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The 8 Major Forces Shaping the Future of the Global Economy

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The 8 Major Forces Shaping the Future of the Global Economy

I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.

– Jimmy Dean

The world is changing faster than ever before.

With billions of people hyper-connected to each other in an unprecedented global network, it allows for an almost instantaneous and frictionless spread of new ideas and innovations.

Combine this connectedness with rapidly changing demographics, shifting values and attitudes, growing political uncertainty, and exponential advances in technology, and it’s clear the next decade is setting up to be one of historic transformation.

But where do all of these big picture trends intersect, and how can we make sense of a world engulfed in complexity and nuance? Furthermore, how do we set our sails to take advantage of the opportunities presented by this sea of change?

The Intersection of Data and Powerful Visuals

Interpreting massive amounts of data on how the world is changing can be taxing for even the most brilliant thinkers.

For this reason, our entire team at Visual Capitalist is focused on using the power of visual storytelling to make the world’s information more accessible. Our team of information designers works daily to transform complex data into graphics that are both intuitive and insightful, allowing you to see big picture trends from a new perspective.

After all, science says that 65% of people are visual learners – so why not put data in a language they can understand?

While we regularly publish our visuals in an online format, our most recent endeavor has been to compile our best charts, infographics, and data visualizations into one place: our new book Visualizing Change: A Data-Driven Snapshot of Our World, a 256-page hardcover coffee-table book on the forces shaping business, wealth, technology, and the economy.

The book focuses on eight major themes ranging from shifting human geography to the never-ending evolution of money. And below, we present some of the key visualizations in the book that serve as examples relating to each major theme.

1. The Tech Invasion

For most of the history of business, the world’s leading companies have been industrially-focused.

Pioneers like Henry Ford and Thomas Edison innovated in the physical realm using atoms – they came up with novel ways to re-organize these atoms to create things like the assembly line and the incandescent lightbulb. Then, companies invested massive amounts of capital to build physical factories, pay thousands of workers, and build these things.

The majority of the great blue chip companies were built this way: IBM, U.S. Steel, General Electric, Walmart, and Ford are just some examples.

But today’s business reality is very different. We live in a world of bytes – and for the first time technology and commerce have collided in a way that makes data far more valuable than physical, tangible objects.

The best place to see this is in how the market values businesses.

Market capitalization of tech companies

As you can see above, companies like Apple, Amazon, and Microsoft have supplanted traditional blue chip companies that build physical things.

The tech invasion is leveraging connectivity, network effects, artificial intelligence, and unprecedented scale to create global platforms that are almost impossible to compete with. The tech invasion has already taken over retail and advertising – and now invading forces have their eyes set on healthcare, finance, manufacturing, and education.

Will atoms ever be more valuable than bytes again?

Interesting Facts:

2. The Evolution of Money

Money is arguably one of humanity’s most important inventions. From beaver pelts to gold bars, the form and function of money has constantly fluctuated throughout history.

In the modern world, the definition of money is blurrier than ever. Central banks have opted to create trillions of dollars of currency out of thin air since the financial crisis – and on the flipside, you can actually use blockchain technology to create your own competing cryptocurrency in just a few clicks.

Regardless of what is money and what is not, people are borrowing record amounts of it.

The world has now amassed $247 trillion in debt, including $63 trillion borrowed by central governments:

Global debt by gdp

In today’s unusual monetary circumstances, massive debt loads are just one anomaly.

Here are other examples that illustrate the evolution of money: Venezuela has hyperinflated away almost all of its currency’s value, the “War on Cash” is raging on around the world, central banks are lending out money at negative interest rates (Sweden, Japan, Switzerland, etc.), and cryptocurrencies like Bitcoin are collectively worth over $200 billion.

How we view money – and how that perception evolves over time – is an underlying factor that influences our future.

Interesting Facts:

3. The Wealth Landscape

Wealth is not stagnant – and so for those looking to make the most out of global opportunities, it’s imperative to get a sense of how the wealth landscape is changing.

The modern view is either extremely healthy or bubbly, depending on how you look at it: Amazon and Apple are worth over $1 trillion, Jeff Bezos has a $100+ billion fortune, and the current bull market is the longest in modern history at 10 years.

