Predictions: Commerce

Prediction: Brazil, China, India, Indonesia, South Korea, and Russia will be responsible for over half of all global economic growth by 2025.

Who: The World Bank, in the report Global Development Horizons 2011 — Multipolarity: The New Global Economy.

Why great: These emerging countries’ economic growth will likely pave the way for improvement in other developing nations’ economies via increased financial and commercial activity across borders.

BUT… According to Mansoor Dailami, manager of emerging trends at the World Bank and lead author of the report, “A key question is whether existing multilateral norms and institutions are sufficiently strong to accommodate the passage toward multipolarity. The challenges of managing global integration among power centers makes strengthening policy coordination across economies critical to reducing the risks of economic instability.”

Bottom Line: The title says it all: Multipolarity. Global economic influence will be shared by various developed and developing countries and the U.S. dollar will no longer solely dominate the international monetary system. The likelihood of this scenario seems strong — the economic rise of these countries has been forecasted for quite some time prior to the World Bank’s report.

Source: http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22915632~pagePK:64257043~piPK:437376~theSitePK:4607,00.html

World Bank Pubs, Emerging economies will grow by 4.7% a year by 2025, and their global GDP will expand to 45%. Read http://ow.ly/5h2vI

Prediction: Prices for staple grains — i.e., food — will increase by 120% to 180% in the next two decades. [2030s]

Who: Oxfam

Background: Environmental, political, and economic forces are all driving up food prices, including climate change and pressure from the biofuels lobbies. Meanwhile, demand for food will increase by 70% as the global population reaches a projected 9 billion by 2050.

Why Great: Individuals, communities, and organizations are taking the future in their own hands — literally — by either growing their own food or joining cooperatives, and by supporting hunger-fighting politicians. Even Big Agriculture could benefit from nurturing the diversity of smallholder farmers, says Oxfam.

BUT… Failure to build a sustainable future for farmers could result in food wars, just as any resource scarcity provokes competition and conflict.

Bottom Line: A “new prosperity” is possible, says Oxfam: “The race to a sustainable future is on, and there will be huge opportunities for those who get there first.”

Source: “Growing a Sustainable Future” by Robert Bailey, Oxfam GB/Oxfam International, May 31, 2011, http://www.oxfam.org.uk/resources/papers/growing-better-future.html

Prediction: There may be a major cocoa shortage by 2020.

Who: Mars, the global confectionary giant.

Background: At issue is standards and certification for sustainability in cocoa production. Without sustainable practices, along with innovative agricultural technologies, “the industry as a whole can expect a shortfall of more than one million tonnes of cocoa in just nine years.”

Why Great: Mars Chocolate is a powerful influencer and has pledged to purchase 100% certified sustainable chocolate by 2020, focusing on “technology transfer that puts farmers first; innovations in agricultural science; and rigorous certification standards.”

BUT… The challenge is to improve the sustainability certification process, which will require industry investment in giving farmers access to advanced agricultural methods, including genetically improved cocoa that is more productive and more-resistant to disease.

Bottom Line: Mars recognizes that improving farming practices is good for farmers, the industry, and the planet. Whether chocoholics care much how their candy bars get to them, the prospects of major shortages could increase their interest in supporting sustainable chocolate.

Source: http://www.foodnavigator.com/Financial-Industry/Cocoa-shortage-by-2020-unless-industry-acts-now-warns-Mars/?c=TgbRk5cTmQIApO3meYbUyA%3D%3D&utm_source=newsletter_daily&utm_medium=email&utm_campaign=Newsletter%2BDaily

http://www.mars.com/global/commitments/sustainability/cocoa-sustainability.aspx

Prediction: The world will no-longer rely on a single reserve currency by 2025.

Who: The World Bank, Tuesday, May 17th.

Why It’s Great: In the words of the study, “A multi-currency regime would more broadly distribute lender-of-last-resort responsibility and make it easier to boost liquidity during times of market distress without as much disruption as is often the case now.”

BUT… Since oil is denominated in dollars, a change to a basket of currency denomination system would send the price of oil much higher.

Bottom Line: The above-outlined emerging economies will grow 4.7% annually (on average)a year between 2011 and 2025, according to the World Bank. Advanced countries will grow on 2.3% a year, on average. This will affect the price of lots of things.

