8 Foreces Shaping The Future Global Economy

The 8 Big Forces Shaping the Future of the Global Economy

In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists. – Eric Hoffer

The world is changing faster than ever before. But what are the big forces shaping the future of our Global Economy?

With billions of people hyper-connected through the internet, we now have a greater ability to connect, communicate and trade. This global network allows companies to scale easily, have an unprecedented reach and also enables new and innovative business models.

However, the global network on it’s own doesn’t reveal the other underlying big forces shaping the future of our Global Economy. Rapidly changing demographics, shifting values and behaviours, political uncertainty, and exponential advances in technology, are set to transform economies at a global level.

How do these big forces global forces influence each other? and how can we make sense of the growing complexity? Moreover, how do take advantage of the opportunities as they arise and use these insights to chart the future?

1. The Growth and Dominance of Technology

For most of the history of business, the world’s leading companies have have produced physical goods.

Industrialists like Henry Ford and Thomas Edison innovated in the physical realm. Whilst they used technology it was still fundamentally about creating things that could then be mass produced. Using production lines, companies invested massive amounts of capital to build physical factories and then distribute these via lorries to physical shops.

The majority of the major blue chip companies were built this way: IBM, U.S. Steel, General Electric, Walmart, and Ford are just some examples.

Top Technology Market Captilizations

However, in today’s world there has been a paradigm shift in our realities. We live in a world where the code is the driving force behind our economy. As a result, commerce has changed and products, as well as services, have become digital. Music, books, communications and services are increasingly digital and therefore easily distributed across our global network.

The most valued companies are now now digital businesses e.g. Facebook, Amazon, Microsoft and Google.

3 Technology Facts Graphic

2. The Changing Shape of Money

The invention of money gave rise to our global economies. From trading goats to gold bars, money and ledgers have provided the backbone for economic growth. Moreover, our ability to place value in goods and hold credit was instrumental to trust.

In recent times though how we define money is becoming blurred. Central banks have created trillions of dollars of currency out of thin air since the financial crisis thus changing the notion of having assets to support credit. Furthermore, technologies such as blockchain create digital currencies that are distributed and do not require central banks.

Overall though people are borrowing more and more to fuel the purchase of goods and their lifestyles. We now have the highest level of debt ever.

Total World Debt In One Chart

The world now has accumulated more than $247 trillion in debt, including $63 trillion borrowed by central governments:

Evolution Of Money Facts

3. The Distribution of Wealth

Wealth changes across the globe. Making sense of these changes presents opportunities. If you understand how the wealth landscape is changing you can make informed decisions about investing, production, customers…

The current view of the markets is that it is extremely healthy. Nonetheless, many view this differently because the current bull market is the longest in modern history.

Will this growth continue, and if so how and where will it come from?

Here’s one look based on projections taken from the World Bank:

The Growth Of Global Wealth In An Infographic

Despite these estimates, there major concerns about inflation to a world and geopolitical black swans.

Economic Forces That Change Markets Infographic

Here’s why those building and protecting wealth are rightly concerned about such events:

Three Global Wealth Facts That Shape Economies

4. The Rise of the Eastern Economies

The economic rise of China has been a driving force that has shaped the global economic landscape over recent decades.

As China shifts from a Country based on production to that of being digital there could be major changes to come. Alibaba may just be the start. The scale and resources of China are astounding and they will affect economies in ways that we cannot as yet imagine.

Understandably, the scale of China’s economy is difficult to put into perspective.

The following map shows the many cities each with higher economic productivity than many countries.

An Infographic Chart Depicting The Gdp Of Chinese Cities Compared To Countries

In total, China has more than 100 cities with a population of over 1,000,000. Each of these cities has sizeable economies primarily built upon factories, natural resource production but this is changing.

One simple illustration is to look at a single region which contains Shanghai, Suzhou, Hangzhou, Wuxi, Nantong, Ningbo, Nanjing, and Changzhou – has a GDP (PPP) of $2.6 trillion, which is more than that of Italy.

Facts About The Eastern Economies

5. Technological Acceleration

As technologies increasingly push beyond the boundaries of what we know is possible, new ways of organising, working and living will be adopted.

The rate of change itself is actually getting faster and faster. Each year advancement supercedes the last but in a shorter timeframe. Furthermore, as technologies converge it is causing an exponential rate of change. Innovation is now happening at a blindsiding pace.

Explaining Exponential Technology Change

This could be described as a function of Moore’s Law, and the law of accelerating returns is also something that futurists like Ray Kurzweil have talked about for decades.

Interestingly, there is another offshoot of accelerating change that applies more to the business and economic world. Not only is the speed of change getting faster, but for various reasons, markets are able to adopt new technologies faster:

An Infographic Showing Technology Adoption Rates

New products can achieve millions of users in just months, and the game Pokémon Go serves as an interesting case study of this potential. The game amassed 50 million users in just 19 days, which is a blink of an eye in comparison to automobiles (62 years), the telephone (50 years), or credit cards (28 years).

As new technologies are created at a faster and faster pace – and as they are adopted at record speeds by markets – it’s fair to say that future could be coming at a breakneck speed.

Some Future Facts Summary Infographic

6. The Journey Towards Sustainable

It’s no secret that we are rapidly depleting the natural resources available on this planet that we call Earth. Moreover, consumption comes with waste as well, which inevitably has led to pollution and the spoiling of habitats on land and in the sea.

The chart below shows the changing shape of U.S. energy consumption from 1776 until today.

The Growth And Change In Energy Use In The Usa Over The Last Two Centuries Infographic

And with the speed at which technology now moves, expect our energy infrastructure and delivery systems to evolve at an even more blistering pace than we’ve experienced before.

Sustainable Future Facts Infographic

7. The Shifting Tides of Human Geography

Global demographics are shifting will completely reshape the global economy.

In Western countries and China, populations will stabilize due to fertility rates and demographic makeups. In contrast to this, the African continent and Asia have booming populations. Within this growth is the trend of urbanization resulting in the growth of megacities, many with populations of over 50 million people.

By the end of the 21st century, this animation shows that Africa alone could contain as many as 13 megacities bigger than New York:

The 8 Big Forces Shaping The Future Of The Global Economy

Projections are that North America, Europe, South America, and China will combine to hold none of the world’s 20 most populous cities.

Shifting Human Geography Facts

8. The Shift In Trading

By definition, a consensual and trusted exchange between two parties is one that makes both parties better off.

Based on this economic principle, Countries across the globe consistently strive to expand their trading capabilities and gain customers. In order to do this they have focused on removing trade barriers since World War II with great success.

We now seem to be trapped in an era where politicians say one thing but act in opposition. In other words, free trade is what they want as long as it doesn’t affect home mrkets.

To get an idea of the scale of trading between two nations, the infographic below shows the trade between the U.S. and Canada.

The Shift In Us And Canada Trade

Trading negotiations and disputes will continue to be an ongoing theme in economics for many years to come. Digital goods and services though will blur the lines of how we trade and what is traded.

Some Facts About Changes In Trade

Global Economic Trends

What are your thoughts on the global economic trends that are set to affect our world in the coming years.

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