Will this growth continue, and where will it come from?

Here’s one look based on projections from the World Bank:

Where is Global Growth Happening?

Despite these estimates, there is a laundry list of items that the ultra-wealthy are concerned about – everything from the expected comeback of inflation to a world where geopolitical black swans seem to be growing more common.

Here’s why those building and protecting wealth are rightly concerned about such events:

Geopolitical black swans and the S&P 500

But the wealth landscape is not all just about billionaires and massive companies – it is changing in other interesting ways as well. For example, the definition of wealth itself is taking on a new meaning, with millennials leading a charge towards sustainable investing rather than being entirely focused on monetary return.

How will the wealth landscape look a decade from now?

Interesting Facts:

4. Eastern Promises

The economic rise of China has been a compelling story for decades.

Up until recently, we’ve only been able to get a preview of what the Eastern superpower is capable of – and in the coming years, these promises will come to fruition at a scale that will still be baffling to many.

Understandably, the scope of China’s population and economy can still be quite difficult to put into perspective.

The following map may help, as it combines both elements together to show that China has countless cities each with a higher economic productivity than entire countries.

China cities vs. country GDPs

In fact, China has over 100 cities with more than 1,000,000 inhabitants. These cities, many of which fly below the radar on the global stage, each have impressive economies – whether they are built upon factories, natural resource production, or the information economy.

As one impressive example, the Yangtze River Delta – a single region which contains Shanghai, Suzhou, Hangzhou, Wuxi, Nantong, Ningbo, Nanjing, and Changzhou – has a GDP (PPP) of $2.6 trillion, which is more than Italy.

Interesting Facts:

Don’t forget: our new book covers
all of these eight themes in detail:

5. Accelerating Technological Progress

As we’ve already seen, there are many facets of change that will impact our shared future.

But here’s the kicker: when it comes to technological progress, the rate of change itself is actually getting faster and faster. Each year brings more technological advancements than the last, and once the exponential “hockey stick” kicks into overdrive, innovations could happen at a blindsiding pace.

This could be described as a function of Moore’s Law, and the law of accelerating returns is also something that futurists like Ray Kurzweil have talked about for decades.

Interestingly, there is another offshoot of accelerating change that applies more to the business and economic world. Not only is the speed of change getting faster, but for various reasons, markets are able to adopt new technologies faster:

The accelerating rate of technology adoption

New products can achieve millions of users in just months, and the game Pokémon Go serves as an interesting case study of this potential. The game amassed 50 million users in just 19 days, which is a blink of an eye in comparison to automobiles (62 years), the telephone (50 years), or credit cards (28 years).

As new technologies are created at a faster and faster pace – and as they are adopted at record speeds by markets – it’s fair to say that future could be coming at a breakneck speed.

Interesting Facts:
Future tech facts

6. The Green Revolution

It’s no secret that our civilization is in the middle of a seismic shift to more sustainable energy sources.

But to fully appreciate the significance of this change, you need to look at the big picture of energy over time. Below is a chart of U.S. energy consumption from 1776 until today, showing that the energy we use to power development is not permanent or static throughout history.

Energy Use Since 1776

And with the speed at which technology now moves, expect our energy infrastructure and delivery systems to evolve at an even more blistering pace than we’ve experienced before.

Interesting Facts:

7. Shifting Human Geography

Global demographics are always shifting, but the population tidal wave in the coming decades will completely reshape the global economy.

In Western countries and China, populations will stabilize due to fertility rates and demographic makeups. Meanwhile, on the African continent and across the rest of Asia, booming populations combined with rapid urbanization will translate into the growth of megacities, holding upwards of 50 million people.

By the end of the 21st century, this animation shows that Africa alone could contain at least 13 megacities that are bigger than New York:

Megacities demographic animation

By this time, it’s projected that North America, Europe, South America, and China will combine to hold zero of the world’s 20 most populous cities. What other game-changing shifts to human geography will occur during this stretch?

Interesting Facts:

8. The Trade Paradox

By definition, a consensual and rational trade between two parties is one that makes both parties better off.

