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STEPHANE GARELLIGENEVA, 10 MARCH 2011
STEPHANE GARELLIPROFESSOR AT IMD AND AT THE UNIVERSITY OF LAUSANNE, SWITZERLAND,
DIRECTOR WORLD COMPETITIVENESS CENTER
A COMPETITIVENESS OUTLOOK FOR 2011, AND BEYOND
FROM BREAKDOWN TO BREAKTHROUGH…
GENEVA10 MARCH
2011
L
STEPHANE GARELLIGENEVA, 10 MARCH 2011
MARK TWAIN, 1835 - 1910
IN THE REAL WORLD,
IN THE RIGHT PLACE,
AT THE RIGHT TIME!
THE RIGHT THING
NEVER HAPPENS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
AN INCREDIBLE DECADE…
20012011
STEPHANE GARELLIGENEVA, 10 MARCH 2011
15 SEPTEMBER 200824 OCTOBER 1907
J.P. MORGAN& OTHER BANKERS
H.PAULSONTREASURY
AND THE « GREAT RECESSION »…TWO DEFINING MOMENTS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE NEW WORLD
ENTERPRISECAPITALISM
STATECAPITALISM
ECONOMICNATIONALISM
SHAREHOLDERSVALUE
STEPHANE GARELLIGENEVA, 10 MARCH 2011
A WORLD OF STATE CAPITALISM?...
OUR ECONOMY GROWS
AT NIGHT…
WHEN THE GOVERNMENT
IS SLEEPING!AN INDIAN SAYING
STEPHANE GARELLIGENEVA, 10 MARCH 2011
A CRISIS IN FOUR ACTS
FINANCIALCRISIS
SHARES
SAVINGS
VALUE DESTROYED
V- $50’000bnLOANS HOUSES
FORSALE
GDP DESTROYED
ECONOMICCRISIS
WORLD GDPWORLD
ECONOMY
V - 5%
ACT I ACT II ACT III
SOCIALCRISIS
WORLD GDPWORLD
EMPLOYMENT
JOBS DESTROYED
V- 50 MILLION
ACT IVMONETARY CRISIS?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
DO WE RISKA DOUBLE
DIP?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
Q4Q3
THE WORLD ECONOMYANNUAL % CHANGE (12 month period)
5.5
2.9
2
4.5
5RUSSIA
POLAND
HUNGARY
CZECH. REP
TURKEY
8.6
6.7
7.0
3.6
4.6
0.6VENEZUELA
MEXICO
COLOMBIA
CHILE
BRAZIL
ARGENTINA
2.71.8
1.54
2.71.3
2.40.6
7.33
1.72EURO AREA
UKCH
SWEDENSPAIN
NLITALY
AUSTRIA
GERMANYFRANCE
BELGIUM
DENMARK
9.86.2
8.26.9
4.83.8
124.8
6.93.8
2.72.2JAPAN
AUSTRALIA
THAILAND
TAIWAN
KOREA
SINGAPORESOUTH AFRICA
MALAYSIA
INDONESIAINDIA
HONG KONG
CHINA
Q42.8%
NOSE DIVINGOR
LEVELLING-OFF?(compared to previous quarter)
-1.1%
- 0.5%
+1.4%
+1.2%
+1.5%
+ 5.1%
3.2%
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE WORLD ECONOMIC WEATHER MAP
STORMY
IMPROVING
HEAT WAVE
UNCERTAIN
OVERCAST
IMPROVING
WINDY
OVERCAST
NOT IN SYNCANYMORE
STEPHANE GARELLIGENEVA, 10 MARCH 2011
WHERE ARE THE
BREAKING POINTS?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
DEBT…
SMALL US BANKS
7’000 $1bn
SOVEREIGN DEBT
GREECE SPAIN PORTUGAL
2’300bn EUROS
IRELAND
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE SOCIAL COST
20.2%
7.4% 8.2%
3.5%
5.1%5.3%
42.9%
20.7%
18.5%
40%
20%
10%
2007 2010
25.%
STEPHANE GARELLIGENEVA, 10 MARCH 2011
3%
5%
10%
2%
INFLATION ON THE RADAR SCREEN…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
INFLATION: THE BIG TEMPTATION…
REDUCE THE VALUE OF DEBT
BOOSTCONSUMPTION
“TAXATIONWITHOUT
LEGISLATION”
MILTON FRIEDMAN1912 -2006
FORCE CURRENCY CHANGES
STEPHANE GARELLIGENEVA, 10 MARCH 2011
AREWE
BANKRUPT?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE COST OF THE CRISIS
$7,200bn$7,200bnRECAPITALIZATION, GUARANTEES, TOXIC ASSETS, etc.
