Is Global Economic Growth Sustainable?

In a recent report, William Blair discussed the three main driving forces of worldwide economic growth since the financial crisis, and looked at the sustainability of its influence moving forward.

Inflation Is Key

Analysts point out that, on a basic level, the world economy is composed of two major elements: wages and corporate profits. Both of these elements are driven by inflation, and therefore a stable, low-inflationary environment has been the goal of world policy makers since the end of World War II.

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However, despite an environment of deflation since the financial crisis, the world economy has still been able to grow. Analysts identified three major reasons for this economic growth that have occurred despite deflation: globalization, technological innovation and deregulation.

Globalization

The increase in worldwide economic cooperation since World War II has produced an unprecedented environment of global trade and investment. As a result of this globalization, integrated supply chains, cheaper products and cheaper services have all concurrently contributed to both economic growth and deflation.

Deregulation

Analysts point to deregulation as another driver of both growth and lower prices. “Deregulation has enabled the opening of industries to private capital, the breaking down of monopolies, changes in workforce regulations, and the creation of wholly new industries,” the William Blair report stated.

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Technological Innovation

Finally, while analysts see recent signs of exhaustion in both globalization and deregulation, they believe that technological advancement will continue to contribute to economic growth. Demand for the production of better, faster, safer and/or cheaper products perpetually drives the worldwide economy forward.

2015 And Beyond

William Blair analysts believe that scary media headlines throughout 2014 that warned investors to fear an upcoming environment of deflation and minimal growth in the world economy were misguided. The report indicated that William Blair expects healthy worldwide economic growth in 2015.