At the convention titled, “Where is Italy going? Where is the world going?”, held on September 14th in Bologna’s beautiful Palazzo De’ Toschi, the organizers asked for my opinion on growth. My answer was: it’s flaccid. And I made my argument like this.
At the global level, we’re riding between 2.5 and 3%. This number has never been so low in recent years, as a large part of this percentage is concentrated in Asia. Therefore, if we remove the Asian continent, the rest of the world is growing at around 1.5%. The United States is at 2%. Europe varies between 0 and 1%, which is to say, not very much.
These numbers can only be explained in one way: China is no longer driving growth. Corroborating the theory that’s been taking hold over the last year or so: we’re facing a centennial stagnation.
The problem is that we’ve created too much productive capacity and the world has exceeded in everything, from mines to oil wells. We’ve wasted many resources and, in the meantime, we’re heading toward deflation, which, along with the ageing population, represent considerably critical aspects. So, we can predict that with this current scenario, excess productive capacity will be disposed of in a decade.
The “happy island” exists and is once again represented by Asia because its population is born without the debts of their western counterparts, who need to shoulder the burden of 2 or 3 retirees each. Regardless of their religion, the same denominator unites them all: an insatiable hunger for education as social leverage, with the mantra “study, study, study” repeated ad infinitum. Today, this finding is objective: Asia is a giant forge of science and scientists. They won’t reach 10% again like they did in the past, but they’ll get back to 5% growth soon.
Furthermore, it should be noted that there are some cities that are going full speed. They’re pushing heavily on innovation through deeply innovative ecosystems, with nearly limitless investments and wealth, where real estate is booming. I’m talking about Boston, San Francisco, Bangalore, Shenzhen, and the triangle between Oxford, Cambridge, and London. Here, innovation is at the maximum.
And this is precisely the principle theme of global growth: innovation. Above all, it is the most positive theme before many problems that range from uncertainties tied to the next US election to global warming, from pollution to terrorism and waves of migration. Meanwhile, there is no uncertainty regarding the power of innovation.
Thanks to biotechnology, we will likely begin to cure Alzheimer’s in five years, and many tumors can be defeated today. Then we have artificial intelligence, the Internet, the sharing economy, Hospitality, online finance, 3D, storable energy, etc., etc. Through innovation, the world will continue to change and more quickly. Surely, certain careers will disappear; maybe lawyers won’t exist anymore (while the future is guaranteed for gardeners). In any case, the positivity of the future world is tied to innovation.
Why did the world stop? It’s simple. Because two substantial categories stopped: Chinese investors don’t invest anymore and American consumers stopped consuming. The frame triggers the question of redistribution, with the wealthy who no longer know what to buy and the poor who would like to consume but ran out of money; so grows the polarization of wealth, with insufficient consumption and excess savings.
Then, my friends in Bologna asked me to speak about Italy, and I refused. They insisted, and so I said a few things. Countries in the globalized world stay afloat in two ways: by making things that cost less or making things that others can’t. Italy hasn’t had the lowest costs for decades, but in the meantime it doesn’t have many excellences. Therefore, not much can be done. In a context like ours, the hope is to make Bologna into a center of innovation. We don’t have any other chance. And we need to encourage our children to turn their attention to innovative sectors.
When I’m in Asia, they ask me to speak about the United States. When I’m in the US, they ask me about Asia and Europe. No one wants me to speak about Italy. Do you know why? Because it’s a boring topic. They hate our politics, or at the very best they don’t understand it. They don’t see any change. Therefore, we’re annoying to them.
Or, we’re seen as a danger because of our public debt.
Or even worse, they count us as dead.
So, every time there’s a modicum of change in Italy (in general, Renzi is seen positively overseas), like the referendum or the Jobs act (that no one really understands but at least it sounds nice), it’s a huge positive sign for the markets, simply because they’re surprised we’re still alive. The world, despite everything, loves Italy. And they’re rooting for our survival.