NCPA - National Center for Policy Analysis

Rising Global Growth Rate

March 13, 1997

Experts say that a number of trends are coming together to fuel a global wave of economic growth unprecedented in size and scope. Among those trends: an expansion of economic freedom and recognition of property rights, smaller governments, an explosion of trade and private investment, and a quickening of innovation that is creating whole new industries.

As a result, the world economic growth rate in the past three years has nearly doubled that of the prior two decades -- raising living standards throughout the world.

  • For the twenty years through 1993, the world's economies averaged annual growth of 2 percent in gross domestic product.
  • But growth then jumped to 3.7 percent in 1994, has stayed in that range and should top 4 percent this year, according to the International Monetary Fund.
  • Forecasters expect world growth for the coming two decades to average 4 percent.

"Governments all over the world are moving in the same direction -- deregulating, privatizing, cutting their deficits and vying for foreign investments," notes Luis Rubio, president of Mexico's Center for Research of Development.

Investment in plant and equipment, both in the industrialized and developing worlds is growing.

  • Direct investment by rich countries in developing ones tripled between 1990 and 1995 -- to $112 billion.
  • Private capital flows to them, which also includes passive investments, have risen 30 percent annually this decade -- to $231 billion last year.
  • This was made possible by larger profits in industrialized nations -- which averaged about 16 percent last year, compared with 12.9 percent in 1980.

Source: G. Pascal Zachary, "Global Growth Attains A New, Higher Level That Could Be Lasting," Wall Street Journal, March 13, 1997.


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