Your SME and Learning From Global Trends Of The Project Economy

Demographics and Growth

The most recent population projections suggest that global population growth will continue, albeit at a moderate pace. the latest available UN projections predicts global population will rise to over 8.7 billion by 2035, and to continue to grow after that point at somewhat less than 1% per annum, with no peak until the end of the century. The increase between today (roughly 7.2 billion) and the expected value for 2035 would be around 1.5 billion, nearly equivalent to the population of China or India. Almost all of this increase would be outside OECD countries and East Asia. According to the recent growth performance and production of IMF for the next five years, Growth in advanced economies has stabilised at 1.4% in advanced economies over the last four years and is expected to continue at that pace for the next few years. By contrast, growth in the rest of the world (i.e. emerging markets and developing economies) is expected to accelerate from 3.1% to 3.6%.

Industrial and technological transformation

Technological progress seems to be accelerating and its nature appears to have changed. Recent advances have been mainly in software and artificial intelligence (AI). Filings under the IPC have grown continuously, rising from about 90,000 in 1999 to about 200,000 in 2013, more than doubling over this 14-year period. In this sense, technological progress has accelerated. If this growth rate were to continue, one would expect that patents should double again by 2035. Patent data (and the outlook for further increases) thus suggest that the supply of innovations is increasing all the time. One development over the last few years concerns the ability of software to mimic human brains. There might be hype around the deployment of AI, but some economically important tasks, such as driving a car or a truck, seem certain to be taken over by machines by 2035.

Climate change and resource competition

the impact on global fossil fuel demand should remain very limited in a 2035 perspective. The contribution of ‘new’ renewables is still only marginal. Globally, 3.2% of global energy demand is covered by new renewables with another 6.8% by ‘old’ renewables, i.e. hydro. Even at a growth rate of 10% per annum, it will take a long time until new renewables obtain a major share in global energy (as opposed to power generation). The same applies to electrification of transport. Currently, the share of electrical vehicles in the EU is 1.4% of new registrations. In the US, the figure is similar. The impact of electrification on transport will have limited effect on both oil demand and greenhouse gas emissions in a 2035 perspective. Even if by 2035 all new cars sold in the EU were EVs, the impact on oil demand would only be about 4 million out of a total 100 million barrels per day by 2035, a reduction of around 4%.

Some effects of climate change are already visible today and are expected to be (much) stronger in the future. These effects include shrinking glaciers, shifts in plant and animal ranges, loss of sea ice, accelerated sea level rise, and more intense heat waves and extreme weather events.46 Specific climate anomalies observed over 2017 include the arctic sea ice extent being 8.5% lower than during the 1981-2010 average, and a number of hurricanes in the Atlantic Ocean resulting in precipitation records. Migration is another area where climate impacts may be significant. By 2050, 143 million people living in vulnerable developing countries in sub-Saharan Africa, South Asia, and Latin America are expected to be forced to move within their own countries due to climate impacts.

Globalization

The concept of ‘globalisation’ needs to be extended to the exchange of technology and ideas. According to Baldwin (2017), this new form of globalisation risks cutting up value chains in an unpredictable way, thus introducing a fear of job losses even if few are actually lost. Expansion of trade is driven by ‘South-South’, (where China is counted as ‘South’) trade, i.e. trade between emerging economies, as they are growing much more strongly than the developed economies. Even in a 2035 perspective, it is likely that trade in goods will remain a key element of the global trading system. The present system, with its low tariffs, the MFN principle (most favoured nation) and the dispute settlement provided by the WTO seems the natural set-up.

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