Source: http://www.reuters.com/article/2011/05/17/businesspro-us-worldbank-emerging-idUSTRE74G5PJ20110517

Prediction: Student loan debt will spark worse economic turmoil in the United States than the credit-card debt crisis or the housing bubbles. Young people ages 16-24 suffer higher unemployment rates than any other U.S. demographic group, even though most have racked up gargantuan amounts of loan debt to earn their degrees. Organized student protests, and eventually civil unrest, will unfold unless the government takes action.

Who: Sarah Jaffe, contributor to Alternet.org [Michael Bloomberg predict]

When: 2010-2020

Why It’s a Great Prediction: Defaulted debts in the U.S. economy already contributed to one major global economic catastrophe in 2007-2008, one from which the world has yet to fully recover. Can any country on earth afford another, in this case tied to student loans rather than housing loans? The situation is ominous for the education itself, also: If people come to associate college degrees with underemployment and lifelong personal debt, then large numbers of young people may decide to forego college. America’s knowledge base will wither, and its standard of living — and by extension, that of the rest of the world — will sink further. The worldwide pain intensifies even more if Jaffe’s warnings of youth riots and violence come to pass.

But… Concerted political reforms and a robust economic recovery might pave the way toward a brighter alternative future. So, too, might more U.S. students turning to more fiscally sane education alternatives — like enrolling in Canadian colleges, eh?

Bottom Line: The United States is a world leader in coming up with overly expensive, credit-busting approaches to the good life. But this cannot go on forever.

Source: Jaffe, Sarah. “The Next Bubble is About to Burst.” June 2, 2011: http://www.alternet.org/economy/151149/the_next_bubble_is_about_to_burst%3A_college_grads_face_dwindling_jobs_and_mounting_loans_?page=entire

Prediction: India will become the world’s third largest auto market by 2020.

Who: J.D. Power and Associates, in the report “India Automotive 2020: The Next Giant from Asia.”

Why Great: India has already risen to become the sixth-largest market for passenger cars and light commercial vehicles. This growth is tied to general economic improvements (greater market liberalization and more foreign investment, in particular) and a growing consumer-driven culture, according to the report. “India could find itself well-positioned to fulfill the needs of the small car segment,” says John Humphrey, senior vice president of global automotive operations at J.D. Power and Associates. He adds: “That said, profit margins are thinner in the small car segment, so automakers are going to need to manage their businesses carefully to optimize profits.”

BUT… According to the report, India’s auto market has three “deficits” to overcome — in international trade, budget, and infrastructure (which is singled out as the largest challenge) — if it is to realize its full potential. Humphrey asserts, “Much of India’s future growth in the automotive sector will depend on successfully creating the infrastructure to support its economy.” The report also points to a fourth “deficit” in terms of skilled engineers and large-scale automotive parts production.

Bottom Line: 700,000 light vehicles were sold in 2000, and around 11 million are predicted for 2020.That represents some serious growth — but it’s far from guaranteed at this point.

Source: http://www.jdpower.com/news/pressRelease.aspx?ID=2011081

Prediction: The United States will need to create 21 million jobs by 2020 in order to achieve full employment.

Who: The McKinsey Global Institute, in their report “An economy that works: Job creation and America’s future.”

Why: The report’s authors looked at the current high level of unemployment (approximately seven million are still out of work as the U.S. enters into an extended “jobless recovery” period) as well as projected population growth over the next decade to arrive at this number.

BUT… If current trends continue, this is unlikely to occur. The economy will not be as strong as it needs to be and many will lack the necessary skills and education for the jobs that will likely exist.

Bottom Line: According to the report, which looks at the potential for job growth across 6 industry sectors, demand for college graduates is likely to rise, so government investment in higher education is imperative. “Our analysis suggests a shortage of up to 1.5 million workers with bachelor’s degrees or higher in 2020. At the same time, nearly 6 million Americans without a high school diploma are likely to be without a job.” The report concludes with a series of policy suggestions, including attracting greater foreign investment and supporting new industries and start-ups, which could help reverse the trends, given a healthy economy.

Source: http://www.mckinsey.com/mgi/publications/us_jobs/index.asp, http://www.ft.com/intl/cms/s/0/0e1161ee-92e4-11e0-9ba7-00144feab49a.html

Prediction: Digital currency will be accepted virtually everywhere in the United States by 2015.

