http://www.mckinseyquarterly.com/links/37899 Drawing on industry case studies from around the world, MGI analyzes policies and regulations that have succeeded and those that have failed in fostering economic growth and competitiveness at the sector level. What emerges are some surprising findings that run counter to the way many policy makers are thinking about the task at hand. http://www.mckinseyquarterly.com/links/37899 More objects are becoming embedded with sensors and gaining the ability to communicate. The resulting new information networks promise to create new business models, improve business processes, and reduce costs and risks. http://www.mckinsey.com/mgi/publications/debt_and_deleveraging/index.asp The recent bursting of the great global credit bubble has left a large burden of debt weighing on many households, businesses, and governments, as well as on the broader prospects for economic recovery in countries around the world. Leverage levels are still very high in ten sectors of five major economies. If history is a guide, one would expect many years of debt reduction in these sectors, which would exert a significant drag on GDP growth. http://www.mckinsey.com/mgi/publications/reserve_currencies/index.asp While some observers assume that the United States has enjoyed an "exorbitant privilege" because the dollar is the global reserve currency, MGI finds that there are only modest net benefits. In 2007–2008, the United States derived a net financial benefit of just $40 billion to $70 billion—or 0.3 to 0.5 percent of U.S. GDP. In a "crisis" year—such as the year to June 2009—the net financial benefit fell to between -$5 billion and $25 billion. Could these modest benefits mean that the United States continues to prioritize its domestic economic agenda over its implicit responsibility to maintain global financial stability—leading to greater currency volatility that threatens economic and corporate competitiveness? http://www.mckinsey.com/mgi/mginews/eurozone.asp The steady rise in current account deficits and surpluses among eurozone countries has amplified the effect of the financial crisis in Europe and may dampen the recovery. Unwinding the imbalances over time will be an important, if complex, task for European policy makers, Susan Lund and Charles Roxburgh write in a column for BusinessWeek. http://www.mckinsey.com/mgi/publications/unleashing_chinese_consumer/ By pursuing a more aggressive program of comprehensive reform, China's leaders could raise private consumption above 50 percent of GDP by 2025, bringing the consumption rate in line with developed countries and vaulting China's economy into a new phase. A more consumer-centric economy would allocate capital and resources more efficiently, generate more jobs, spread the benefits of growth more equitably, and also enrich the global economy with $1.9 trillion a year in net new consumption. http://www.mckinsey.com/mgi/publications/The_New_Power_Brok_Private_Equity/ The power brokers' collective performance in the financial crisis, though better than the sharp declines in wealth of most institutional investors, masks an important shift: Asian sovereign and petrodollar investors emerged as more influential than ever, while hedge funds, and private equity saw their previously rapid growth interrupted. http://www.mckinsey.com/mgi/publications/changing_fortunes Global economic integration and technological advances have combined to produce permanent changes in the skill levels required to flourish in the U.S. labor market. Seventy-one percent of U.S. workers are in jobs unfavorable to robust income growth. While there is no single cause or "silver bullet" remedy for rising income dispersion, upgrading the productivity, skills, and rewards in the service sector is the key challenge. http://www.mckinseyquarterly.com/links/34195 Demand for energy will return, and oil prices could spike anew as soon as the world economy recovers. http://www.mckinsey.com/mgi/publications/lean_russia/index.asp Labor productivity in Russia remains low, but improvements have been promising. In five sectors - steel, retail, retail banking, electric power and residential construction - productivity stands now on average at 26 percent of U.S. levels in 2007. http://www.mckinsey.com/mgi/publications/income_disparity/index.asp Recent trends in health care costs, health care coverage, and household income have contributed to growing disparities between different income groups in the United States. http://www.mckinsey.com/mgi/publications/beating_recession/index.asp European consumers have already cut back their spending