About 2,500 years ago, Greek philosopher Heraclitus warned against any attempts at forecasting the future, proclaiming, “nothing endures but change”. With this view in mind, The Bull & Bear Business section does not present absolute forecasts, but instead thought provoking discussion starters about the collective future. The analysis conducted was based on credible, empirical evidence and led to the identification of four trends that will have a lasting influence going forward.
The first trend is the fact that the global balance of economic power is, and has been, shifting from developed to developing countries. The result is an inexorable eastward shift of the world’s economic center of gravity. Succinctly, growth in less industrialized economies has been outpacing growth in the more industrialized economies in recent years. While this trend is not new, the evolution has reached a tipping point that allows us to confidently state that the World has changed. Indeed, 2013 was the first year since reliable records began where the combined emerging and developing economies were larger, in absolute terms, than the industralized economies of the world. Despite market commentary citing the risk of an emerging markets slowdown (an estimated 1-2% decrease in GDP), emerging markets will still be growing at a rate that far outpaces that of the traditional economic powers (US, UK, etc.). The most remarkable element of this trend is that we are only at the beginning of its manifestation.
This reshaping of the world economic order is unprecedented, both in terms of scale and speed. The magnitude of this shift is going to produce readjustments affecting not only GDP, but also global spending power, population, and trade. It is bound to have powerful implications on the way education, politics, and business are conducted in a world where China’s economy will overtake the US economy in the next 5 years according to many reports. Another, perhaps more thought-provoking statistic of this new world: for those of us about to embark on our professional journey, a PwC study published last year suggests that economies like Nigeria and Indonesia might outclass their Canadian or French counterparts by the time the class of 2014 retires.
People and Places
The second notable trend relates to the phenomenal demographic shifts we are witnessing on a global scale, which are inherently tied to the shift in global spending power. The main driver of these shifts is the ageing of the global population, linked to overall rising life expectancy. According to McKinsey, the proportion of North American 60+ year olds is going to double by 2050, reaching a quarter of the global population. By contrast, other countries have populations that are young and growing, promising increasingly large and highly active workforces and consumer markets.
The social and economic impact of these demographic shifts will be substantial, as the pressure of supporting the growing ranks of retirees will put the shrinking working population under great strain. The pressure to feed, house, educate, and employ ageing populations will no doubt present significant challenges.
Over the past number of years, it has become clear that, in addition to the explosion of the Asian middle class, the massive urbanization will be the defining economic factor for the next two generations. UN-sourced data shows that the world’s urbanized population is expected to grow by 72% by 2050. Furthermore, a McKinsey report has identified 440 specific cities, many of which are largely unnoticed, that could account for half the global GDP in the next decade.
The unparalleled growth of cities as leading markets, combined with the economic rebalancing phenomenon, is going to create strong pressure on limited natural resources. The global population will continue to expand, reaching an estimated 9.6 billion in 2050, straining energy, water, and food supply to unprecedented levels.
According to recently released data, demand for these basic resources will exceed sustainable capacity by 2030 if current trends continue.
In many parts of the world, the impact of climate change will increase the occurrence of extreme weather events, and frequency of water shortages. Their effects will make it more difficult to raise animals and grow crops than before – precisely at a time where there are more mouths to feed. All of this raises questions that have no easy answers.
We have the technology…Right?
Given the growings constraints so far, there is increasing pressure to increase productivity and spur more technological breakthroughs. The constant cycle of innovation is creating new industries faster than ever and revolutionizing existing ones (notably, the impact of 3D printing on the manufacturing industry). In 2010 alone, more data was transmitted online than all the previous years before that. The processing of all this data, and other trends such as the rise of the “internet of things,” will also be a defining dynamic of the decades ahead.
As we have seen, some societies are ageing faster than others-mostly in the West. The supply of working age individuals as a proportion of total population is decreasing – therefore increasing the burden of supporting the ever-expanding ranks of retirees. The median age in Europe is 41 compared to a median of 27 in Southeast Asia and 18 in Sub-Saharan Africa. These figures are powerful. Asia, which is already home to 60% of the world’s population, has, on average, a much younger population than the West.
In view of these facts, it is no surprise that this century is being called the Asian Century. They also push us predict that the 22nd century will be the African Century. After centuries of western dominance, it appears that in our lifetime, a previously unbroken streak of economic superiority will come to an end.