Based on this microeconomic principle, and also on the consensus by economists that free trade is ultimately beneficial, countries around the world have consistently been working to remove trade barriers since World War II with great success.

But nothing is ever straightforward, and these long-held truths are now being challenged in both societal and political contexts. We now seem to be trapped in a trade paradox in which politicians give lip service to free trade, but often take action in the opposite direction.

To get a sense of how important trade can be between two nations, we previously documented the ongoing relationship between the U.S. and Canada, in which each country is the best customer of the other:

USA/CAN Trade Relationship

With the recent USMCA agreement, the two countries seem to have sorted their differences for now – but the trade paradox will continue to be an ongoing theme in economics and investing at a global level for many years to come, especially as the trade war against China rages on.

Points to Consider:

How You Can Visualize Change

The forces behind change are not always evident to the naked eye, but we believe that by fusing data, art, and storytelling together that we can create powerful context on the trends shaping our future.

If you enjoyed our summary above, you can explore these ideas further with our book “Visualizing Change”, which offers 256 pages of infographics, data visualizations, and charts on the future direction of the global economy and technology.

Get your copy of Visualizing Change today

Our book makes a great holiday gift. Get it on Amazon.com or Amazon.ca, or even customize a bulk order with your logo

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Central Banks

The Anatomy of the $2 Trillion COVID-19 Stimulus Bill

A visual breakdown of the CARES Act, the $2 trillion package to provide COVID-19 economic relief. It’s the largest stimulus bill in modern history.

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The Anatomy of the $2 Trillion COVID-19 Stimulus Bill

The unprecedented response to the COVID-19 pandemic has prioritized keeping people apart to slow the spread of the virus. While measures such as business closures and travel restrictions are effective at fighting a pandemic, they also have a dramatic impact on the economy.

To help right the ship, the Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act — was passed by U.S. lawmakers last week with little fanfare. The act became the largest economic stimulus bill in modern history, more than doubling the stimulus act passed in 2009 during the Financial Crisis.

Today’s Sankey diagram is a visual representation of where the $2 trillion will be spent. Broadly speaking, there are five components to the COVID-19 stimulus bill:

CategoryTotal AmountShare of the Package
Individuals / Families$603.7 billion30%
Big Business$500.0 billion25%
Small Business$377.0 billion19%
State and Local Government$340.0 billion17%
Public Services$179.5 billion9%

Although the COVID-19 stimulus bill is incredibly complex, here are some of the most important parts to be aware of.

Funds for Individuals

Amount: $603.7 billion – 30% of total CARES Act

In order to stimulate the sputtering economy quickly, the U.S. government will deploy “helicopter money” — direct cash payments to individuals and families.

The centerpiece of this plan is a $1,200 direct payment for those earning up to $75,000 per year. For higher earners, payment amounts will phase out, ending altogether at the $99,000 income level. Families will also receive $500 per child.

There are three other key things to know about this portion of the stimulus funds:

  1. There will be a temporary suspension for any student loan held by the federal government. This means no payments required and no interest accrued until the end of September, 2020.
  2. Borrowers with federally backed loans can request forbearance on mortgage payments for up to six months.
  3. There will be an expansion of unemployment benefits, including a four-month enhancement of benefits. This plan includes freelancers, workers in the gig economy, and furloughed employees.

Big Business

Amount: $500.0 billion – 25% of total CARES Act

This component of the package is aimed at stabilizing big businesses in hard-hit sectors.

The most obvious industry to receive support will be the airlines. About $58 billion has been earmarked for commercial and cargo airlines, as well as airline contractors. Perhaps in response to recent criticism of the industry, companies receiving stimulus money will be barred from engaging in stock buybacks for the term of the loan plus one year.

One interesting pathway highlighted by today’s Sankey diagram is the $17 billion allocated to “maintaining national security”. While this provision doesn’t mention any specific company by name, the primary recipient is believed to be Boeing.

The bill also indicates that an inspector general will oversee the recovery process, along with a special committee.

Small Business

Amount: $377.0 billion – 19% of total CARES Act

To ease the strain on businesses around the country, the Small Business Administration (SBA) will be given $350 billion to provide loans of up to $10 million to qualifying organizations. These funds can be used for mission critical activities, such as paying rent or keeping employees on the payroll during COVID-19 closures.

