The world economy faces considerable uncertainty in the short term. Willthe eurozone manage to sort out its problemsand avert a breakup?Will the United Statesengineer a path to renewed growth? Will China find away to reverse its economic slowdown?

The answers to these questions will determine how the global economyevolves over the next few years. But, regardless of how these immediatechallenges are resolved, it is clear that the world economy is entering adifficult new longer-term phase as well – one that will be substantially less hospitable to economic growth than possibly anyother period since the end of World War II.

Regardless of how they handle their current difficulties, Europe and America willemerge with high debt, low growth rates, and contentious domestic politics.Even in the best-case scenario, in which theeuro remains intact, Europewill be bogged down with the demanding task of rebuilding its frayed union. And, in the US, ideological polarization between Democrats and Republicanswill continue to paralyze economic policy.

Indeed, in virtually all advanced economies, high levels of inequality, strains on the middle class, and aging populationswill fuel political strife in a context ofunemployment and scarce fiscal resources. As these old democracies increasinglyturn inward, they will become less helpfulpartners internationally – less willing to sustain the multilateral tradingsystem and more ready to respond unilaterally to economic policies elsewherethat they perceive as damaging to their interests.

Meanwhile, large emerging markets such as China,India, and Brazil are unlikely to fill the void, as they will remain keen to protect their national sovereignty androom to maneuver. As a result, the possibilities for global cooperation oneconomic and other matters will recede further.

This is the kind of global environment that diminishes every country’spotential growth. The safe bet is that we will not see a return to the kind ofgrowth that the world – especially the developing world – experienced in thetwo decades before the financial crisis. It is an environment that will producedeep disparities in economic performancearound the world. Some countries will be much more adverselyaffected than others.

Those that do relatively better will share three characteristics. First,they will not be weighed down by high levelsof public debt. Second, they will not be overly reliant on the world economy,and their engine of economic growth will be internal rather than external.Finally, they will be robust democracies.

Having low to moderate levels of public debt is important, because debtlevels that reach 80-90% of GDP become a serious dragon economic growth. They immobilize fiscalpolicy, lead to serious distortions in the financial system, trigger politicalfights over taxation, and incite costlydistributional conflicts. Governments preoccupied with reducing debt areunlikely to undertake the investments needed for long-term structural change.With few exceptions (such as Australiaand New Zealand),the vast majority of the world’s advanced economies are or will soon be in thiscategory.

Many emerging-market economies, such as Braziland Turkey,have managed to rein in the growth of public debt this time around. But theyhave not prevented a borrowing binge intheir private sectors. Since private debts have a way of turning into publicliabilities, a low government-debt burden might not, in fact, provide thesecountries with the cushion that they think they have.

Countries that rely excessively on world markets and global finance tofuel their economic growth will also be at a disadvantage. A fragile worldeconomy will not be hospitable to large netforeign borrowers (or large net foreign lenders). Countries with largecurrent-account deficits (such as Turkey) will remain hostage to skittish market sentiment. Those with largesurpluses (such as China)will be under increasing pressure – including the threat of retaliation – to rein in their “mercantilist”policies.

Domestic demand-led growth will be a more reliable strategy thanexport-led growth. That means that countries with a large domestic market and aprosperous middle class will have animportant advantage.

Finally, democracies will do better because they have theinstitutionalized mechanisms of conflict management that authoritarian regimes lack. Democracies such as Indiamay seem at times to move too slowly and be prone to paralysis. But they provide thearenas of consultation, cooperation, and give-and-take among opposing socialgroups that are crucial in times of turbulence and shocks.

In the absence of such institutions, distributive conflict can easilyspill over into protests, riots, and civil disorder. This is where democratic India and South Africa have the upper handover China or Russia.Countries that have fallen into the grip of autocratic leaders – for example, Argentina and Turkey – are also increasingly at adisadvantage.

An important indicator of the magnitude of the new global economy’schallenges is that so few countries satisfy all three requirements. Indeed,some of the most spectacular economic success stories of our time – China inparticular – fail to meet more than one. It will be a difficult time for all.But some – think Brazil, India, and South Korea – will be in a betterposition than the rest.