27% OF GDP 27% OF GDP
STEPHANE GARELLIGENEVA, 10 MARCH 2011
ONE BILLION DOLLARS HERE,
ONE BILLION DOLLARS THERE
RONALD REAGAN, 1911 - 2004
SOON OR LATER,WE SHALL BE TALKING
ABOUT MONEY!
STEPHANE GARELLIGENEVA, 10 MARCH 2011
1999
+$236bn
2009
- $1,845bn
2010
-$1,560bn
-$4 BILLION A DAY!2010
US BUDGET DEFICITS: THE LEGACY….
SOURCE: CONGRESSATIONAL BUDGET OFFICE
STEPHANE GARELLIGENEVA, 10 MARCH 2011
-8.9%
A WORLD OF SINNERSBUDGET DEFICITS AS A % OF GDP
Source: OECD
-5.7%
-10.1%
-9.1%
-6.2%
-7.4%
-14.3%
-4.8%-7.8%
-5.5%
-5.3%-2.7%
-5.1%
STEPHANE GARELLIGENEVA, 10 MARCH 2011
GEORGES W. BUSH1946 -
THERE IS A LOTOF NUMBERS
IN IT…
CLEARLYIT MUST BEA BUDGET!
STEPHANE GARELLIGENEVA, 10 MARCH 2011
UP AND AWAY…
78%
2007
106%
2010
G20DEBT as a % of GDP
+ $9,000bn
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE PREVAILING SYSTEM:
STEPHANE GARELLIGENEVA, 10 MARCH 2011
HENNY YOUNGMAN1906 -1998
THINGS COULD BE WORSE…
I COULD BEONE OF
MY CREDITORS!”
STEPHANE GARELLIGENEVA, 10 MARCH 2011
WHERECAN GOVERNMENTS
FINDMONEY?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
A SYSTEM WHEREBY
A PERSON WHO CAN NOT PAY
CREDITWORTHINESS?
GETS ANOTHER
PERSON WHO CAN NOT PAY
TO GUARANTEETHAT HE CAN PAY!
CHARLES DICKENS1812 - 1870
GOVERNMENT THAT
IT
A BANK THATA GOVERNMENT THAT
STEPHANE GARELLIGENEVA, 10 MARCH 2011
$908bn $877bn
FUELING THE US DEBT…
$1’600bn
STEPHANE GARELLIGENEVA, 10 MARCH 2011
HOW TO FIND MONEY?
BORROW
SELL
OR
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THOMAS JEFFERSON1743 - 1826
A GOVERNMENT
BIG ENOUGHTO GIVE YOU EVERYTHING
YOU WANT
IS STRONG ENOUGHTO TAKE
EVERYTHINGYOU HAVE
STEPHANE GARELLIGENEVA, 10 MARCH 2011
July 1981 – November 1982July 1990 – March 1991March 2001 – November 2001December 2007 – July 2009
14 months8 months8 months
19 months
RECESSIONS
EVERY 9- 10 YEARS…
(32 Recessions since 1854)
THE NEXT BIG ONE?
2018 -2020?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE DEEPER
REVOLUTION
STEPHANE GARELLIGENEVA, 10 MARCH 2011
A CURRENCIES WAR?
2010
1.38
0.90
2002
US$ vs EURO
1977 2010
20%
80%WORLD CURRENCY HOLDINGS
1989
60%
30%
1.56 0.012
0.1491.04
STEPHANE GARELLIGENEVA, 10 MARCH 2011
$6’200bn
A FLOCK OF MONEY…
FOREIGN CURRENCY RESERVES
WHERE WILL IT LAND?
EMERGING MARKETS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
WHO IS HAVING THE MONEY?Foreign currency reserves
Euro 520bn
EURO TREASURY BONDSUS TREASURY BONDS
$908bn
$2648bn $1051bn
$372bn $289bn$294bn $279bn$476bn $463bn
STEPHANE GARELLIGENEVA, 10 MARCH 2011
A NEW SOUTH – SOUTH BLOCK….
