In 2019, we gathered the data, created the visualizations, and shared with you global factors driving economic activity, socioeconomic conditions, and global events. As we move into the third decade of the 21st century, we are taking a moment to connect our insights from 2019 to our outlook on global trends that we believe will shape the world economy during the next 10 years. Here we share our top 5 trends to watch.
Climate Change and Climate Change Policies
The transition to low-carbon targets creates risks. Environmental policies are unfriendly to major companies and industries that depend on fossil fuels, reducing performance and creating unexpected losses in asset value.
Extreme weather events also create business risks — including operational interruptions, bankruptcies, and loan losses among lenders.
As vital resources such as water and food are increasingly hit with scarcity constraints, we’ll face increased social stability issues. For example, by 2040 more than one billion people will live in areas facing extreme water shortages. Competition for these resources could destabilize governments and lead to military conflicts.
Businesses and investors can also find opportunities as economies begin to swap carbon-intensive goods and services for innovative low- or zero-carbon substitutes such as green energy and electric vehicles. Read more >
The Third Wave of Deglobalization | Domestic Markets Will Drive Global Growth
Over the last two decades the shift of production capacity from developed to developing countries has driven growth of the global economy. The rise of the global model has undeniably provided benefits, but the data show that globalization has actually constricted growth of developed nations.
Global value chains are not growing today and trade growth is lagging behind economic growth.
In developed economies, globalization’s benefits have come in large part at the cost of the middle class. This has significant implications — politically, socially, and otherwise — which will continue to be felt in the coming decades. Read more >
Accelerating Rate of Technological Progress
Rapid technological changes have always been a sensitive topic because of the direct relationship with employment.
Powerful digital technologies (such as artificial intelligence, advanced robotics, mobile platforms, machine learning, neural networks, cloud computing, and the internet of things) are rapidly spreading to all sectors of the economy. Largely because of the pace of advancement, it will become difficult for workers (including high-skilled workers) to adapt through education and training. And, unlike the previous four tech revolutions, the digital revolution will substitute not just labor but human cognition as well.
The impact of tech evolution will be unevenly distributed across countries and industries, according to wealth, skill, and education levels of local labor forces, among other factors, forcing a global discussion on and response to managing the inequality gaps that threaten to follow. Read more >
Technological changes have a track record of spurring unexpected consequences. For example, data ubiquity and relatively unlimited computational power lowered returns of hedge funds that have made money by manufacturing data. If mass adoption of digital technologies lowered returns in high risk investing, what are the prospects for the rest of the economy? Read more >
Increasing Global Instability
The last 70 years have been the most peaceful in history. The ratio of fatalities to population and the absolute number of fatalities from armed conflicts are the lowest in history. States simple have not gone to war with each other in the same way as they have in the past.
Today, 1000s of people still die every month in armed conflicts globally. Violence accounts for more than 10 percent of world GDP. Tens of millions of people have been forced to flee their homes. Global military spending today is now close to Cold War levels.
And what lies beneath modern conflict? One driver is economic growth, which exacerbates the competition for resources. To avoid the cost of open conflict, major powers have recruited technology into their military arsenals to incite local conflict in the fight for influence.
Inequality Will Be a Major, Transboundary Political Issue
Over the last decade income inequality globally exceeded record levels set 100 years ago. During the 1920s, the income of the richest person in the world was 100,000 times higher than average per capita income. Today, this ratio increased to 450,000 times the average.
The massive concentration of wealth and income among the rich moves society away from democracy toward plutocracy, breaks social elevators, depresses economic growth, and gives rise to criminal behavior. Even in high and middle income countries inequality easily translates into social protests like the Yellow Vest protests in France and the more recent protests in Chile.
Inequality is a challenge not only for politicians and economists, but also for statisticians. To date, socio-economic development and progress has been measured by change in GDP. But this is a measure of income but not its distribution. We expect new approaches will emerge in response to demands for more modern measures of socio-economic progress in the coming decade.