The point of the report is simple: we’re nearing the end of a business cycle that has been running since the late 1970s, when the industrialized world went looking for cheap labor and found it in Asia. But now things are changing. The boom in Asia and the downturn in the West is affecting the entire globe in ways that will bring new stresses to the world economy. Lots more demand, but not enough supply, and nowhere to go (except possibly Africa).
Here are some of the shifts that are now taking place:
1. Global population:
THEN (1980): 4.4 billion
NOW (2011): 7 billion
The 2.6 billion population growth has happened mainly in the East and Africa. But with falling fertility in these regions, and the fact that they still are improving health and upper age limits, the growth is largely in the working age population.
2. The global workforce:
THEN (1980): 2 billion
NOW (2011): 4 billion
Two thirds of the world’s 15-64 year-olds come from Asia (excluding Japan, but including India)- that’s a huge shift in the labor market and demand. But the industrialized world’s labor force is set for a 5% decrease by 2030.
3. The consumers:
THEN (1980): 1 billion people make up three quarters of global consumption
NOW: Consumption growing in the emerging markets. 90 million more middle class people expected to become middle class every year for the next two decades, and 95% of them in the emerging markets.
4. Natural resources:
THEN: Natural resources were plentiful.
NOW: Resources will be scarce.
5. Commodity prices:
NOW: Expensive, and rising
6. Market conditions and attitude:
THEN: Appetite for risky assets, disinflation, market stability
NOW: Low appetite for risk, inflation, short volatile market cycles
7. Government in the economy:
THEN: Limited government intervention in the economy seen as the best option
NOW: Hybrid models, protectionism and growing intervention of State in economies
What might happen.
Asia and Africa are loaded with development opportunities.
Circumstances will force desperately needed innovation in energy and technology sectors.
The changes in the emerging world, and oncoming inflation, are the only thing that can save the industrialized world from economic stagnation.
What do you think about this analysis?