It is now widely acknowledged that the increasing international integration and liberalization of the past decades has ushered in an era of turbulence and uncertainty in the global economy.footnote1 The growth and fragility of financial markets, the impact of their excesses upon real economies, the disruptive effects of China’s dramatic rise, the scale of America’s foreign debt and the effects of intensifying competition on national labour markets all point to continuing instability in the decades ahead. What follows is a survey of some of the most salient trends in the world economy today and a sketch of the directions they may indicate.

To begin with the United States. It is worth recalling that, as recently as 1989, an mit Commission on Industrial Productivity set up to consider the risk posed to the us economy by rising productivity levels in Europe and Japan, could begin its report with the gloomy warning that:

To live well a nation must produce well. In recent years many observers have charged that American industry is not producing as well as it ought to produce, or as well as it used to produce, or as well as some of the industries of some other nations have learned to produce. If the charges are true and the trend cannot be reversed, then sooner or later the American standard of living must pay the penalty . . .

Products made in the United States are said to be inferior . . . American factories are accused of inefficiency; the work force is said to be indifferent and ill-trained; and managers are criticized for seeking quick profits rather than pursuing more appropriate long-term goals.footnote2

The mit Commission carried out eight case studies, including cars, computers and consumer electronics; in each industry, the seriousness of the competition posed by European or, more often, Japanese companies was stressed. Given the excitement that has since surrounded the nimble high-tech companies of the ‘new economy’ boom, the Commission’s comment on semiconductors is striking: ‘The contest was between small, single-product, inexperienced under-financed American start-ups and the heavyweights of Japanese industry. David did not defeat Goliath’.footnote3