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What will happen to global economics in the next 34 years

Before looking forward to 2050, we must first look back at the key economic and social developments during the past half a century, and perhaps look even further back than that. The rapid rise of emerging economies during the last 50 years is truly astounding in the long-term historical context. Developing economies now account for over half of the global output (55%, in PPP terms). This is a total reversal from the G7 economies’ share of global output of 57% in 1960.

The world as a whole is in the midst of a dramatic transformation of its economies, societies, as well as peoples’ aspirations. Since the 1960s, hundreds of millions of people have been lifted out of absolute poverty, with the global absolute (income) poverty rate having fallen from 52% in 1981 to less than 10% in 2015; just over half of the world’s 7.3 billion people can now be classified as upper or middle class.

However, this has, in turn, created or exposed a new set of major challenges. Growth has been uneven between (and within) countries, and explained mostly by the rapid growth of Asia, led by countries like China and India. Many countries, indeed regions, remain heavily dependent on the vagaries of the commodity markets. Disparities in income and access to basic services are unacceptable. Countries are struggling to create meaningful jobs for the younger generation. At the same time—with the information and communications revolution—peoples’ aspirations are rising rapidly. Climate change threatens the very survival of our planet. Global governance and international institutions appear ill-suited for the tasks ahead.

Below are ten global megatrends that we believe will affect the long-term economic and social prospects of all countries—rich and poor, big and small in the next 34 years:

Chinese food stall, by edwardpye. CC0 Public Domain via Pixabay.
Chinese food stall, by edwardpye. CC0 Public Domain via Pixabay.
  1. Demographics: By 2050, the world will have some 9.7 billion people compared to 7.3 billion in 2015; over half of the net increase will be in Africa. All regions of the world will have aging societies, except for Africa and the Middle East. This sharp divergence in the demographic trends combined with difficulties in creating jobs for Africa’s bulging youth population will pose unprecedented challenges to the global community. The world will either have to learn to live with an aging and eventually shrinking population, or accept large-scale immigration.
  2. Urbanization: The pace of urbanization will accelerate, with two thirds of the world living in urban areas as North America, Latin America, and Europe already do. Asia and Africa face an avalanche of urban migration between now and 2050, with China, India, and Nigeria alone likely to add a billion people. If well harnessed, these trends could be a powerful force for the overall economic growth, but they will also require huge investments to create modern, smarter, safer, and more livable cities.
  3. Globalization and international trade: Continued globalization of trade and investment will lead to an even more intertwined world. As East Asia has amply demonstrated, a prudent embrace globalization can accelerate productivity growth and facilitate convergence with the global best practice. But, it causes painful disruptions too, requires careful national policies as well as a truly open and fair global trading system.
  4. Globalization of finance: Continuation of the past trend towards larger, more global, and integrated financial markets will create more opportunities and could act as a positive force for economies with well-functioning financial systems. But even for them, it will create new risks and volatility that will need careful management. Further fundamental reforms of the global monetary, financial and taxation systems, and institutions are necessary to prevent re-occurrences of costly global financial crises as in 2007.
  5. Emergence of a massive middle class: This trend will be a natural outcome of the continued (inclusive) economic growth. By 2050, 84% of all people in the world may belong to the upper or middle class. Emergence of large middle classes can potentially be a powerful positive force for economic and social development. But the existence of large middle classes will also add pressures on the political leaders to keep their promises, deliver concrete results and be held accountable.
  6. Competition for finite natural resources: Under the central scenario of this volume, by 2050, people in as many as 84 countries could enjoy income levels equal to or higher than those of Southern Europe today. The fundamental question is whether the earth can sustain the demands of the resulting 4 billion or more new upper and middle class consumers, if they choose to replicate the current lifestyles of Western consumers, or would they move to more frugal lifestyles that would demand less from the earth?
  7. Climate change: This is possibly the greatest global common threat of our generation. Its resolution is in the enlightened self-interest of all countries—including developing countries—and requires cooperative global efforts. Global warming, while harmful to all, will cause the most economic damage to the poorest countries in Africa and Asia.
  8. Technological progress and breakthroughs: offer tantalizing prospects of solutions to many current and emerging societal problems, including: climate change; energy and food security; medical care for all (including the elderly); and provision of services to the bottom billion.
  9. Historic rise of emerging market economies: A major shift in global economic power is underway, from the west to the east and from the north to the south. By 2050, in some scenarios, up to 70% of the global output could be in today’s developing countries. Global governance needs to be transformed to reflect this new landscape.
  10. Emergence of fundamentalism and non-state actors: Violent non-state actors pose potential serious threats to global security and rule of law. Concerted cooperative global actions are urgently needed, together with an all-out effort to promote higher and more inclusive growth.

Obviously, the impact of these megatrends on individual economies or regions will vary, and may change over time.

Featured image credit: Bangkok skyline, by Prachanart Viriyaraks. CC-BY-2.0 via Flickr.

Recent Comments

  1. Aceibis

    The myth of over population still persists even to this day, 50 plus years removed from the start of the decline in the total fertility rate. 3 significant trends will underlay the economic situation over the next 34 years

    1) the aging population of first world countries and the welfare state required to sustain this growing cohort

    2) the ongoing decline of that portion of the first world population that produces and consumes products and services

    3) the relentless urbanization of the human population across all societies

    In summary, the human population is heading for voluntary extinction. That is not to say we will cease to exist, but that our rate of reproduction in total will remain far below replacement levels until there is a concerted effort by the state to systematically manage pro-creation for economic sustainability of the general population.

    As for India, the urbanization rate is increasing which translates into downward pressure on TFR. I don’t believe we will see the current projections for total population by 2050. For Nigeria, the rate of increase is also falling as it is for all nations on earth. As the country becomes more westernized and urbanized the rate of natural increase will slow as well.

    In summary, the greatest challenge will be to manage the transition between a growth economy to a sustainable economy. At the same time maintaining political stability as traditional middle class standards of living continue to fall.

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