McKinsey Quarterly 2023 Number 1

to 2019. While a continued shift toward Asia appears likely, future Asian models for economic success, and how they might differ from the Western paradigm, are less clear.

Unresolved questions The following are some unresolved questions regarding capitalization:

● Will the next productivity engine to drive growth be found? Labor productivity growth in G-7 nations decelerated for almost the entirety of the era of markets. The world could identify and fire up the next productivity engine and double down on growth enablers, or a slower rate of growth could become the norm. ● Will the rise and rise of the global balance sheet be reversed? Increasing leverage could be blunted or sustained by outgrowing debt or could lead to a difficult deleveraging across economies. Similarly, the growing global balance sheet could be sustained by accelerating GDP growth or increasing savings rates. Alternatively, asset prices could revert to the historical mean through a painful devaluation. How can leaders think about the road ahead? Looking at a future that could be less cohesive or less prosperous may invite pessimism, but looking back over the past 80 years gives us a compelling case for optimism too. Negativism shouldn’t overwhelm effective decision making. In Western societies, in particular, a chronic bias toward pessimism and a lack of faith in the liberal order seem endemic. Yet the post war period brought unprecedented progress and global development. Even now, when so many challenges have coincided in just a few short years, there are firm reasons to think that the future will be bright. - First, many issues can be addressed now, at least in part, with current technologies if the world can prioritize them systematically and focus efforts on the issues in the circle of control. In the case of the net-zero transition, for instance, leaders could address methane emissions first before moving on to other aspects of the climate challenge. In health, they could prioritize quick wins, such as embracing the Choosing Wisely campaign that’s spreading around the world and aims to reduce low-value medical care. It’s better to start taking action rather than be deterred out of fear of not achieving everything now. A second source of optimism is that many breakthrough technologies are moving from science fiction to reality–for example, the creation of small, modular nuclear reactors. The first US final certification of such a design was announced in 2022. Another example: the CRISPR gene-editing tool is migrating from lab to bedside to tackle cancer and genetic disorders, such as sickle cell anemia and thalassemia. Third, local bright spots act as beacons for the path forward. Take, for instance, Finland’s education system, which leads the world with its less regimented, more locally empowering approach to learning. Another example: the Netherlands has developed an effective, nurse led model of holistic, continuous care for the elderly. Perhaps the most compelling example of effective action in the teeth of a deep global challenge was the response in many parts

McKinsey Quarterly 2023 Number 1

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