The Boston Consulting Group is publishing a far-reaching diagnosis of the global economic crisis and an in-depth analysis of what leading corporations need to do in order to excel in a postrecession slow-growth world, in a new book titled "Accelerating Out of the Great Recession: How to Win in a Slow-Growth Economy" (McGraw-Hill, February 2010).

The authors, David Rhodes and Daniel Stelter, senior partners at BCG, argue that companies face ongoing and long-term challenges brought on by global trade imbalances, unstable financial institutions, and overleveraged consumers who can no longer be counted on to drive economic growth.

“There will be no return to the ‘old normal,’ and, just as we won’t be able to count on the consumer—especially the U.S. consumer—to rescue the global economy, it’s unlikely that the growth of emerging economies such as China and India will be enough to generate a return to pre-2008 global growth,” says Stelter.

Rhodes adds that business will have to adapt to some ‘new realities’—including greater government intervention, the shakeup of existing industry structures, cost-conscious consumers inclined to save more, and an atmosphere in which stakeholders, ethics, and solid governance take priority over shareholders and quarterly results.
 

Painful Adjustments, New Opportunities

Companies need to prepare for a multispeed global economy. While some countries (such as China, India, and Brazil) are seeing a return of prerecession growth rates, the developed world will experience many years—if not a decade—of slow growth.

“It’s important to remember that U.S. consumers generate a large share of global GDP—nearly 19%. There’s no obvious short-term replacement for this mainstay of global commerce. Even China’s economy will not have sufficient strength to save the economy: it would take a 32% increase in private consumption in China to offset a 5% reduction in U.S. consumer spending,” says Rhodes.

Companies will have to make some painful adjustments as they come to terms with the new realities.

To stabilise the financial sector, governments mobilized more than $18 trillion, and they injected more than $2 trillion to stimulate the real economy. These initiatives to “reflate” the global economy amount to an unprecedented and historic experiment, and it is not clear what the long-term impact will be. There remain “zombie banks” that do not or cannot provide loans, making shrinking credit a problem that could last for years. And even with a 1990s-type job creation rate, it would take until 2014 for unemployment to return to its prerecession level. Also, one of the side effects of all the government intervention is the increased influence of politicians in business affairs.

But the authors conclude that the rewards for companies that effectively navigate this slow-growth world will be significant and sustainable. Corporate leaders who act boldly have the potential to seize once-in-a-lifetime opportunities that will allow them to change the pecking order of their industries.