Building “smart economies” requires global cooperation

GFierce competition among global powers in search of economic security and leadership has contributed to a highly fragmented global economy. Trends that include countries increasingly imposing trade barriers such as tariffs, technological decoupling and disruption of capital flows currently show little sign of slowing down. This is happening in a context of heightened geopolitical tensions and a general shift towards multipolarity. The economic costs of fragmentation are high, with the International Monetary Fund (IMF) estimating that increased restrictions on international trade could reduce global production by up to 7% in the long term, totaling US$7.4 trillion.

However, this economic fragmentation coincides with a unique opportunity to begin building much more productive, inclusive and sustainable economies across the world. These smart economies are anchored in exponential advances in a wide range of technologies, from digital technology to energy technology and biotechnology. The task now facing all stakeholders is to look for ways to maximize the growth benefits of this innovation drive while minimizing the drag of fragmentation. More creative dialogue and cooperation is urgently needed to seize this opportunity and avoid falling into a “tepid 20s” marked by slow growth and growing debt challenges, as mentioned by IMF Managing Director Kristalina Georgieva earlier this year.

As leaders from business, government, civil society and international organizations gather this week at the 15th Annual New Champions Summit in Dalian, China, the goal is to discuss how these solutions can be found and implemented.

Navigating between sovereignty and interoperability

Technologies driving the next wave of economic activity and growth – including artificial intelligence, quantum computing and biotechnology – have prompted significant policy changes, given the high-risk implications of capturing these fast-growing markets. Going forward, there is a profound need for balance between the competing imperatives of sovereignty and security, on the one hand, and openness and interoperability, on the other.

Restricting the flow of essential cutting-edge technologies just as these sectors are beginning to flourish has global implications. The IMF recently predicted that a decoupling of high technology (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 certain 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 developing systems that can work together – rather than creating competing, isolated systems, will allow us to unlock the full range of benefits of these innovations. It is clear that moving beyond interoperability to coordination and cooperation will further expand certain opportunities.

Centering people and planet

The benefits derived from smart economies must focus on people as well as the world we inhabit, with technological advances impacting everything from employment, skills and wealth distribution, to healthcare, education and public services. Among the most urgent impacts is the need to reskill and upskill the global workforce to meet the demands of tomorrow’s economy.

According to the World Economic Forum Future of Jobs Report published last year, technologies are expected to disrupt 44% of workers’ core skills over the next five-year period and will be responsible for structural labor market turnover of 23% of jobs. A combination of public policies and private sector initiatives will therefore be needed to ensure that advances in technology result in a strong positive outcome for workers through productivity gains and the creation of new jobs in general.

Likewise, these gains must translate into a concrete boost and intensification of efforts to mitigate the impacts of climate change and ensure a positive nature world. The World Economic Forum is committed to driving this work through its initiatives such as the Jobs Consortium and Reskilling Revolution, which aim to transform skills and create good jobs around the world, and the First Movers Coalition, which leverages corporate climate commitments to drive demand for and adoption of emerging climate technologies.

Unlock energy technology convergence

There is still a lot of work to do to achieve 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 billion dollars will be needed in energy transition technologies to meet the objective of limiting the increase in the global average temperature to 1.5°C, according to the International Renewable Energy Agency (IRENA). This will require tripling renewable energy and doubling energy efficiency simultaneously.

Technological advances currently under development could unlock the momentum needed to realistically achieve these goals. These innovations are varied and include smart infrastructure networks, CO capture technologies_two, the development of hydrogen fuel cells to replace traditional power generation, scientific advances in nuclear fusion as a long-term energy solution, and the expansion 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 tackle complex and pressing challenges if we connect the dots across industries and geographies. Finding ways to do so is absolutely necessary to reinvigorate the global economy in this new era.