56% CHINESE EXPORTS = EMERGING ECONOMIES
SIZE
PROJECTSRAW
MATERIALS
MONEY
BRANDS
HI TECH
STEPHANE GARELLIGENEVA, 10 MARCH 2011
NEW PRIORITIES FOR MONEY
INDUSTRIAL ASSETS
EVERYWHERE
FINANCIAL ASSETS
GOVERNMENT BONDS
LOCAL COMPANIES
AT HOME
INFRASTRUCTURE
LOCAL AND REGIONAL
$700bnin the
Gulf Region
700Chinese corp.
In Africa
21 out 22Chinese top corp.
state financed
STEPHANE GARELLIGENEVA, 10 MARCH 2011
EMERGING GLOBAL BRANDS…
EMERGING ECONOMIES
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE ANSWER:GLOBALIZATION
2.0?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
1985
30%
0%
20%
SHARE OF WORLD MANUFACTURING
PORT ELIZABETHNEW JERSEY
2010
45%OF CONTAINERS
LEAVINGARE EMPTY
2010
RE-LOCALIZATION
STEPHANE GARELLIGENEVA, 10 MARCH 2011
MANUFACTURING AS % OF GDP
1990
2009
16.0% 17.7% 28.2%
11.2%11.2% 11.4%11.4% 20.4%20.4%
FINANCIAL SECTORAS % OF PROFITS
1980 : 16% 2008: 41%2008: 41%
RE-INDUSTRIALIZATION?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
- SERVICES-LED- CONSUMPTION-BASED
ECONOMY
TO A
- A TECHNOLOGY-BASED- EXPORT-ORIENTED
POWERHOUSE
FROM
THE BIG MISTAKE…
JEFF IMMELTCEO, GE
THAT IDEA WAS FLAT WRONG!
STEPHANE GARELLIGENEVA, 10 MARCH 2011
WORKERSCARS
EMPLOYMENT IN MANUFACTURING
1966: 8 Mo 2009: 2.5 Mo2009: 2.5 Mo
26,840645,000
5,8005,800600,000
RE-PRODUCTIVIZATION…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
CHARLES DICKENS1812 - 1870
“INDUSTRYIS THE KEYSTONE OF PROSPERITY…
AND THESOUL
OF BUSINESS”
STEPHANE GARELLIGENEVA, 10 MARCH 2011
HOWWILL
CUSTOMERS REACT?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
1 BILLION PHONES = $12bn
TWO TYPES OF ECONOMY:
1. REPLACEMENT ECONOMY
A PURCHASEREPLACES
AN EXISTING PRODUCT
« DRAMATIC » INNOVATION
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE OTHER ECONOMY…
2. FIRST BUY ECONOMY
A PURCHASEINTRODUCES
A NEW PRODUCT
PURCHASING POWER KEYNES
EMERGING MARKETS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
TWO TYPES OF ECONOMY
I NEED IT!
EMERGING MARKETS
I WANT IT!
ADVANCED MARKETS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE NEXTBUSINESSMODELS?
STEPHANE GARELLIGENEVA, 10 MARCH 2011
MARKET PROSPECTS FOR 2050s
A GENERATION AWAY ( just as the 70S…)
STEPHANE GARELLIGENEVA, 10 MARCH 2011
1766
392 628
809
525820082050
THE WORLD TODAY, AND TOMORROW…Population in millions
973
337731
577
4054EUROPENORTH AMER.
LATIN AMER. AFRICA ASIA
STEPHANE GARELLIGENEVA, 10 MARCH 2011
2,644 Mo2008
3,600 Mo2030
EMERGING MIDDLE CLASS
- MONEY
- CONSUMPTION
EMERGING LESS POOR
$100 - $200 PC THE $2500 CAR MICROFINANCE MOBILE MONEY
NEW
BUSINESS MODEL
TWO ENGINES OF GROWTH…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
- 1.2bn PEOPLE = NO SAFE WATER
- 80% DISEASES COME FROM WATER
TATA SWACH PURIFIER
$16.1
SAFE WATER…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
FROM OLD TO NEW AFRICA…
4.9%GDP
GROWTH
316MILLION
CELL PHONES
1,400LISTED
COMPANIES
100REVENUES$ 1 BILLION
20REVENUES$ 3 BILLION
GDP= $1,700 bn10th
WORLD LARGEST ECONOMY
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE COMMODITY
FEVER
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE COMMODITIES COME BACK!
