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We talked to economist Daniel Altman about his latest book “Outrageous Fortunes,” where he discusses the trends that he thinks will shape the future of the global economy. Here’s a list of his predictions:
China will get richer, and then it will get poorer again: China is growing fast enough to pass the United States as the world’s largest economy, but when it does, it will quickly and permanently settle into a lower range due to a variety of cultural and institutional factors.
The European Union will disintegrate as an economic entity: Comparisons of long-term liabilities and economic potential divide the European Union’s members into four segments. Not only are these segments separated by their economic prospects, they are roughly contiguous as well. The leaders won’t want to be held back by the laggards, and soon the segments will go their separate ways.
The new colonialism will leave the colonizers and the colonized worse off in the long term: Cash-rich countries such as China and Saudi Arabia are buying up land and resources around the world in billion-dollar chunks. These deals do little to encourage responsible behavior on the part of the governments hawking their assets and there is a high probability that the politicians’ successors will renege on preexisting deals. Many of the newly colonized nations will squander the proceeds of their asset sales, and the new colonizers won’t be able to count on the resources they need to grow.
Changing immigration policies in rich countries will worsen the brain drain from poor countries, even as they get richer: Countries with aging populations will recruit the most educated, talented, and entrepreneurial immigrants from the developing world to shore up their workforces and tax revenues. Though opportunities for these professionals will be improving at home, the savvier wealthy countries will extend an irresistible welcome to ensure that the decades-old brain drain will continue.
The backlash against capitalism won’t last, but it won’t be replaced by political stability, either: Across Latin America and Eastern Europe, left-wing governments have made a comeback in recent years. The quasi-socialist governments that have resulted are unlikely to last, however. If they can’t raise living standards, unsatisfied electorates will quickly replace them. If they can, their people will become more entrepreneurial and less interested in state control of the economy.
Americans will become the world’s sales force: The American commercial culture has taken over the world because it captures something that everyone seems to want: a dream life in which everyone is welcome, everyone can be rich, and everyone can be a star. The dominance of English and the Internet (an American invention) allow the American commercial machine to exploit its edge by teaching people in other countries how to sell–the American way.
As the global economy integrates, the middleman will win: Far from being replaced by direct trading between businesses and consumers, middlemen will play a vital role in the future of the global economy. Their ability to bridge languages, legal systems, cultures, and business practices will make them the gatekeepers of global commerce.
The collapse of the World Trade Organization will unlock new gains from trade: After a decade of talks in the Doha Development Round, the World Trade Organization is still locked in a stalemate with little hope of lowering protectionist barriers. A shift to the regional trade agreements will create a self-perpetuating cycle of liberalization that may open markets as much as or more than any global deal.
A new set of lifestyle hubs will replace today’s business hubs: The ease of working across time zones and geographies has given rise to a new class of mobile professionals who will cluster in places where comfortable lifestyles, not a critical mass of business, are the main draw.
An enormous financial black market will arise outside of traditional centers: New regulations born of the recent crisis will send aggressive investors looking for trading environments where the old rules still apply. They’ll find these environments in a chain of offshore financial hubs, some of which are already offering the same services as New York, London, Tokyo, and Hong Kong. But a crisis in the black market will still have the power to reverberate back in the traditional centers.
Global warming will make rich countries cleaner and richer and poor countries dirtier and poorer: The pressure of climate change will further encourage the best and brightest of the developing world to seek out more temperate climates, raising incomes in rich countries while lowering them back home. Furthermore, a global carbon-trading regime will force poor countries to either engage in costly cleanups or accept exports of polluting industries, products, and waste from wealthier countries.
The structure of political institutions will stop the world from solving its biggest problems: Most solutions to the big problems facing the global economy involve either a long-term investment or cross-border cooperation, and our world is currently ill equipped to do either.
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