The economy will take some fascinating - if potentially frightening - turns in the next forty years, if research is to be believed. Several megatrends, including globalization, debt, and environmental change will have dramatic impacts on the future economy, bringing about substantial changes to the landscape of resources and goods, and how they are traded.
- Globalization: In the future, the world will become increasingly globalized, as industries consolidate their resources worldwide (Hirst and Thompson).
- Debt: Debt will also increase in the future, as more and more borrowing occurs and material resources decrease.
- Environmental change: As global warming increases and the environment changes, the economy will have to dramatically alter its dependence on oil and unsustainable practices in order to survive.
- Shifting centres of economic activity: As economics progresses and globalization expands, economic activity will move from as heavy an emphasis on the United States and China toward a convergence between Asia and Europe for approximately 43% of the world's GDP. India and China will soon become their own centers of economic activity, moving innovation forward (ATOS.net).
- CHIME liquidity: CHIME stands for China, India and the Middle East, and will increase greatly in liquidity (one's ability to invest) over the next few decades, leading to its greater economic links and shifting of economic centers (ATOS.net). It is then predicted that, as China and India become their own economic centers, outsourcing of jobs will move to Africa as a sourc for cheap labor.
- increasing inflation: Inflation will increase in the future along their typical route (approx. 4-5% every six months), though experts say that this inflation will fall off due to changes in the central tendency, which mess with inflation expectations often (Haubrich).
- 2-speed economies: Two speed economies, which are currently present in Australia, will increase, as some industries (for example, mining) will thrive while others (tourism) falter. This has dramatic implications for companies, as the successful businesses keeping countries afloat will not be able to help employment (The National Times).
The result of this increasing complexity in the world economy, and the changes in the environment caused by fossil fuel emissions, it is predicted that it will become such a commodity that oil will be $200 a barrel. As resources become more scarce, shifts will occur in which knowledge becomes a commodity more so than material goods; economic protectionism will increase as countries increase restrictions and tariffs on imported goods in order to protect domestic industry.
The meltdown of the global financial system is noted as a significantly likely trend far into the future. Eventually, the Chinese banking system will collapse due to its rapidly expanding credit and non-performing loans, which are increasingly lent by the state-owned banks instead of private entities (Teo). There may also be a second asset bubble far down the line, as the world restructures its economy in the wake of this huge financial collapse, which will have great implications for the world economy due to heavy reliance on Chinese loans. This asset bubble may take place due to a resurgence in local trade, minimizing risk and lowering outside debt to aggregate forces like banks.
ATOS.net - http://ascentlookout.atos.net/en-us/sep_trends/economic/shifting_centers_of_economic_activity/default.htm.
Haubrich - http://www.clevelandfed.org/research/commentary/2011/2011-20.cfm
Hirst and Thompson - http://people.cas.sc.edu/coate/Readings/Hirst_and_Thompson.pdf
National Times - http://www.smh.com.au/opinion/editorial/twospeed-economy-requires-policy-action-20120729-236ef.html
Teo - http://newasiarepublic.com/?p=32148