4 Forces That Are Changing the Global Economy4 Forces That Are Changing the Global Economy

When change happens, adjustments need to be made. This fact of life is especially relevant, for the world’s economy’s operating system is currently being rewritten. There are four primary forces that are drastically changing everything in the global economy, at an extremely fast rate. In comparison to the Industrial Revolution, where there was only one force changing everything, this change in the economy is estimated at happening 10 times as fast, 300 times the scale, and resulting in having 3,000 times the impact. Many people recognize that each of these changes are happening, but often forget that not only are these four factors dominant on their own, but when their strength combines with one another, the overall effect is augmented to create a force that is unbelievably disruptive.

When change happens, adjustments need to be made. This fact of life is especially relevant, for the world’s economy’s operating system is currently being rewritten. There are four primary forces that are drastically changing everything in the global economy, at an extremely fast rate. In comparison to the Industrial Revolution, where there was only one force changing everything, this change in the economy is estimated at happening 10 times as fast, 300 times the scale, and resulting in having 3,000 times the impact. Many people recognize that each of these changes are happening, but often forget that not only are these four factors dominant on their own, but when their strength combines with one another, the overall effect is augmented to create a force that is unbelievably disruptive.

1. Urbanization. The center of the economy has shifted to emerging markets, for they are experiencing industrial and urban revolutions. This shift of the locus of economic activity is progressing at a rate of which has never been seen before. One example of the center of the economy is China, and its cities in particular. It is expected by 2025, that China will be home to more large companies than either the United States or Europe, and nearly half of the world’s companies who have nearly $1 billion in revenue, to be headquartered in an emerging market. Executives will continue to relocate to the places where growth is the fastest, in hopes of keeping up with the exponential growth. It is expected that the locus of economic activity will continue to shift within these new markets as well. Smaller and medium sized cities will be likely to grow with the global urban population in the upcoming years, and these unfamiliar places that exist now could easily become the locus of economic activity in the future.
2. Technology. From the Industrial Revolution to present day, new technology is constantly presenting new opportunities that disrupt traditional methods, approaches and systems. Facebook attracted 6 million users in its first year and that number multiplied 100 times over the next five years. In comparison, it took radio 38 years to attract 50 million listeners. It is evident that not only has technology become a larger part of our lives, but its growth has also accelerated. This accelerated adoption of new products spurs accelerated innovation. This acceleration is speeding up so fast that it is expected to continue to grow at an exponential speed beyond the power of human intuition to anticipate. Technology has also allowed for people to have access to an unprecedented amount of information and instant communication in the palm of their hand. Technology offers the promise of economic progress for billions in emerging economies at a speed that would have been unimaginable without the mobile Internet. The widespread access to technology allows for small and start up business to launch their company with little capital, and the life cycles of companies are becoming shorter, forcing executives to calculate and make decisions at a faster rate.
3. Shrinking Population. With fertility falling, the world’s population is shrinking each year. For example, Japan and Russia have seen their populations decline over the past few years, and it is expected that China and Latin American will also experience this demographic deficit. With a smaller workforce in the future, there will be a burden on productivity for driving growth, and the economy will have to adapt. Caring for a large amount of elderly people will also strain the government’s financial situation.
4. Global Connections. Around the world people have become more connected through trade and movements in capital, people, and information. In recent decades there has been a significant change in these flows of trade and finance. There used to be a lot of direct connections with people worldwide for trading purposes; now, it has grown into a complex web of connections. These changes have resulted in changes such as Asia’s emergence as the world’s largest trading region. Global capital flows expanded 25 times between 1980 and 2007. Technology has facilitated these connections and communication, which not only allows them to develop, but also to create new ones with increasing speed. Overall, a new dynamic phase of globalization has erupted which creates unmatched opportunities for people across the world.

  1. Urbanization. The center of the economy has shifted to emerging markets, for they are experiencing industrial and urban revolutions. This shift of the locus of economic activity is progressing at a rate of which has never been seen before. One example of the center of the economy is China, and its cities in particular. It is expected by 2025, that China will be home to more large companies than either the United States or Europe, and nearly half of the world’s companies who have nearly $1 billion in revenue, to be headquartered in an emerging market. Executives will continue to relocate to the places where growth is the fastest, in hopes of keeping up with the exponential growth. It is expected that the locus of economic activity will continue to shift within these new markets as well. Smaller and medium sized cities will be likely to grow with the global urban population in the upcoming years, and these unfamiliar places that exist now, could easily become the locus of economic activity in the future.
  2. Technology. From the Industrial Revolution to present day, new technology is constantly presenting new opportunities that disrupt traditional methods approaches and systems. Facebook attracted 6 million users in its first year and that number multiplied 100 times over the next five years. While it took radio 38 years to attract 50 million listeners. It is evident that not only has technology become a larger part of our lives, but also its growth has become accelerated. This accelerated adoption of new products spurs accelerated innovation. This acceleration is speeding up so fast that it is expected to continue to grow at an exponential speed beyond the power of human intuition to anticipate. Technology has also allowed for people to have access to an unprecedented amount of information and instant communication in the palm of their hand. Technology offers the promise of economic progress for billions in emerging economies at a speed that would have been unimaginable without the mobile Internet. Because of the widespread access to technology, and allowing for small and start up business to use little capital to launch their company, the life cycles of companies are becoming shorter and executives are having to make decisions at a faster rate.
  3. Shrinking Population. With fertility falling, the world’s population is shrink each year. For example, Japan and Russia have seen their populations decline over the past few years, and it is expected that China and Latin American will also experience this demographic deficit. With a smaller workforce in the future, there will be a burden on productivity for driving growth, and the economy will have to adapt. Caring for a large amount of elderly people will also strain the government’s financial situation.
  4. Global Connections. Around the world people have become more connected through trade and through movements in capital, people, and information. In recent decades there has been a significant change in these flows of trade and finance. There used to be a lot of direct connections with people worldwide for trading purposes, now it has grown into a complex web of connections. These changes have resulted in changes such as Asia’s emergence as the world’s largest trading region. Global capital flows expanded 25 times between 1980 and 2007. Technology has facilitated these connections and communication, which not only allows them to develop, but to create new ones with increasing speed. Overall a new dynamic phase of globalization has erupted which creates unmatched opportunities for people across the world.

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