in response to the economic downturn, and signs of an even deeper retrenchment are present. Businesses need to tune into and sharpen their awareness of evolving consumer attitudes and tactics if they are to survive the recession and position themselves for economic recovery. http://www.mckinsey.com/mgi/publications/us_consumers/index.asp U.S. consumers are spending less and saving more. Unless incomes grow faster, each percentage point increase in the saving rate would reduce spending by more than $100 billion - a serious drag on any recovery. http://www.mckinsey.com/mgi/publications/next_energy_crisis/index.asp Global energy-demand growth is expected to flatten in the short term but will rebound with recovery. Indeed, there is potential for liquids-demand growth to outpace that of supply—risking a new spike in oil as soon as 2010 to 2013, depending on the depth of the economic downturn. http://www.mckinsey.com/mgi/publications/US_healthcare/index.asp The United States spends $650 billion more on health care than expected, even when adjusting for the economy's relative wealth. MGI examines the underlying trends and key drivers of these higher costs. http://www.mckinseyquarterly.com/links/31751 As consumers batten down the hatches and the global economy slows, senior executives confront a more profoundly uncertain business environment than most of them have ever faced. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even prosper. http://www.mckinsey.com/mgi/mginews/skyhigh.asp We can dramatically reduce greenhouse gases and grow the global economy for less than we think. http://www.mckinsey.com/mgi/publications/reforming_Japan_health/executive_summary.asp Three interrelated factors are impeding Japan's ability to reform its health system: resources are overutilized, many of the proposed solutions fail to address root causes, and political considerations make reform difficult. http://www.mckinseyquarterly.com/links/31414 Most U.S. baby boomers are not prepared for their retirement. Boomers can help mitigate the consequences by remaining in the workforce beyond the traditional retirement age. That will require important changes in policy, business practices, and personal behavior. http://www.mckinsey.com/mgi/publications/fueling_sustainable_development.asp By choosing more energy-efficient cars and appliances, improving insulation in buildings, and selecting lower-energy-consuming lighting and production technologies, developing countries could cut their annual energy demand growth by more than half from 3.4 to 1.4 percent over the next 12 years. This would leave energy consumption some 22 percent lower than it would otherwise have been—an abatement equivalent to the entire energy consumption of China today. http://www.mckinsey.com/mgi/publications/capture_europe_energy/index.asp With energy-efficiency standards in Europe set higher than in many other regions, European companies are in a strong position to make large energy-cost savings and innovate lucrative new markets in energy-efficient technologies and services, attracting worldwide demand. If policy makers and business engage fully in boosting energy efficiency, Europe could hold energy demand at today’s level instead of seeing it grow 1.2 percent annually. http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?_requestid=202995&ml_subscriber=true&ml_action=get-article&ml_issueid=BR0809&articleID=F0809A&pageNumber=1 In order to develop appropriate new rules for the current era, we must begin to think differently about the rapidly evolving financial world, focusing on three key dimensions: activity on a global scale, new private and public actors, and financial activity taking place outside traditional publicly traded and regulated markets, Diana Farrell argues in the Harvard Business Review. http://www.mckinseyquarterly.com/links/30327 China's cities are booming. Intelligent policies could make the good effects prevail over the bad ones. http://www.mckinsey.com/mgi/publications/Power_Brokers_Gaining/index.asp Four financial market power brokers—Asian sovereign investors, petrodollars, hedge funds, and private equity firms—have grown in size and clout during the financial crisis that began in mid—2007. The crisis underscored one of the biggest benefits offered by the power brokers: vast pools of liquidity. Yet risks remain. http://www.mckinsey.com/mgi/publications/Carbon_Productivity/index.asp Meeting commonly discussed greenhouse gas abatement paths by 2025 while maintaining economic growth will require a tenfold increase in "carbon productivity," the amount of GDP produced per unit of carbon