The study of the global economy is more than an understanding of the present state of the world. Global economic awareness also involves understanding the future of the global economy. Now, this doesn’t require psychic powers. Instead, careful study and analysis can help us predict and prepare for future global economic trends.
This complete guide forecasts expected global economic trends as well as explains the processes used to formulate economic predictions. While it won’t make you psychic, the information below will help you increase your understanding of economic futures.
Jobs Today vs. Jobs for the Future Economy
What do you do for work today? Did that type of job exist 50 years ago? Ten years ago? Major industries can have a significant impact on the world economy for decades only to disappear seemingly overnight.
Examples include coal mining, automotive assembly, factory work and more. While those jobs still exist today, they are no longer as dominant as they once were. Instead, they’re being phased out for vocations which didn’t even exist less than a decade ago.
Planning for a career which is “future proof” can be difficult. How do you know what training you need if the job doesn’t even exist yet? What skills should you be learning which have a timeless appeal to employers?
The McKinsey Global Institute studies global automation and job loss. They predict over 800 million jobs will be lost to automation by the year 2030. Even if you have an existing job, the future economy can be a source of anxiety. Automation and outsourcing create a looming threat for practically every industry. Job insecurity can be a source of constant stress.
The Rise of Globalization
The term “globalization” is used a lot these days. In many cases, it’s praised as either the solution to economic inequality or the cause of it. But aside from the political associations, globalization is also a fundamental economic concept which has existed for centuries.
Globalization is the increased growth of trade and economic development between nations. Generally, globalization involves free trade, the free exchange of capital and often entrance into cheap labor markets.
But aside from economics, globalization often has a cultural and political impact on nations, too. Many people want restrictions on immigration and trade in an attempt to keep low-skilled jobs within their own countries. As a result, immigration is a hot-button issue for many countries throughout the world.
Pros and Cons of an Interconnected Global Economy
Proponents of globalization argue that increased international trade will significantly help conquer worldwide income inequality. When people in poor, developing countries can earn a daily wage, the entire community is uplifted. Globalization creates opportunities for people around the world where none would otherwise exist.
Opponents point to different effects of globalization. Many times companies will move production to countries with the cheapest labor pool. This often means factories and facilities within developed Western countries are closed and the workforce laid off. Low-skilled workers are those most often affected.
A Brief History of Globalization
Increased globalization is a reality which must be managed by nations, businesses and people. The best way to understand where the world economy is heading is to look at where it’s been. The history of globalization can be divided into three phases:
The first phase of Globalization occurred around the 15th century. Western European countries began to explore and colonize locations throughout Africa and the Americas. These colonies would excavate raw materials.
In turn, the European manufacturers would turn those raw materials into goods. These products were then sold both in Europe and across the colonies. European manufacturers enjoyed new markets and steady profits.
However, income inequality was high from the start. European cities boomed while Africa and the Americas suffered. During the second phase of globalization, European cities did build up infrastructure within the developing nations. But only to the extent which helped with the processing of raw materials.
The global economy is currently in the modern age of globalization. While the center of world power has shifted from Europe towards the U.S., the developing world remains mired in poverty, illiteracy and often governmental corruption.
So while globalization is technically nothing new, it is progressing today faster than ever before. Let’s take a look at why:
The Accelerated Rate of Technology
Jobs phase out and in of popularity and usefulness over time. That’s a natural result of advancement in technology and changes in society. However, changes today occur faster than ever before.
Technology such as automation and A.I. has led to sweeping changes in the manufacturing industries. When machines can assemble products large and small, line workers don’t become as necessary.
The increased ability to communicate globally is another huge factor in the rise of international trade. Even just 20 years ago, international business was a logistical nightmare involving expensive phone calls, language hurdles, time zone navigation and more.
The internet has made international communication simple, cheap and easy. Software allows for instantaneous translation. Live video allows for “in person” meetings regardless of each person’s real-world location.
Future Global Economic Trends
So, what’s on the horizon for the global economy? Economic, political and cultural experts generally focus in on the following:
Increase of Virtual Jobs
A trend which actually began during the 2008 recession, virtual jobs created a huge increase in independent proprietorships. A dedicated entrepreneur can start a business without having to worry about renting a location or hiring a bunch of employees. Instead, they can develop relationships with freelancers online.
Some of these virtual jobs require a low skill set so they typically go to developing countries. Customer support and data entry are popular examples here. But other jobs require more well-educated individuals with a specific skill set. Web development, copywriting and even traditional office works are all examples of jobs which are increasingly being done virtually.
Just because more people will be working virtually doesn’t mean cities will dwindle in population. Instead, the opposite is likely to occur. Cities will become increasingly more crowded.
The population makeup of major cities is likely to change. Following the current trends found in New York and San Francisco, cities will be increasingly home to younger, single residents.
This will most likely result in an increase of what are called “luxury cities.” Cities will become even more expensive, but will also see an increase in entertainment geared towards the young, single population.
Russia’s Future Economy
If there’s one country to watch in the next five years, it’s Russia. Sanctions, a drop in oil prices and government corruption have all seriously weakened the Russian economy. The nation has seen roughly a 4% constriction in their GDP.
Russia doesn’t have a ton of options in its current state. Within about five years, they’ll need to undergo serious economic and politic reforms. Otherwise, they could face continued marginalization on the world stage.
As illustrated above, much of the workforce will fall into one of two groups. They’ll either be living in cities or working virtually. Both situations don’t require a lot of relocation. While previous generations typically moved three or four times a year, younger workers are more likely to stay put for longer periods of time.
Virtual work doesn’t require the employee or contractor to live in any specific location. This provides more freedom. One benefit of the global economy is that many people will be able to choose where they live without worrying about being close to a physical work location.
The Share Economy
The Share Economy is already in full effect with apartment-sharing services like Airbnb and ride-sharing services like Uber and Lyft. Look for those services to change in some form, perhaps drastically. The legal ramifications of ride and apartment sharing are becoming a growing issue.
Some communities have begun banning apartment-sharing services as permanent residents become increasingly annoyed by the behavior of temporary neighbors. Ride-sharing services are facing legal challenges from taxi companies as well as safety concerns regarding the competence of the drivers.
Final Thoughts on Futures
Unfortunately, we can’t see the financial future by gazing into a crystal ball. So predictions related to the world’s financial future will always be inexact. However, by combining the history of globalization with the present state of technology, we can hopefully spot upcoming economic trends.