The Great Reshaping

There are several major trends, that in my mind, will start shifting the global economic and geopolitical structures this year, and over this decade:

1. Deglobalization - a lot of conversation around this topic is surfacing in academic and political circles. Democracies have been in decline and authoritarianism & nationalism on the rise in the 21st century (https://freedomhouse.org/report/nations-transit/2021/antidemocratic-turn). Heavy handed neoliberal policies from the 1980's onward disrupted local supply-chains and cultures across most nations. This has fomented a lot of discord leading to the rise of populism globally. With the COVID pandemic, followed by the Ukraine war, global supply chains were significantly disrupted. Now we may be witnessing the swing of the pendulum back to regional and local relocation of supply-chains and some level of global economic decoupling. This can be witnessed in the latest industrial policy in the US and other countries. Depending on how far the pendulum swings, this can lead to many predictable (e.g., inflation, rise in inequality in developing nations, shift in investment policies and investment flows, etc.) and unforeseen consequences.

2. Leverage/ deleveraging - Ray Dalio has been sounding this alarm for at least a decade. Global debt is now at ~$230 trillion. Global GDP is at ~$100 trillion. Many developing nations are already looking at defaulting, and balance sheets will have to be restructured. If interest rates remain high and continue to rise, this will further crowd out investment in high-risk innovation and potentially impact growth and productivity. Somewhat adjacent, if China and Saudi Arabia ink a yuan-denominated oil deal, this will put significant pressure on the world's favorite reserve current i.e., the USD. What will break the camel's back, and what happens after that?

3. Environment/ Resources - Climate change is now perhaps one of the loudest topic of discussion in the zeitgeist. We know climate change is happening, there are reasonable arguments to suggest that some of this is due to excess human consumption and activity, and other arguments to suggest the cyclical nature of temperature changes. Regardless, this is creating geopolitical strife (e.g., inception of Syrian conflict). Importantly, beyond climate, there is a mass depletion of environmental resources (https://www.un.org/sustainabledevelopment/blog/2019/05/nature-decline-unprecedented-report/). We are tapping out our natural resources that fuel our insatiable appetites and excess consumerism (e.g., food, water, minerals, precious metals, etc.). This trend can further exacerbate extreme forms of tribalism, nationalism, geopolitical conflict, and zero-sum thinking.

4. Aging - Average life expectancy in OECD countries for women is ~84 years and for men, 78 years. The expectation, barring pandemics or catastrophes, is that life expectancy will continue to inch up over this century with further medical advances. On the other hand the average OECD birth rate is ~1.7 children/ woman, well below the equilibrium birth rate of 2.2-2.5 children/ women. These statistics are different for developing countries, where the birth rates are higher. Africa is the youngest planet on earth. Developed nations are significantly lagging. This can have profound implications. We will have more aging people vs. younger people. Our social systems and structures (e.g., pension, healthcare, retirement, etc.) will start to come under duress soon. This will require a significant rethink of how we organize society, and all prevailing systems and assumptions will have to be examined on the chopping block.

5. Loneliness/ Mental Health - In 2020 in the US alone, ~12 million adults seriously considered suicide, ~3 million adults made a plan, ~1 million attempted suicide, and ~50,000 actually committed suicide (men commit suicide at 3-4x the rate of women). With the advent of modern technology, especially social media, the shift in historical organization away from extended families, neighborhoods, and communities, the COVID pandemic, among other factors, the loneliness epidemic is on the rise (https://www.psypost.org/2022/01/massive-meta-analysis-finds-loneliness-has-increased-in-emerging-adults-in-the-last-43-years-62377). "Julianne Holt-Lunstad, Ph.D., professor of psychology at Brigham Young University, recently authored a large-scale meta-analysis on social isolation and loneliness, consisting of over 200 studies and 3.7 million participants. Her research suggests that prolonged periods of loneliness and isolation can have serious adverse effects, including heart disease, stroke, depression, and premature death. As she describes, 'There is robust evidence that social isolation and loneliness significantly increase the risk for premature mortality, and the magnitude of the risk exceeds that of many leading health indicators. Indeed, many nations around the world now suggest we are facing a ‘loneliness epidemic’" (Psychology Today). It is estimated that ~20% of Americans suffer from some form of mental illness today, and we are ill equipped to deal with these trends. These numbers fare worse in other places like Germany and Japan. What are the implications of this on our societies?

6. The Democracy Deficit (*added 3/14/23 to original post) - According to Freedom House research, we have now moved through 16 consecutive years of decline in global freedom (https://freedomhouse.org/report/freedom-world/2022/global-expansion-authoritarian-rule). Not only have dictatorial and autocratic regimes succeeded in shifting global incentives, but "democracies are being harmed from within by illiberal forces, including unscrupulous politicians willing to corrupt and shatter the very institutions that brought them to power. This was arguably most visible last year in the United States, where rioters stormed the Capitol on January 6 as part of an organized attempt to overturn the results of the presidential election. But freely elected leaders from Brazil to India have also taken or threatened a variety of antidemocratic actions, and the resulting breakdown in shared values among democracies has led to a weakening of these values on the international stage." From Hungary to Italy, from US to Brazil, from India to Israel, nationalistic, ethnic, and theocratic fervor is on the rise. And this severely threatens the rules and norms of liberal democracy established in the 20th century post WW-2. The fissures are deepening, political violence is on the rise, anarchic displays are becoming more prominent, and freedoms are being curtailed. Is this merely a cyclical or rather a secular trend, and can we reverse it without resorting to broad-scale violence and destruction?

What other trends keep you awake?