What’s Going On? Trends Shaping Our World
What’s going on in the world today? Our global experts explore a few trends that are shaping the world in 2017 and beyond.
The Rapid Rise of Cities
In Asia and Latin America, we have seen the rapid growth of cities as people have migrated from rural areas into urban areas with more opportunities and wealth. We are seeing many super-cities with enormous populations emerging, but without the infrastructure of the
more developed cities. Anybody who has witnessed the apparent chaos of some of the faster growing super cities such as Dhaka in Bangladesh, Karachi in Pakistan or Lagos in Nigeria, will surely wonder how these cities cope without the basic infrastructure that sustains developed cities.
Up until recently, we have seen a counter-urbanization in the more developed countries of The U.S. and Europe. The increase in car ownership over the last 50 years meant that people could choose to live further away from the city center and away from its crime and congestion. Business parks sprung up in peripheral locations to ease the commute for employees and benefit from lower cost locations. However, in the last five years, this latter trend has reversed. Younger people, in particular, have preferred to live in the city and
businesses, eager to attract this talent, have followed them back to the Central Business District. This means we are seeing cities like London, Paris, New York, Los Angles and Houston growing in population. London is forecast to growth by 2.5m between now and 2031, a phenomenal growth of 16% when it has been static for many years. This has also been driven by a recognition that cities are economically and environmentally more sustainable than mass suburban sprawls. There is a lot of research about the wellbeing and health benefits of cities where people walk and cycle compared to a car-dependent population. Many European cities such as Copenhagen are leading the way in creating truly sustainable and healthy places to work, shop and live.
Moving By The Millions
Migration is arguably the most politically important topic in many of the developed countries in the world. Scenes of refugees risking their lives crossing the Mediterranean as they seek asylum in Europe from the Middle East and Africa are common features on our television news stories. Similar stories happening in Asia where The United Nations Refugee Agency estimates there are 3.5m people seeking asylum largely from Afghanistan and Myanmar. Economic migration into Europe, and within Europe, across Asia and into the United States is an even bigger factor, and driving some of the political shocks of 2016, notably Brexit and the election of Donald Trump.
The number of people living outside of their home country in 2015 due to economic migration was 243m people (3.3% of the world’s population), whilst refugees accounted for less than 20m. In 2015, two-thirds (67%) of all international migrants were living in just 20 countries. The largest number of international migrants (47m) resides in The United States of America, equal to about a fifth (19%) of the world’s total. Germany and the Russian Federation host the second and third largest numbers of migrants worldwide (12m each), followed by Saudi Arabia (10m) and The United Kingdom (nearly nine million).
On The Decline: Our World In Data
Economic migration, as well as urbanization, are resulting in significant depopulation in rural areas in some countries, and to such an extent that some states are seeing a significant national decline in population. The causes of Syria’s decline are obvious, but we are also seeing very significant population declines in many countries in Eastern Europe, the Caribbean and Pacific driven largely by migration.
However, perhaps the bigger global change and impact on economic sustainability and real estate, is the declining birth rate in many larger developed countries. The extent of this significant drop has the potential to stall long-term global economic growth and cause major issues in countries with low birth rates. To be at a sustainable level a country typically needs two children per woman. Of the G7 economies three countries are significantly below this level – Germany, Italy and Japan all at 1.4. Canada is only at 1.6 whilst the other three G7 economies do have more sustainable levels but are in gradual decline – UK (1.9), U.S. (1.9) and France (2.1).
The impact on the Global economy is reinforced in table 3 which shows population growth for G7 countries. This shows that Japan, Germany and Italy are all showing declining populations. Given the strong correlation of population with economic growth this is indeed concerning. There are various reasons why birth-rates drive population decline. These are widely debated and range from cultural, economic and social perspectives.
An Aging World
All the G-7 countries are also facing increasing age dependency ratios – the number of elderly people that need to be sustained by the wealth generated by the working population. Since the 1960s, there have been very large increases in dependency. This will be made significantly worse in Japan, Germany and Italy as their low birth rates results in a reduced working population in the medium term.
International migrants tend to include a larger proportion of working-aged persons compared to the overall population. Positive net migration can contribute to reducing old-age dependency ratios as well as driving up birth rate. However, international migration cannot reverse, or halt, the long-term trend towards an aging population. Even if current migration patterns continue, all major areas are projected to have significantly higher old-age dependency ratios in 2050.
The population implosion risks for Germany, Japan and Italy, as well as many smaller developed countries, are significant. Together with increasing old-age dependency ratios in all G7 countries raises many fundamental questions, especially at a time of low growth and high debt.
- Can standards of living be sustained in societies where the labor force shrinks in the wake of an aging population? How can this be achieved at a time of unprecedented debt burdens?
- Is a debt-driven economic model sustainable in the long run in a zero-growth economy?
- Can increased immigration and/or workforce expansion alleviate the problems?
- How will industries adjust to fewer and older consumers with different needs and demands?
- Will social security funding be sustainable?
- Can a new equilibrium between working and retired people be found?
These fundamental questions will impact where and how we work, shop and live
in the future, and the associated real estate needed to facilitate this.