Productivity and Prosperity

Investing in productivity growth can spur economic growth and support higher living standards. Productivity in the median economy jumped six fold in the past quarter century, but there is variation. Thirty emerging economies, home to 3.6 billion people, are in the “fast lane” of improvement. If they maintain their pace, they would converge to advanced-economy productivity levels within roughly the next quarter century. “Middle lane” economies would take more than a hundred years, while “slow lane” ones would never converge. At the same time, advanced-economy productivity has slowed by about one percentage point since the global financial crisis. Directed investment in areas such as digitization, automation, and artificial intelligence could fuel new waves of productivity growth in advanced and emerging economies, which is the best way to continue improving well-being and prosperity around the globe. This are the findings of the McKinsey Global Institute 2024 report.

 Micro-, small and medium-size enterprises, or MSMEs, are the lifeblood of the global economy. They account for two-thirds of business employment in advanced economies and almost four-fifths in emerging economies, as well as half of all value added. Improving MSME productivity to match top-quartile levels relative to large companies is equivalent to 5 percent of GDP in advanced economies and 10 percent in emerging economies.

 

Mckinsey used investment to take Europe’s pulse and found it low. Insufficient investment compromises Europe’s competitiveness, way of life, and standing in the world. US investment in intellectual property and equipment is double that of Europe per capita, and Europe’s pool of venture capital assets is just one-quarter of the US total. Today, returns on invested capital are four percentage points higher in the United States than in Europe. Reducing barriers to investment, such as energy costs, talent shortages, business and labour market regulation, and geo- and macroeconomic uncertainty, can give Europe a pulse on its competitiveness and help attract capital.

 

Malaysia’s investments on R& D currently is below 1% of GDP. There are threats by the Government to raise it to 2% but not effected. Advanced economies do 3-5% in R&D investments. So, we have a long way to go if we continue to focus on chicken ham, addendum and other sensitivities. 

Reference:

McKinsey Global Institute: 2024 in Charts, 12 December 2024