Who: PayPal president Scott Thompson.

Why Great: People will no longer have to worry if they have enough cash on them or go out of their way to stop by their bank’s ATMs. On a larger scale, a mostly cashless society would go a long way towards eliminating illegal underground economies and reducing criminal activity, as David R. Warwick points out in “The Case Against Cash” (THE FUTURIST, July-August 2011).

BUT… The news is coming from PayPal. Surprising? Also, it’s good news depending on how you feel about information gathering and privacy issues. There will be data on every transaction made and that data will need protecting (of course, this is already an issue).

What to do about it: In Thompson’s words, “embrace a digital lifestyle” and stop using cash and checks.

Bottom Line: Wallets may be destined to become antique collector’s items in the next few years.

Source: https://www.thepaypalblog.com/, http://mashable.com/2011/06/29/paypal-100-million/

Prediction: By 2015, the majority of organizations that manage innovation processes will galvanize innovation by making a game out of it.

Who: Gartner, Inc.

Background: “Gamification” — applying game mechanics, such as scoreboards and rules of play, to non-game systems — is a well-known trend underway in IT, Web development, and many other types of businesses and organizations. Their management teams are all looking to increase customer feedback, employee engagement, and idea generation. They achieve all three by creating game-like platforms that make the work of discussion and correspondence feel more like a game. For example, Great Britain’s Department for Work and Pensions created a social collaboration platform for its 120,000 personnel. Called Idea Street, it features points, leader boards, and a “buzz index.” In its first 48 months, approximately 4,500 users had registered and had generated 1,400 ideas, of which 63 had gone forward to implementation. The World Bank developed a similar application, called Evoke, which crowdsources ideas from players across the globe to solve social challenges.

Why Great: Plenty of adults, just like kids, enjoy friendly competition. The Department for Work and Pensions, the World Bank, and other organizations are clearly coming up with creative ways to channel grownups’ proclivities for games and, in the process, get higher volumes of serious work done. And who can argue with that?

BUT… No app is going to work magic. It is only as useful as the people who use it (or don’t use it). The two organizations above may have the dual benefits of an engaged population willing to contribute ideas and an open-minded leadership willing to receive new ideas. Both of these are important, and unfortunately, not every organization has them. Those that don’t will probably not see as much gain from gamification.

Bottom Line: Businesses and organizations are looking for, and often finding, highly productive ways to combine business and pleasure.

Source: http://www.gartner.com/it/page.jsp?id=1629214

Prediction: Worldwide government debt will increase another 40% by 2016 (reaching $48,100 billion; up from $34,400 billion this year). Financial stability of every major economy on earth will be in jeopardy. Advanced economies are the ones running up the negative balances; emerging market economies account for 17% of global debt now and will account for 14% in 2016.

Who: Eswar Prasad and Menjie Ding, Financial Times

Background: Debt constitutes “a major threat to global financial stability,” according to Prasad and Ding in this report, and they detail steep aggregate debt increases across the global financial system to make their case. The causes are many. Sagging economic performance is setting back the United States and Europe. Japan’s economy is underperforming, too, while simultaneously contending with the aftershocks of the 2011 tsunami disaster.

Why Great: One need look no farther than Greece and Portugal to see what happens if debt is allowed to spiral out of control. If this report’s analyses are correct, there could be many more Greeces and Portugals across the world in the years ahead: No region is free of looming debt. What’s even scarier is that the major economies, such as Europe, have the most crushing debt problems. This matters because these larger economies are bailing the troubled smaller ones out now. If the larger economies remain in the red, they will have no more bailouts to spare, and troubled economies everywhere will be on their own.

BUT… Could BRIC growth soften the blow?

Bottom Line: It happened in Greece, and it happened in Portugal. It could apparently happen in a lot of other places, too.

Source: Brookings, http://www.brookings.edu/articles/2011/0731_debt_burden_prasad.aspx

Prediction: “micro-multinationals” will dominate the planet (with a little assistance from cheap robots) by 2025.

Who: Hal Varian, chief economist for Google, in an article for Foreign Policy.