100%
1999 - 2009
Source: Bloomberg
PAST 12 MONTH
INDUSTRIALS
FOOD
+58%
+41%
Source: The Economist
200%
300%
GOLD
SUGARCOPPER
OIL
GASCORN
NICKEL
308%
270%269%
202%
108% 104%94%
378%
LEAD
STEPHANE GARELLIGENEVA, 10 MARCH 2011
COAL
46%
STEEL
27%
ALUMINIUM
19%
FISH
33%
CHINA’S APPETITE…AS A % OF WORLD CONSUMPTION
COPPER
20%
CEMENT
47%OIL
8.5%
STEPHANE GARELLIGENEVA, 10 MARCH 2011
1970
100
0
50
CONSUMPTION IN MILLION TONNES
2008
38
62
13
79
36
103PORK
CHICKENBEEF
2010 2030
WORLDPRODUCTION
INCREASE CEREALS
+ 50% + 85%MEAT
THE PRESSURE OF FOOD
STEPHANE GARELLIGENEVA, 10 MARCH 2011
ECOLOGICAL FOOTPRINTECOLOGICAL FOOTPRINT
A DOG
MEDIUM-SIZED
0.84HECTARES
SOURCE: Robert and BrendaVALE, Victoria University, of Wellington, New Zealand
LAW OF UNEXPECTED CONSEQUENCES…
164 KgOF MEAT
95 Kg OF CEREALS
ANNUALTOYOTA LAND CRUISER4.6-LITRE
0.41HECTARES
10,000 Km
STEPHANE GARELLIGENEVA, 10 MARCH 2011
28% WERE ELECTRIC!
BACK TO THE FUTURE…
4,192 CARS BUILT
1900
STEPHANE GARELLIGENEVA, 10 MARCH 2011
65
RETIRED
76
GOOD SHAPE
80 5%
OVER-ACHIEVER
LIFE EXPECTANCY
+ 5 HOURS PER DAY
A SECOND LIFE: AGE AND WELLNESS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
CHANGING THE MINDSET
COMPETENCIES AND SKILLS
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THOMAS JEFFERSON, 1743 - 1826
NOTHING CANSTOP
THE MAN…
WITH THERIGHT
MENTAL ATTITUDE!
STEPHANE GARELLIGENEVA, 10 MARCH 2011
« WE STUDYA GOOD IDEA
AN ANONYMOUS CEO
?
A SENSE OF TRYING…
UNTIL IT BECOMESA
BAD ONE !»
STEPHANE GARELLIGENEVA, 10 MARCH 2011
RALPH GULDAHL1911- 1987
1937- 1939- TWO US OPEN- ONE MASTERS
A BOOK…
THE DANGER OF « OVERTHINKING »
STEPHANE GARELLIGENEVA, 10 MARCH 2011
CONFIDENCEIS
WHAT YOU HAVE
BEFOREYOU UNDERSTAND
THE PROBLEM!
WOODY ALLEN, 1935 -
JUST DO IT…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
“THE PERSONWHO SAYS
IT CANNOT BE DONE
SHOULDNOT INTERRUPT
THE PERSON DOING IT!”
A CHINESE PROVERB
RESPECT WHAT IS LESS OBVIOUS…
STEPHANE GARELLIGENEVA, 10 MARCH 2011
ADJUST TO CHANGES IN SOCIETY
MARK TWAIN, 1835 - 1910
NEVER DO WRONG
ESPECIALLYWHEN SOMEBODY
ISLOOKING!
STEPHANE GARELLIGENEVA, 10 MARCH 2011
MONTAIGNE, 1533 - 1592
TIMING IS EVERYTHING
IT IS VERY WRONGTO BE RIGHT
BEFORE EVERYONEELSE!
NEWTON - AppleAUGUST 1993
LAKER AIRWAYSAUGUST 1978
NOT IF IT IS RIGHTBUT WHEN IT IS RIGHT
STEPHANE GARELLIGENEVA, 10 MARCH 2011
THE SPIRIT OF COMPETITIVENESS…
JEAN-BAPTISTE CHARCOT1867 - 1936
POURQUOI –PAS?
WHY NOT?MENTALITY
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