As well, the bill sets aside $10 billion in grants for small businesses that need help covering short-term operating costs.

State and Local Governments

Amount: $340.0 billion – 17% of total CARES Act

The biggest portion of funds going to local and state governments is the $274 billion allocated towards direct COVID-19 response. The rest of the funds in this component will go to schools and child care services.

Public and Health Services

Amount: $179.5 billion – 9% of total CARES Act

The biggest slice of this pie goes to healthcare providers, who will receive $100 billion in grants to help fight COVID-19. This was a major ask from groups representing the healthcare industry, as they look to make up the lost revenue caused by focusing on the outbreak — as opposed to performing elective surgeries and other procedures. There will also be a 20% increase in Medicare payments for treating patients with the virus.

Money is also set aside for initiatives such as increasing the availability of ventilators and masks for the Strategic National Stockpile, as well as providing additional funding for the Center for Disease Control and expanding the reach of virtual doctors.

Finally, beyond the healthcare-related funding, the CARES Act also addresses food security programs and a long list of educational and arts initiatives.

Hat tip to Reddit user SevenandForty for inspiring this graphic.

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China

COVID-19 Crash: How China’s Economy May Offer a Glimpse of the Future

China has seen a severe economic impact from COVID-19, and it may be a preview of what’s to come for countries in the early stages of the outbreak.

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COVID-19 economic impact

The Economic Impact of COVID-19

China, once the epicenter of the COVID-19 pandemic, appears to be turning a corner. As the number of reported local transmission cases hovers near zero, daily life is slowly returning to normal. However, economic data from the first two months of the year shows the damage done to the country’s finances.

Today’s visualization outlines the sharp losses China’s economy has experienced, and how this may foreshadow what’s to come for countries currently in the early stages of the outbreak.

A Historic Slump

The results are in: China’s business activity slowed considerably as COVID-19 spread.

Economic IndicatorYear-over-year Change (Jan-Feb 2020)
Investment in Fixed Assets*-24.5%
Retail Sales-20.5%
Value of Exports-15.9%
Industrial Production-13.5%
Services Production-13.0%

*Excluding rural household investment

As factories and shops reopen, China seems to be over the initial supply side shock caused by the lockdown. However, the country now faces a double-headed demand shock:

  • Domestic demand is slow to gain traction due to psychological scars, bankruptcies, and job losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to “restrain” their spending habits after the virus.
  • Overseas demand is suffering as more countries face outbreaks. Many stores are closing up shop and/or cancelling orders, leading to an oversupply of goods.

With a fast recovery seeming highly unlikely, many economists expect China’s GDP to shrink in the first quarter of 2020—the country’s first decline since 1976.

Danger on the Horizon

Are other countries destined to follow the same path? Based on preliminary economic data, it would appear so.

The U.S.
About half the U.S. population is on stay-at-home orders, severely restricting economic activity and forcing widespread layoffs. In the week ending March 21, total unemployment insurance claims rose to almost 3.3 million—their highest level in recorded history. For context, weekly claims reached a high of 665,000 during the global financial crisis.

“…The economy has just fallen over the cliff and is turning down into a recession.”

Chris Rupkey, Chief Economist at MUFG in New York

In addition, manufacturing activity in eastern Pennsylvania, southern New Jersey, and Delaware dropped to its lowest level since July 2012.

Globally
Other countries are also feeling the economic impact of COVID-19. For example, global online bookings for seated diners have declined by 100% year-over-year. In Canada, nearly one million people have applied for unemployment benefits.

Hard-hit countries such as Italy and Spain, which already suffer from high unemployment, are also expecting to see economic blows. However, it’s too soon to gauge the extent of the damage.

Light at the End of the Tunnel

Given the near-shutdown of many economies, the IMF is forecasting a global recession in 2020. Separately, the UN estimates COVID-19 could cause up to a $2 trillion shortfall in global income.

On the bright side, some analysts are forecasting a recovery as early as the third quarter of 2020. A variety of factors, such as government stimulus, consumer confidence, and the number of COVID-19 cases, will play into this timeline.

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