equivalents emitted. The macroeconomic costs of this "carbon revolution" are likely to be manageable. http://www.mckinsey.com/mgi/publications/The_Coming_Oil_Windfall/index.asp Between 2007 and 2020, the member states of the Gulf Cooperation Council will earn $5 trillion to $9 trillion from exports of crude oil. Depending on oil prices and levels of domestic investment, 30 to 60 percent of this windfall could flow into overseas capital markets. http://www.mckinsey.com/mgi/publications/Impact_Aging_Baby_Boomers/index.asp Despite their aggregate wealth, a vast majority of U.S. Baby Boomers are unprepared for retirement. Enabling them to work longer would significantly benefit both individuals and the broader economy, but policy makers and business leaders will need to take action. http://www.mckinsey.com/mgi/mginews/where_big_best.asp The rise of megacities has created slums and chaos elsewhere, but in China, they are cleaner and more efficient. http://www.mckinsey.com/mgi/publications/Japan_Future_Health_Care.asp Health care spending in Japan could double as a proportion of GDP within 30 years, driven by advances in medical technology, growing wealth, and demographic changes. To close the funding gap, policy makers need to consider reforms such as adjusting reimbursement coverage to avoid more wasteful spending and encouraging more private payments without undermining universal coverage. http://www.mckinsey.com/mgi/publications/china_urban_billion/index.asp By pursuing a more concentrated urbanization path guided by action to boost urban productivity, China's local and national policy leaders would minimize the pressures and maximize the economic benefits of urban expansion. A two-part report details the scale, pace, and global implications of urbanization at the sector and city levels. http://www.mckinsey.com/mgi/publications/Investing_Energy_Productivity/index.asp Additional annual investments in energy productivity of $170 billion through 2020 could cut global energy demand growth by at least half while generating average internal rates of return of 17 percent. Such outlays would also achieve significant energy savings and cuts in greenhouse gas emissions. http://www.mckinsey.com/mgi/publications/The_Coming_Oil_Windfall/index.asp At an oil price of $70 a barrel, the six nations of the Gulf Cooperation Council would earn a cumulative $6.2 trillion by 2020, or more than triple the amount they earned from 1993 through 2006. Decisions by Gulf leaders on how to use this wealth will have global repercussions for decades. http://www.mckinsey.com/mgi/publications/Mapping_Global/index.asp MGI's analysis highlights trends in the global financial markets across countries, regions, and asset classes. It finds assets reached $167 trillion in 2006, while capital flows climbed to a record $8.2 trillion. http://www.mckinsey.com/mgi/mginews/private_equity.asp Despite the credit crunch, private equity isn't fading away. In fact, the industry's assets may double by 2012, Diana Farrell writes in BusinessWeek Online. A chart-driven article in The McKinsey Quarterly examines the growth of new financial power brokers in the global capital market, including oil investors, Asian central banks, hedge funds and private equity. http://www.mckinsey.com/mgi/publications/Serving_Aging_Baby_Boomers/index.asp By 2015, the U.S. baby boomer generation will command almost 60 percent of net U.S. wealth and 40 percent of spending. While the conventional wisdom about boomers suggests they are widely affluent, only 25 percent are financially prepared for retirement and are aging with confidence, according to a new McKinsey Quarterly article. http://www.mckinsey.com/mgi/mginews/powerbrokers.asp They are rich, secretive, feared, and poorly understood. Here's the truth about the four hottest players in global markets, Diana Farrell and Susan Lund write in Newsweek International. http://www.mckinsey.com/mgi/publications/The_New_Power_Brokers/index.asp Even under conservative scenarios, the assets of the new power brokers—petrodollars, Asian central banks, hedge funds, and private equity—will nearly double over the next five years to $15.2 trillion. http://www.mckinsey.com/mgi/mginews/businessweek/us_china_trade.asp It's easy to blame the weak yuan for the huge U.S. current account deficit, but MGI research finds it's not the real problem, Diana Farrell writes in BusinessWeek Online. http://www.mckinsey.com/mgi/publications/leap_frog/index.asp By taking advantage only of currently existing technologies that pay for themselves, China could further its ongoing efforts and reduce total energy demand in 