## There is an economic promise to be made across generations, one that requires us to take decisive action this decade

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**Canonical URL:** [There is an economic promise to be made across generations, one that requires us to take decisive action this decade](https://www.imf.org/-/media/files/publications/fandd/article/2024/06/georgieva-june24.pdf)

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### Overview
- Author: Kristalina Georgieva.
- Central claim: We can deliver a promise of progress to future generations if we act decisively this decade, combining sound macro fundamentals with better international cooperation and a different kind of growth—more sustainable and equitable.
- Core drivers of past progress: technological innovation, capital accumulation, and economic integration (trade and capital flows).

### Historical progress and shortcomings
- Achievements over the past century:
  - Per capita global income has risen eightfold.
  - Global population has quadrupled over the past century.
  - Over the past three decades, 1.5 billion people lifted themselves out of poverty, and hundreds of millions entered the middle class.
  - Dramatic improvements in life expectancy, infant mortality rates, literacy rates, and education levels—especially for girls.
  - Over the past 40 years, a six-fold expansion in global trade and global capital flows rose more than tenfold.
  - In Bulgaria, per capita income has quadrupled since the fall of the Iron Curtain due largely to integration with the EU and global trade.
- Shortcomings and risks:
  - Economic inequality is very high within and across countries: some three-quarters of the world’s wealth today is owned by just one-tenth of the population.
  - More than 780 million people face hunger.
  - Too many developing economies are no longer catching up to advanced economy income levels.
  - High inequality corrodes social capital and trust and raises risks of geopolitical fragmentation and rival blocs.
  - Climate shocks are already imposing costs across economies and global supply chains.

### Two scenarios for the next 100 years (IMF staff)
- Low-ambition scenario:
  - Global GDP would be about three times larger than today.
  - Global living standards would be twice as high as they are today.
  - This scenario is based on the lower-growth experience of living standards in the 100 years before 1920.
- High-ambition scenario:
  - Global GDP would be 13 times larger than today.
  - Global living standards would be 9 times higher than today.
  - This scenario is based on the much higher average growth rates from 1920 until now.
- Policy implication: Commitment to sound fundamentals (price stability, sustainable public debt levels, financial stability), open trade, entrepreneurship, and improved international cooperation are needed to reach the high-ambition outcome.

### Three priority areas for capital allocation
- Climate economy:
  - Goal: Reach a carbon-neutral economy and ensure a livable planet by acting decisively this decade.
  - Financing: Mobilize trillions of dollars in climate investments—for mitigation, adaptation, and transition.
  - Market failure: Pricing carbon is identified as the most efficient way to accelerate decarbonization.
  - Current numeric benchmarks:
    - The average price per ton of carbon dioxide emissions today is only $5.
    - The price needed to reach by 2030 is $80.
    - Carbon pricing programs now cover a quarter of global emissions (a doubling since 2015).
    - Investors’ response: for every $1 spent on fossil fuels, $1.70 is now spent on clean energy—compared with a ratio of 1:1 five years ago.
  - Benefits: Millions of green jobs, increased innovation, accelerated green technology transfer, and potential to break the historical link between growth and emissions.
- Next industrial revolution (technology and AI):
  - Areas: Quantum computing, nanotechnology, nuclear fusion, virtual reality, new vaccines, gene therapy, artificial intelligence.
  - Potential: AI could turbocharge productivity, shrink human capital gaps in the developing world, and help income catch-up.
  - Risks and labor impact:
    - IMF research: in advanced economies, about 60 percent of jobs could be affected by AI.
    - Of those jobs affected, half may see benefits from AI tools, but the other half may be rendered obsolete.
  - Policy responses: Scale up investment in digital infrastructure, expand access to retraining and reskilling, and establish global principles/guardrails for the responsible use of AI.
- Investment in people:
  - Focus: Health, education, stronger social safety nets, and economic empowerment of women.
  - Demographic context:
    - Africa is home to the youngest and fastest-growing populations; by the end of this century, Africa’s share of the global population is set to reach close to 40 percent.
    - Europe and East Asia are rapidly aging, with some populations shrinking.
  - Fiscal and policy levers for low-income countries:
    - IMF research example: by building tax capacity, low-income countries could boost their annual budget revenues by up to 9 percent of GDP—bringing their tax effort in line with emerging market economies.
  - Goal: Connect Africa’s human resources with abundant capital in advanced and major emerging markets to attract long-term investment, technology, and know-how.

### Role of international cooperation and the IMF
- Need to update 20th-century multilateralism to a “21st century multilateralism” that is more open to fresh thinking, more representative, and better balanced between advanced economies and emerging market and developing economies.
- IMF contributions and capabilities:
  - Since the pandemic, the IMF has injected about $1 trillion in liquidity and financing into its 190 member countries.
  - Introduced programs for emergency financing and direct debt relief for the poorest members.
  - Expanded macroeconomic work to include climate, gender, and digital money.
  - The IMF is positioned to provide impartial analysis and advice, act as a global “transmission line” for sound economic policies, financial resources, and knowledge, and serve as a platform for global economic cooperation.
- Imperative: Countries should not revert to inward-looking policies; cooperation is necessary to tackle borderless problems like climate change.

### Key quotations preserved from the source
- “My grandchildren’s prospects will hinge on whether we can allocate capital to where it is needed most and will have the greatest positive impact.”
- “We need better international cooperation and a different kind of growth—more sustainable and equitable.”
- Keynesian references used by the author:
  - John Maynard Keynes predicted that living standards would be as much as eight times higher in 100 years’ time.
  - Keynes: “In the long run, we are all dead.” (interpreted as a call to act in the short run).
  - Keynes: “In the long run almost anything is possible.” (1942).

*Kristalina Georgieva, JUNE 2024. This article draws on a lecture, “The Economic Possibilities for My Grandchildren,” delivered by the author on March 14, 2024, at King’s College, Cambridge.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2024/06/georgieva-june24.pdf_