Why you should care
Because the earth quaked this year, and you might have missed it.
The author is a director of the McKinsey Global Institute.
Recapping the top stories from the past 12 months is the media’s favorite year-end pastime. There will be no shortage of roundups revisiting the outrage in Ferguson, the Republican midterm sweep and the World Cup. Here’s what probably won’t get a lot of attention, but whose economic impact is denominated in hundreds of billions of dollars to trillions: a fattening world, robots and our future sci-fi existence.
Indeed, while focusing on individual events, however momentous, is popular, it tends to gloss over the seismic shifts that reshape the landscape. It’s the long-term technological and economic trends that matter, and from those come my purely personal and idiosyncratic list of things that changed the conversation in 2014, and signal even bigger transformations ahead.
1. Piketty and the elephant in the room. The great inequality debate started back in 2011, when “the 1 percent” entered our lexicon. This year, a 700-page statistical tome became an unlikely best seller and made a rock star out of French economist Thomas Piketty: Capital in the Twenty-First Century makes the case that we’re living in another Gilded Age. It sparked a heated debate over exactly what we ought to do about it, enlivening calls for a living wage across the U.S. and Europe. Cracking this issue will require broader solutions: policy changes, company commitments, educational tools and digital platforms to help reinvent opportunity.
2. Globalization is no longer just about cheap labor. For years, we’ve imagined globalization as plastic product imports from China and oil from the Middle East. But new research shows that trade isn’t so simple anymore. Ideas and innovation now trump cheap goods and labor in terms of economic value flowing across borders. The fastest-growing flows? Exchanges of sophisticated, knowledge-intensive goods and services, data and communications. This new reality is already reshaping trade negotiations and international IP agreements. Advanced economies are owning the knowledge game — the U.S. leads the pack. Hot on its heels — surprise! — is China.
3. Offline, left behind. The Internet hit 3 billion users in 2014. China posted explosive growth, becoming the world’s second-largest e-tailing market virtually overnight. Shortly after its blockbuster IPO, Alibaba posted sales of more than $9 billion on China’s equivalent of “Black Friday” — just a small fraction of China’s digital transformation. But some 60 percent of the world’s population remains offline, due to poverty, lack of education or the absence of basic Internet infrastructure. Most are women, poor and rural, concentrated in roughly 20 countries. Addressing this digital divide is an urgent economic development issue.
4. The days of miracle and wonder are here. When Paul Simon penned this lyric back in 1986, he probably never dreamed of the intersection of genomics and big data. Scientists have created the world’s first synthetic enzymes, a possible precursor to next-gen medical treatments and diagnostics. Unprecedented computing power and new genomics promise to transform health care and agriculture, creating heartier crops that could help feed the world. But along with this comes thorny ethical and legal policy questions that we’ll be wrestling with for years.
5. Machines vs. your job? Anxiety over effects of self-driving cars, robotics and automation on employment hit big this year. Tech visionaries Erik Brynjolfsson and Andrew McAfee warned in The Second Machine Age that we’re in for wrenching economic changes as increasingly sophisticated computers fill more human roles. Many are wondering about the genie we’re letting out of the bottle. From Davos to Jackson Hole to right here in Silicon Valley, business and policy leaders grappled with what it means for the future of work. Will technology create more jobs than it destroys? The answer for now is to study up.
6. The peer-to-peer economy is here to stay. The peer-to-peer business model is simple but revolutionary: Provide the platform that makes a market for individuals to offer goods and services and to broker their own deals, from finance (Kiva, Kickstarter) to services (TaskRabbit) to hand-crafted goods (Etsy). Not everyone expected Uber, Lyft and Airbnb to rock the once-immutable taxi and hotel industries. Users love ’em, and, in theory, these platforms offer new, flexible jobs. Still to figure out: How do we make these models work fairly for everyone from communities to governments and those whose assets and investments are tied up in the other model?
7. Shale, shale, shale. The year 2014 proved that shale’s no temporary blip. It’s generating high-paying jobs and a wave of private infrastructure investment. The United States has surpassed Saudi Arabia and Russia as the world’s largest oil and natural gas liquids producer. We’ve seen a sharp drop in oil prices. The U.S. could reduce its net energy imports, effectively, to zero in the next decade. No one worth their salt would have bet on that five years ago. You can already feel the geopolitical tectonic plates shifting.
8. Empowering India. Over the past two decades, the official poverty rate has declined sharply in the world’s largest democracy. But the Empowerment Line, a new way to measure poverty, shows more than half of India’s population struggles to meet basic needs. India’s recent sluggish growth means that hardship’s not about to end. Voters showed their frustration in a sweeping electoral victory for new Prime Minister Narendra Modi. If he makes good on pledges to sweep away the red tape that has choked India’s productivity, hundreds of millions could attain a better life. And if India succeeds, much of the developing world, from Mexico with its two-speed economy to Brazil, could see a model for reform.
9. All eyes on Africa. Let’s get beyond Ebola. I was privileged to be on hand as leaders from across the continent gathered at the White House for a first-of-its-kind U.S.-Africa summit, focusing not on Africa’s ills but on its value as a trading partner and as a region rich with opportunity. Investors are waking up, realizing that Africa was home to eight of the 15 fastest-growing economies between 2000 and 2013. Yet the United States accounts for only 4 percent of Africa’s trade, and lags behind China and Europe in foreign direct investment. Deepening engagement could unlock huge potential — for Africa, and the U.S. as well.
10. A weighed-down economy. The obesity epidemic has been building for decades, but new research is eye-popping: Obesity costs the global economy some $2 trillion annually, more than the economic toll from smoking, worldwide armed conflict and terrorism. Half of the world’s population could be overweight or obese in the next 15 years, placing an enormous strain on health-care systems. It will take an all-hands-on-deck approach to dent the problem. Individuals will have to learn to manage portion sizes, the food industry will need to rethink its products, and institutions will need to limit the availability of high-calorie foods.