Why Great: Thanks largely to the Internet, “even the smallest company can now afford a communications and computational infrastructure that would have been the envy of a large corporation 15 years ago,” Varian writes. These small businesses, known as micro-multinationals, can distribute their products (especially those that are Web-based) — and hire employees — in virtually any country in the world. Varian points to Skype, based in Estonia, as a successful example of such a company. Micro-multinationals can help prevent “brain drains,” too, since employees can work remotely from anywhere in the world. And soon, according to Varian, inexpensive robotic devices will be available to boost these businesses. This technology, which previously only large companies could afford, will further level the playing field.

BUT… Varian adds, that terrorists and others who seek to create disruption and chaos have also “benefited enormously from the same proliferation of information technology that has enabled micro-multinationals and robotics.” He further points out that any problems with the communications infrastructure itself could cause “catastrophes.” In addition, he mentions that legislative and regulatory issues, among others, could prevent the potential of inexpensive robotic technology from fully being realized.

Bottom Line: In summing up. Varian says, “A simple way to forecast the future is to look at what rich people have today; middle-income people will have something equivalent in 10 years, and poor people will have it in an additional decade.” While this may come across as an overly-simplistic (and overly-optimistic) forecasting shortcut, it does seem applicable in the business world.

Source: http://www.foreignpolicy.com/articles/2011/08/15/micromultinationals_will_run_the_world

Prediction: Thanks to a rebound in housing construction, unemployment will fall below 7% by 2013, earlier than the Federal Reserve is predicting.

Who: Warren Buffet on the Charlie Rose Show, following the publishing of his most recent Op-Ed in the New York Times.

Why It’s Great: It’s a bold, direct, and unapologetically optimistic statement about the resiliency of the U.S. economy from the world’s most successful investor. More importantly, it might actually be right. U.S. Commerce Department Data released the week of August 26th showed that 165,000 new houses were on the market in the month of July. That’s the lowest inventory of new homes on the market since the government began keeping track 47 years ago.

BUT… Buffett may be a great investor, but he’s not an impartial voice. Forecasting a rebound in home construction overlooks the fact that millions of Americans still face difficult credit conditions, U.S. consumer debt remains at historically elevated levels. In this environment, the consensus credit-worthy consumers will delay home purchases until the economy improves, which is a function of unemployment receding, which is a function of people buying houses.

Bottom Line: The U.S. economic recovery is surprisingly dependent on housing and consumer spending and thus will be volatile for some time.

Source: http://www.youtube.com/watch?v=xVOn371TCPo

Prediction: Baby Boomers easing into retirement will continue to dump U.S. stocks in favor of less risky assets, causing a 13% decline in the U.S. stock market by 2010 (relative to 2010).

Background: “Despite theoretical ambiguities, U.S. equity values have been closely related to demographic trends in the past half century. There has been a tight correlation between population dependency ratios… and the price/earnings ratio of the U.S. stock market. In the context of the impending retirement of baby boomers over the next two decades, this correlation portends poorly for equity values.”

Who: The Federal Reserve Bank of San Francisco, August 22, 2011.

Why it’s Great: It’s an unusually honest appraisal of how changing demographics influence equity valuations. In broaching it, the authors of the letter are trying to look out for retail investors (which is probably more than their brokers are doing). Also, the authors use the same metric to product a robust bull market for stocks between 2025 and 2030. Good news for the grandkids!

BUT… Even the authors acknowledge that their metric is one just one among many. Technological breakthroughs creating new enterprises a loosening of immigration policy, other events could render the prediction moot.

Bottom Line: Be careful of stock brokers baring “buy” opportunities.

Source: http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html?utm_source=home

Prediction: Iraq’s per capita GDP will double by 2015, thanks to oil revenues.

Who: Majid Al-Suri, a Central Bank of Iraq economist

Background: Oil may be one of the few bright spots in Iraq’s attempts to rebuild itself post-Saddam. National oil output in July 2011 stood at 2.8 million barrels a day — higher than pre-invasion oil production, which hovered at around 2.6 million barrels a day in early 2003, and equal to or higher than production at any time since. Al-Suri projects that output will keep growing and, when combined with steadily rising prices for oil in the global market, will push Iraq’s per-capita GDP from its present-day level of $4,500 up to $10,000 by the end of 2015.

