primary challenge is government inefficiencies and
bureaucracy, reported by over 60% of respondents. Respondents give a score of 3 (―somewhat
unconfident‖) for public confidence in the government‘s ability to handle challenges. Despite
this, the country is predicted to grow 4.5% annually, which is high compared to other countries
in its income range.
37
South Korea
(24 Respondents. Coefficient of variation for 10-year growth estimate: .30)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
South Korea is the third largest economy in Asia, and was the host of the most recent
G-20 summit. Respondents from South Korea have diverse opinions on what will hamper the
country‘s growth. While no respondent indicates infrastructure or access to finance as a prime
concern, every other category is considered a top challenge by at least 5% of respondents. The
most frequently cited challenges, at 32%, are crises in other economies and government
inefficiencies and bureaucracy. Still, respondents do not seem to think that these varied
challenges will be serious hindrances to growth, which is predicted to be 4%, high compared
with other economies at a similar level of income.
38
Thailand
(18 Respondents. Coefficient of variation for 10-year growth estimate: .22)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
With political turmoil since 2006, including a coup against then-Prime Minister Thaksin
Shinawatra, it is understandable that respondents in Thailand think political instability will be a
top hindrance to growth over the next few years. Distrust in government is further reflected by
corruption, and government inefficiencies and bureaucracy, being the next two most frequently
reported barriers to growth. Despite these concerns, there is room for optimism: the average
score for public opinion on governmental ability to handle these challenges is 3.2, close to the
neutral score of 3.5. Respondents predict growth will be 4.5% annually over the next decade,
which is on par with other countries at a similar income level.
39
Turkey
(12 Respondents. Coefficient of variation for 10-year growth estimate: .13)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Turkey sits in both Europe and Asia and has ambition to join the European Union.
Respondents in Turkey report lack of education or training of the labor force as the top challenge
to growth. A supply of skilled labor is necessary for the country to transition away from
agriculture and manufacturing toward a more service-based economy. Another big worry is
unpredictability of government policies, reported by half of respondents. Respondents think
people have hope that the government can solve these challenges: the country receives a score of
4 (―basically confident‖) on this measure, tied with China and Hong Kong for third highest score
among emerging market economies. With annual growth predicted at 4.6% over the next decade,
Turkey seems poised to do well, even when compared with countries at a similar level of income.
40
United Arab Emirates
(18 Respondents. Coefficient of variation for 10-year growth estimate: .20)
0 20 40 60 80 100
Percentage of Respondents
Note: We asked respondents to list up to three top challenges to growth over the next ten years.
Despite Abu Dhabi‘s large sovereign wealth fund from oil revenues, 44% of respondents
from the United Arab Emirates list government debt as a top challenge to growth, making it the
most frequently cited issue. This is likely because of Dubai‘s debt, which has received enormous
financial help from Abu Dhabi, including a 2009 restructuring of the debt of Dubai World, the
investment company that manages and supervises a portfolio of businesses for the Dubai
government. The country receives a score of 3.9 – close to ―basically confident‖ (4) – on public
opinion concerning the ability of government to overcome obstacles to growth. Ultimately,
respondents think the country will be able to maintain an annualized level of growth of 4% over
the next decade, comparable to other rich emerging market economies such as Hong Kong and
Korea and well above growth rates predicted by developed countries.
41
Part III: Appendix
Description of Sample and Survey
42
Table A2
43
Table A3
44