2020 by as much as 23 percent. Lower energy demand would also mean that China could cut its projected oil imports by up to 15 percent and its CO2 emissions by at least 20 percent by 2020. http://www.mckinsey.com/mgi/publications/wasted_energy/index.asp By capturing the potential available from existing technologies, the United States could cap U.S. energy consumption, as well as its greenhouse gas emissions, at today's levels. http://www.mckinsey.com/mgi/publications/US_imbalancing_act/index.asp The U.S. current account deficit could continue to grow over the next five years. However, to reverse the deficit by 2012, a massive dollar depreciation would be required. http://www.mckinsey.com/aboutus/mckinseynews/simpleplan.asp Diana Farrell of the McKinsey Global Institute argues a commitment to energy efficiency can help avert a global climate crisis. http://www.mckinsey.com/aboutus/mckinseynews/sarkozy_recipe.asp France's new leader should nourish the economy by limiting restrictions, increasing labor market flexibility, and boosting public-sector productivity, Diana Farrell writes in a column for BusinessWeek on-line. http://www.mckinsey.com/mgi/publications/Curbing_Global_Energy/index.asp There is a large opportunity to contain accelerating energy demand growth in practical, cost effective ways, and, in the process, cut CO2 emissions. http://www.mckinsey.com/mgi/publications/india_consumer_market/index.asp If India continues on its current high growth path, incomes will almost triple over the next two decades, and the country will climb from its position as the twelfth-largest consumer market today to become the world's fifth-largest consumer market by 2025. http://www.mckinsey.com/mgi/publications/BrazilOffshoring.asp Brazil must address labor shortcomings and other issues if it hopes to capitalize on its considerable potential as an offshoring destination. http://www.mckinsey.com/mgi/publications/ChileOffshoring.asp The country has already attracted the attention of multinational companies; now it must address its shortcomings to reach its offshoring potential. http://www.mckinsey.com/mgi/publications/MexicoOffshoring.asp To take advantage of the growing global market for offshored services, the country must do more to improve the suitability of its workforce. http://www.mckinsey.com/mgi/publications/CapitalMarkets.asp Although the region's financial depth is low, Latin America could be on the verge of a breakthrough if policy makers continue reducing public debt and reforming the financial and legal systems. http://www.mckinsey.com/mgi/publications/FivePriorities.asp To enter the ranks of the world’s leading economies, Brazil must remove entrenched barriers to productivity. http://www.mckinsey.com/aboutus/mckinseynews/tremors_shake.asp Is New York losing out to London? McKinsey Global Institute Director Diana Farrell discusses worldwide shifts beyond the trans-Atlantic rivalry. http://www.mckinsey.com/ideas/books/anthology/ Now available, a new collection of McKinsey Global Institute research, published by Harvard Business School Press, offers perspectives on offshoring, productivity and what drives economic growth. http://www.mckinsey.com/mgi The McKinsey Global Institute (MGI) was established in 1990 as an independent economics think tank within McKinsey and Company. MGI investigations are conducted with the goal of improving business performance and competitiveness while establishing a fact base for sound policy making. MGI studies aim to challenge the conventional assumptions of corporate leaders and policy makers alike. en-us McKinsey and Company http://www.mckinsey.com/mgi/publications/brazil_grow.asp A sector-based analysis maps the barriers to productivity in Brazil and identifies the path to higher growth. http://www.mckinsey.com/mgi/publications/Philippines_offshoring.asp The Philippines is in a strong position to capitalize on the opportunities of offshoring. However, the government and private sector must work to strengthen both some perceived and real weaknesses. http://www.mckinsey.com/mgi/publications/India_offshoring.asp The country must not only produce more top-quality engineers but also show the world the depth and quality of its talent in other fields - and in cities beyond Bangalore and Mumbai. http://www.mckinsey.com/mgi/publications/Reforming_India.asp To finance economic growth, India's financial system must mobilize savings more effectively - a goal that calls for reducing the government's fiscal deficit, which crowds out private investment, and for reforming banks and capital markets. http://www.mckinsey.com/mgi/publications/european_economy.asp