Why Great: Iraq is still on the brink: Insurgent attacks are rising, security forces are weak, standards of living remain low, unemployment is horrendous, and corruption is rampant. A failed-state future looks increasingly certain, and that would be a scenario no good person wants to see: outpourings of civil warfare; mass flight of refugees; catastrophic drop-off in the global oil market; a resorgimento for Islamic terrorist networks; and the annihilation of movements for Middle Eastern democratic reform. Iraq’s government could still avert this implosion, but only if it massively boosts security, economic activity, and public infrastructure. Strong GDP growth would make all that possible.

BUT… Al-Suri sounds awfully optimistic, given the present-day mess. Does he really believe his prediction? Or is he just saying it to entice more foreign contractors and placate the U.S. government that has been getting on his country’s case of late about the lack of progress? No one disputes that Iraq has lots of oil to be drilled, but there needs to be law and order on the ground before anyone can drill it. Iraq is still plagued with sectarian violence that shows no signs of quitting. As such, the country is going to have a hard time convincing oil companies to set up shop. Ergo, revenue growth is going to be hard to achieve.

Bottom Line: Iraq needs economic growth to achieve stability, and it needs stability to achieve economic growth — it’s a nasty catch-22, no matter what rosy predictions a Central Bank of Iraq economist may dish out.

Source: Iraq Business News, http://www.iraq-businessnews.com/2011/03/14/iraqs-per-capita-income-to-double-by-2015/

Prediction: The euro zone will collapse, many of its member nations ditching the Euro for their own national currencies, by 2016.

Who: Nouriel Roubini, a French economist and the president of Roubini Global Economic LLC. He holds great renown in France for having accurately predicted the 2008 financial crisis back in 2006.

Background: France, Germany, and several other major European powers founded the euro zone in hopes that Europe’s many economies could be most successful if they pooled their resources and interests into one common market. In Roubini’s opinion, the member nations have not stuck to the plan. Their economic policies remain too divergent and too competitive with each other. Today’s European fiscal crisis is the outcome — bad fiscal management in Greece and Portugal drags down Spain and Ireland. He sees only two ways out. The first is that all euro-zone members adopt one single budgetary policy and tax system. In the absence of this, he says, the euro zone’s less successful member nations will give up the Euro and reinstate their own national currencies.

Why Great: This is bound to shake up global markets — but in a bad way, good way, or both? It’s debatable. On one hand, collapse of the Euro could hugely disrupt trade across Europe, which could wreck Europe’s stock markets. Unemployment and budget crises across the continent could worsen, possibly triggering the elections of extremist politicians and more global chaos. Immigration into Europe would slow, and emigration out of Europe might accelerate. But on the other hand, the countries who abandon the Euro might come out winners. Their new, purportedly crash-proof currencies might be held as more credible by domestic businesses and outside investors. Europe could see a new era of economic prosperity, just one with different centers of gravity.

BUT… Many European officials believe in the deep integration of which Roubini speaks and are trying to get it implemented. If they succeed, then his second, default scenario will not have to come to pass.

Bottom Line: Europe’s financial system gets few votes of confidence. Major overhaul now might be necessary to avert major collapse late on.

Source: Le Figaro, http://www.lefigaro.fr/conjoncture/2011/06/14/04016-20110614ARTFIG00351-roubini-predit-l-explosion-de-l-eurozone.php

Prediction: The present-day economic troubles now growing across the world will culminate in a new Great Depression by 2013.

Who: Nouriel Roubini, a French economist and the president of Roubini Global Economic LLC

Background: Roubini notes the simultaneous slowdowns of economic growth in the United States, United Kingdom, and the euro zone with alarm. He fears that they are the makings of a new, even worse financial crisis that will sweep the globe no later than 2013. He urges national leaders everywhere to quickly institute massive new stimulus initiatives to avert it.

Why Great: A new stimulus is definitely not going to happen in the United States. Few European governments seem disposed to it, either. In all, there is no good reason to think that Roubini’s prescription will be taken. That’s dire news for economies everywhere, if “Dr. Catastrophe” — as Roubini is sometimes called for having foretold in 2006 of the 2008 U.S. housing crash — is correct on his diagnosis of another impending global recession.

