Crossroads 2024: Economic Stagnation or Productivity-Driven Future?

As we stand at the threshold of 2024, the global economy teeters on the brink of two divergent paths: one leading to economic stagnation and the other to a future of productivity-driven abundance. The choices made by business leaders today will determine which path we take. The recent McKinsey report highlights the potential for a brighter future, fueled by the convergence of several transformative forces, including the first successful fusion experiment, the vast promise of applied AI, mRNA therapeutics, gene editing, and other technology trends¹.

The report argues that there is no better time than now for business leaders to invest in a prosperous and sustainable future. By embracing a three-sided productivity opportunity—upskilling workers, offsetting higher input prices and interest rates, and targeting investments in capital and technology—companies can operate more efficiently, empower workers, generate higher wages, and accelerate growth¹. This approach mirrors the last great productivity acceleration in the United States between 1995 and 2000, which saw companies that coupled capital and technology investments with capability building and changes in management practices experience soaring productivity, lifting the entire economy¹.

However, this optimistic outlook is not guaranteed. The global economy is still grappling with uncertainty, compounded by new geopolitical disruptions, shifts in the global economic order, and the ongoing energy transition¹. Elevated inflation and interest rates, frustrated consumers, constrained labor markets, and domestic political volatility continue to pose challenges¹. Business leaders must navigate these mercurial conditions while pursuing the productivity imperative to not only position their organizations for outperformance but also to contribute to the advent of future abundance.

Looking beyond 2024, the range of possible economic scenarios could create widely different medium- and long-term market outcomes. While the consensus expectation is for growth to revert to pre-COVID-19 trends, there are plausible scenarios where growth could be well above or well below historical levels¹. The key takeaway from the McKinsey report is clear: the future is not preordained, and it is the actions taken today that will shape the economic landscape of tomorrow. Business leaders have a unique opportunity to steer us towards a future of abundance, but it will require a concerted effort to harness the productivity potential that lies within our grasp.

Sources:

(1) The productivity imperative in 2024 | McKinsey. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/2024-and-beyond-will-it-be-economic-stagnation-or-the-advent-of-productivity-driven-abundance.

(2) The Daily Read – McKinsey & Company. https://www.mckinsey.com/~/media/mckinsey/email/alerts/2024/01/2024-01-22a.html.

(3) What will happen to the global economy in 2024? – The World Economic Forum. https://www.weforum.org/agenda/2024/01/economic-outlook-2024-recession-inflation