The focus of the financial markets will be squarely on Washington, DC, next week with the annual meetings of the International Monetary Fund and World Bank as well as meetings of the Institute of International Finance. High stakes issues abound for global policymakers, from the economic outlook to monetary policy, inflation, international trade and government debt.
Ahead of the meetings, MGI has published the latest in its series of reports on the global balance sheet: Out of balance: What’s next for growth, wealth, and debt? The report takes a long-term view on wealth and growth rooted in government, corporate, and household balance sheets, and applies it to the world’s key economies: the United States, Europe, and China. And check out the commentary by authors
Olivia White
,
Rebecca J. Anderson
, and
Jan Mischke
for Barron's, The Economy Is Walking A Tight Rope. What Could Trip It Up.
Some of the key conclusions:
- By many measures, the world is out of financial balance. Global wealth is $600 trillion, but it has outgrown GDP since 2000 as paper gains powered its rise. Every $1 in investment generated $2 in debt. Cross-border imbalances are growing.
- The global balance sheet of the world’s assets and liabilities points to four scenarios. Only productivity acceleration restores balance while maintaining wealth and growth. Others are less rosy. Sustained inflation would shrink real wealth and debt relative to GDP but weaken household budgets and business planning. A balance sheet reset may trigger wealth losses and years of scant growth. Another is secular stagnation with low interest rates—but also tepid growth and ongoing risk
- In the United States, up to $160,000 in per capita wealth is at stake by 2033. Productivity acceleration would raise annual GDP growth to 3.3 percent and boost per capita wealth by $65,000. Wealth would erode by $95,000 in sustained inflation or balance sheet reset.
- Europe stands to fall further behind unless productivity accelerates. For example, if Germany stays in secular stagnation, its gap to US GDP per capita could widen by $19,000.
- Chinese household wealth could expand by half or drop slightly. In all our scenarios, both wealth and GDP would grow more slowly than in a generation. The productivity acceleration scenario requires structural changes and a major step-up in consumption.
- Each country has a hefty productivity prescription, and what happens in one may affect the others. Europe would have to invest, China consume, and the United States save—on the order of 3 to 7 percent of GDP.
- For more, read the report, Out of balance: What’s next for growth, wealth, and debt?, by
Jan Mischke
,
Rebecca J. Anderson
,
Olivia White
,
Sven Smit
,
Michael Birshan
,
Nick Leung
,
Sylvain Johansson
,
Arvind Govindarajan
, and
Ezra Greenberg
.
- Register for MGI's event on October 21, The FDI shake-up: How foreign direct investment today may shape industry and trade tomorrow.
🎓Lean 6σ Green Belt Certified ✅ | API Manufacturing & Operational Excellence | Driving Continuous Improvement & Lean Transformation |
2wPowerful insights from McKinsey Global Institute on the critical role of productivity acceleration in shaping future growth. This resonates deeply with Lean Six Sigma and Operational Excellence—sustainable value emerges from relentless focus on efficiency, innovation, and systemic improvement. Interested to hear how others see these economic dynamics influencing their approach to transformation and continuous improvement.
Guardian of Legacy | Founder of James Martin’s Museum | Work in Silence — Create Legacy
4wThe world is not in a wealth crisis — it’s in a crisis of direction. It has created abundance without a compass — numbers without meaning. True productivity will always be the one that generates purpose before profit. 🇵🇹 O mundo não está em crise de riqueza, mas em crise de direção. Criou abundância sem bússola — números sem norte. A verdadeira produtividade será sempre a que gera propósito antes de gerar lucro.