BUT… Hamilton hasn’t always been right. As Bloomberg reporter Scott Hamilton notes, “When the Standard & Poor’s 500 Index fell to a 12-year low on March 9, 2009, (Roubini) said it probably would drop to 600 or lower by the end of that year. Instead, the U.S. equity benchmark gained 65 percent for the rest of 2009.” Let’s all hope that he’s wrong about this new Great Depression, too.

Bottom Line: If you’re looking for good news on the economic front, you’re not going to get it from Roubini.

Source: Bloomberg, http://www.bloomberg.com/news/2011-09-06/roubini-says-global-economic-slowdown-accelerating-next-financial-crisis.html

Prediction: By the 2020s, the Americas will supersede the Middle East as the world’s go-to source for petroleum. Geopolitics will shift considerably, as OPEC will no longer have so much clout.

Who: Mark Perry, University of Michigan economist

Background: North and South America combined hold far more underground oil reserves than the Middle East and North Africa. The Middle East was favored last century, however, because the Americas’ oil exists primarily in less accessible forms and environs — offshore deposits, shale rock, oil sands, and heavy oil formations. More recently, though, innovations in drilling and mining have made accessing these oil sources much easier. Consequently, oil industries in the Americas have grown quickly in short order. Perry thinks that the United States could become a prominent oil exporter and, in addition, share its oil-accessing technologies with European countries that want to tap their own domestic supplies instead of being at the mercy of oil-rich Russia.

Why Great: It’s good news for economic growth and job creation in the Americas. It’s not so good news, however, for environmental sustainability. A burgeoning oil industry in the United States would likely slow societal momentum toward weaning off fossil fuels and eradicating carbon emissions. Not to mention it could put a slough of hitherto-untouched wilderness areas in harm’s way.

BUT… Perry’s expectation that the United States would exploit more of its domestic oil reserves is very believable. It doesn’t necessarily follow, though, that the OPEC countries will lose business because of it. Many energy analysts expect worldwide energy consumption to grow enormously as the century wears on. Odds are there will be enough global hunger for oil that both the Middle East and the Americas will go on reaping huge oil revenues drilling their oil wells to quench it.

Bottom Line: Human civilization has room for many oil giants, though the same can’t be said of earth’s ecosystems.

Source: http://www.dailymarkets.com/economy/2011/08/17/adios-opec-the-americas-not-the-middle-east-will-be-the-world-capital-of-energy-in-the-future/

Prediction High Levels of unemployment will haunt young people until 2012. The number of young people forced to delay their careers due to the recession of poor labor market will suffer diminished earnings ability for decades.

Who: Andrew Sum, an economist and director of the Center for Labor Market Studies at Northeastern University

Background: Today’s young adults are facing the highest unemployment since World War II. Nearly one out of five lives in poverty.

Unemployment is two to three times worse for Gen Y then it is for baby boomers.

For Gen X, debts have been rising and incomes falling. In the words of Derek Thompson at the Atlantic, “They’re working harder — a two-parent family worked 26 percent more hours in 2010 than in 1975 — and making less. Thirty-something men had an average income of $40,000 some 30 years ago; today, it’s $35,000.”

Why Great: Acknowledging the debt and dim economic prospects of today’s young people is the first step in drafting federal policies (a student loan forgiveness bill?) to fix the problem.

BUT… Robust growth could reverse this trend.

Sources: http://finance.yahoo.com/news/Who-Had-Worst-Recession-atlantic-3314192070.html?x=0

http://www.businessinsider.com/america-lost-generation-census-2011-9?utm_source=twbutton&utm_medium=social&utm_campaign=moneygame

Prediction: The European debt crisis could lead to war in 10 to 20 years.

Who: Polish Finance minister Jacek Rostowski, speaking before the European parliament in Strasbourg on September 15.

Why great: The sooner you recognize a worst case scenario, the sooner and easier you can avert it.

BUT… The prediction reflects the historic German fear of hyper-inflation, which some German policy makers believe will ensue if euros are printed to cover the bad debts in Greece (and elsewhere.) Hyperinflation in Germany following World War I resulted in unprecedented social unrest and, eventually, fascism. But deflation, rather than inflation, remains the larger threat to the global economy.

Bottom Line: It isn’t the 1930s. The euro zone members should focus on the crisis at hand.

Source: http://www.businessinsider.com/jasek-rostowski-war-poland-2011-9