A veteran economist and money manager looks ahead at the currents and countercurrents likely to roil the global economy in the next thirty years.
Demographics is destiny, writes Ezrati (Kawari: How Japan’s Economic and Cultural Transformation Will Alter the Balance of Power Among Nations, 1999, etc.), or at least “as close as one can come where economics and finance are concerned.” Thus, the aging populations of America, Japan and the European Union countries will drive most of the adjustments necessary to ensure prosperity. Labor shortages in these developed nations, only partly ameliorated by immigration, will leave mass production to the emerging economies of China, India and Brazil, while the old powerhouses will increasingly depend on innovation and refinement for their economic successes. Trade and increased globalization will work to relieve the pressure imposed by demographics but only if the developed nations remove needless impediments—brainless government subsidies, protectionist policies, shortsighted regulation—to growth, intensify their research and development efforts, improve their educational institutions and provide training for workers bound to be displaced by the new environment. At the same time, developing economies must broaden and integrate their economies. These changes, Ezrati acknowledges, won’t be painless—we’ve already experienced the huge financial booms/busts, the widening income gaps and the erosion of the middle class that come with more intense levels of globalization—and nations like Russia, Venezuela and the Gulf States that rely on oil exports for their current prosperity are at special risk, but attempts to restrain globalization will likely cause worse hardship. He concludes by explaining why the U.S. is the only viable candidate to lead the world into the new era, offering recommendations as to how America can shore up its principal role and setting out historical reasons to be hopeful about success.
A balanced analysis of the future shape of the world’s increasingly interdependent economies.