I asked ChatGPT to compare these two McKinsey articles about the direction of global economy and wealth and observe what changed in McKinsey’s thinking over the 18 months
1. The rise and rise of the global balance sheet: How productively are we using our wealth? (Nov 2021)
2. The future of wealth and growth hangs in the balance (May 2023)
Here is what she thinks:
Comparing this with the 2021 article, several key changes and continuations in trends can be identified:
1. Continued Growth In ‘Paper Wealth’ And Sluggish Economic Growth:
Both articles highlight the significant growth in ‘paper wealth’ (such as asset valuations) outpacing real economic output. The 2023 report underscores that this trend has continued, contributing to rising inequality and inefficiencies in the allocation of capital.
2. Shifts In Balance Sheet Dynamics
The 2023 report suggests that there may be a shift in how the world borrows, lends, and accrues value. This is different from the 2021 report, which largely described the status quo of asset price inflation and debt growth without indicating potential shifts in these dynamics.
3. Potential Scenarios For The Future
The 2023 report models four scenarios: return to past era, higher for longer, balance sheet reset, and productivity acceleration. This modeling represents a new development, as the 2021 report did not present such detailed future scenarios.
4. Greater Focus On Economic Uncertainty And Volatility
The 2023 article emphasizes current tremors in the financial system and high uncertainty, which seems to be a shift from the 2021 focus on historical trends and the post-COVID rebound.
5. Increased Emphasis On Productivity Acceleration
While the 2021 report discussed the importance of productive assets, the 2023 report puts a stronger emphasis on productivity acceleration as a desirable outcome, underscoring the need for investment in productive areas.
6. Rising Debt Concerns
Both reports highlight the growing concern about debt levels, but the 2023 report delves deeper into the potential consequences of this debt growth, such as the risk of a balance sheet reset and its impact on the global economy.
7. Policy And Decision Maker Challenges
The 2023 report more explicitly discusses the challenges faced by policymakers and business leaders in navigating these uncertain times, reflecting a shift from the more historical and analytical focus of the 2021 report.
Overall, while the fundamental themes of asset inflation and sluggish GDP growth continue, the 2023 report introduces new elements of uncertainty, future economic modeling, and the urgency of addressing productivity and sustainable growth. These changes suggest a global economic environment that is increasingly complex and uncertain, requiring nuanced and forward-looking responses from governments, businesses, and financial institutions.