America's growing current account deficit has set off loud alarm bells. But many commentators are overlooking a key reality of the global economy. http://www.mckinsey.com/mgi/publications/Reforming_India.asp To maintain adequate social programs, Europe must restore full employment and generate economic growth through regulatory reform. http://www.mckinsey.com/mgi/publications/us_autoindustry/index.asp An in-depth analysis of the U.S. auto sector between 1987-2002 found that process innovations were the largest contributor to the increase in auto sector productivity growth, while product innovation advantages were short-lived. http://www.mckinsey.com/mgi/publications/rethinking.asp Fewer U.S. jobs can be performed remotely than is commonly presumed. Rather than trying to stop globalization, the goal must be to facilitate and ease the changes it brings. http://www.mckinsey.com/mgi/publications/domestic_services.asp Given the right competitive environment, local services can be a powerful source of wealth creation and jobs for middle-income economies - more powerful than offshore services could ever be. http://www.mckinsey.com/mgi/publications/us_productivity.asp A sector-by-sector analysis unveils the sources of continued productivity growth in the U.S., even after the dot com collapse in 2000. http://www.mckinsey.com/mgi/publications/gcmAnnualReport.asp The world's financial assets now total $136 trillion and are set to exceed $228 by 2010 if current trends persist, according to MGI's second annual review of the financial assets of more than 100 countries since 1980. Much of this growth is driven by debt, with government and private debt securities accounting for more than half of the overall growth in the global financial assets from 2000-2004. http://www.mckinsey.com/mgi/publications/china_capital/index.asp A more integrated approach to reform could reduce the inefficiencies in China's financial system and bring about big gains for the economy. http://www.mckinsey.com/mgi/publications/sweden/index.asp To sustain growth in the face of globalization and changing demographics, Sweden should focus on three priorities: improve competition in the private sector, accelerate productivity in the public sector, and focus on job creation in services sectors. http://www.mckinsey.com/mgi/publications/india_growth/index.asp Addressing the inefficiencies in India's financial system could free up $48 billion of capital a year and raise the country's real GDP growth to 9.4 percent a year, according to new research by the McKinsey Global Institute. http://www.mckinsey.com/mgi/publications/china_emerging_middle_class.asp Global companies that focus mainly on serving China's urban affluent consumers risk missing the real opportunity – the emerging middle class. http://www.mckinseyquarterly.com/links/22629 An exhibit-driven article underscores how China's banking system must change drastically. http://www.mckinsey.com/aboutus/mckinseynews/unlockingindia.asp Reform of India's financial system would mean better use of capital and the elevation of millions from poverty, McKinsey Global Institute research shows. http://www.mckinseyquarterly.com/links/23092 A stronger financial system in India would make its economy grow more quickly and ensure higher tax revenues-without higher tax rates. http://www.mckinsey.com/aboutus/mckinseynews/chinafinancial.asp Aggressive reform of China's financial system is necessary to promote sustainable growth, according to research by the McKinsey Global Institute. http://www.mckinsey.com/mgi/publications/talefinsys.asp China's problem is that capital costs zero. India's problem is zero capital. http://www.mckinsey.com/aboutus/mckinseynews/financialreform.asp For both China and India, financial reforms are much more likely to achieve the social objectives that are currently used to justify the distortion of the financial system by the government. Such reforms should be among their highest priorities. http://www.mckinsey.com/aboutus/mckinseynews/swedenbalance.asp The McKinsey Global Institute's Diana Farrell says the country is demonstrating that a competitive market need not conflict with social protection for citizens. As China transitions to more of a consumption-led economy, a massive middle class is expected to emerge. http://www.mckinsey.com/mgi/publications/third_annual_report/index.asp MGI’s third analysis highlights trends in the global financial markets across countries, regions and asset classes. It finds assets reached $140 trillion in 2005 and, for the first time, provides a detailed look at cross-border capital flows.