Catching up with my global economic forecast, a decade later

Ten years ago the paperback version of my international bestseller, Outrageous Fortunes, hit bookstores and e-commerce websites. The book’s subtitle promised “The Twelve Surprising Trends That Will Reshape the Global Economy,” but the introduction warned that these were trends to watch for at least a decade into the future. Now that the time has passed, how many came true – and why?

Long-term forecasting is difficult in any field, but being an economic Nostrodamus is particularly perilous. Just about anything can affect the global economy, from the proverbial butterfly flapping its wings to natural and geopolitical events that seem to come from nowhere. And as I wrote in the introduction, the point of forecasting is often to prevent unfortunate outcomes – in other words, to take action and ensure that the direst predictions don’t come true.

Still, we can learn a lot by asking why some predictions have already come true and others haven’t. So here they are, my 12 predictions, more than a decade later. How am I doing so far?

China will get richer, and then it will get poorer again. When my book was published, China’s economy was still growing by about 10% per year, adjusted for changes in prices. In 2019, before the Covid-19 pandemic struck, that rate had fallen below 6% – if you believe the Chinese government’s statistics. If it falls by the same amount in the next decade, then it may begin to lag behind the United States and other economic leaders. At the moment, China won’t even publish its economic numbers. Some forecasters are already saying that China will fail to overtake the United States and become the world’s biggest economy – an assertion that would have been heresy back in 2011. But China has been gradually opening its economy to more foreign investment, and it could still improve the overall environment for entrepreneurship and innovation.

The European Union will disintegrate as an economic entity. It’s already happening. I showed how the EU split neatly into four quadrants along economic and geographic lines, with the northwestern countries in the most privileged position. It’s not surprising that one of them – the United Kingdom – has left the union. Will more follow if another financial crisis occurs?

The new colonialism will leave the colonizers and the colonized worse off in the long term. It may be too soon to tell how much the involvement of neocolonial powers like China and Saudi Arabia will affect the long-term welfare of poorer countries where they buy land and invest. After 2012, Chinese overseas purchases of agricultural assets doubled in just four years. More recently, African countries have felt the squeeze of rising prices and shortages of commodities. But one of the most serious emerging worries about the new colonialism is the debt burden incurred by colonized countries. China has made loans totaling $160 billion to African countries since 2000. Ten sub-Saharan countries that took at least 10% of their 2019 gross domestic product (GDP) worth of Chinese loans from 2012 to 2019, before the pandemic began. The average increase in indebtedness in 2019 was $2.50 for every dollar they took from China. If these countries cannot manage and repay their debts to China, in many cases they will risk forfeiting control of the assets and infrastructure they built with the loans.

Changing immigration policies in rich countries will worsen the brain drain from poor countries, even as they get richer. This trend was well underway a decade ago, and more recent numbers have only confirmed it. For example, the rate of migration for doctors trained in Africa to the United States rose by 27% between 2005 and 2015. These doctors came principally from Egypt, Nigeria, and South Africa, whose economies grew by an average of 4.6% per year during the same period – roughly double the rate of growth of their populations. The pandemic did encourage some people to move back home to their families, but that reversal may be only temporary.

The backlash against capitalism won’t last, but it won’t be replaced by political stability, either. At the original time of writing, the aftermath of the global financial crisis had brought left-wing populists and economic reformers to power in countries across South America, Eastern Europe, and Asia. But economic dislocations create openings for populists on the right as well as the left. In the same regions – as well as in the United States and Western Europe – these right-wingers seized the reins as voters reacted to the failings of their predecessors. As predicted, what had been a steady stream of center-left and center-right consensus-builders became a violently swinging political pendulum.

Americans will become the world’s sales force. This prediction was on the mark, but it has gone through more channels than I expected. Overseas insurers William Russell ranked business development/sales, digital marketing, and digital content creation in the top five jobs for expats in 2022. Americans have also figured out that one of the best ways to leverage their selling ability is to buy up global brands, especially in sports and entertainment. In 2012, four soccer teams in the English Premier League were controlled by American investors. When the 2022-23 season begins, there will be seven. And then there’s the most literal part of Americans’ conquest – the ubiquity of salesforce.com, the online selling tool par excellence.

As the global economy integrates, the middleman will win. International law firms have been huge beneficiaries of globalization, and even the pandemic hasn’t slowed them down. Chicago’s Baker McKenzie became a $3 billion firm in 2021, with revenues growing more in Europe and Asia than in North America. Global media buying via agencies is now a $60 billion industry, growing at 6% per year. And global investment banks blew through the pandemic with record fees of almost $160 billion in 2021.

The collapse of the World Trade Organization will unlock new gains from trade. The WTO’s Doha Development Round of trade talks had already dragged on for more than a decade by 2012 and was declared dead a few years later. I suggested that countries would have an incentive to lower barriers between trading blocs as well as within blocs. Lo and behold, in 2020 the Association of Southeast Asian Nations joined Australia, China, Japan, New Zealand, and South Korea to form the world’s biggest free trade agreement, the Regional Comprehensive Economic Partnership. Will the United States and European Union finally complete an even bigger blockbuster agreement?

A new set of lifestyle hubs will replace today’s business hubs. Even before the pandemic, mobile professionals were deciding to work remotely from places where they could find better amenities and a more reasonable cost of living. I suggested that Vietnam, the Czech Republic, Bulgaria, Malaysia, Singapore, Argentina, Slovenia, Costa Rica, Uruguay, and Tunisia might be among the top destinations. Half of these featured in the top ten destinations for expatriates in the 2019 and 2021 Expat Insider survey. In the earliest version of the survey, from 2014, only one made the top ten.

An enormous financial black market will arise outside of traditional centers. Panama Papers? Crypto? Dark money? Say no more.?

Global warming will make rich countries cleaner and richer and poor countries dirtier and poorer. One way to check this is with the Environmental Performance Index (EPI) from Yale University, which measures “ climate change performance, environmental health, and ecosystem vitality”. Among countries where the International Monetary Fund projects that GDP per capita will be below $2,000 in 2022, 39 have seen their EPI fall in the past decade while only 20 have maintained or increased their scores. In the group of countries where GDP per capita will be above $20,000 in 2022, 68 posted the same or higher EPI scores versus a decade ago, and only three have shown declines.

The structure of political institutions will stop the world from solving its biggest problems. Countries have trouble making decisions by consensus and even engaging in basic cooperation, especially when questions of sovereignty are involved. The failure to stem the Covid-19 pandemic was a case in point; a coordinated global response could probably have saved millions of lives. Climate change, violent extremism, and the global refugee crisis are among the other challenges that governments have chosen to tackle individually and idiosyncratically rather than as a group. Even the Paris Climate Agreement didn’t last long. The clock is ticking – will we finally unite to stave off disaster for future generations?

Daniel Altman is the chief economist at Instawork.