At CRE.Converge 2019, Reva Goujon, vice president of global analysis for Stratfor, shared her insights into current political and economic events around the world that will be sure to have far-reaching implications into 2020 and beyond.
Goujon set the stage by describing the current “global inflection point,” or how aging demographics, exponential technologies, global trade evolutions and great power competitions are collectively reshaping the global order.
By the year 2050, the number of humans ages 60 and above will outnumber those ages 14 and under in the United States – which has never happened in history. “The developing world isn’t quite there yet, but they’re catching up, and aging twice as fast as the developed world,” said Goujon.
“The entire world together is heading towards this major inflection point with many implications,” Goujon said. Pension payouts for will come during a time when governments are already burdened, while populations of younger workers are buried in debt and not equipped to make up for the shortfalls, and the low-growth environment could exacerbate these pain points.
“In the capital markets, younger workers tend to spend and borrow a lot, while older workers tend to save and invest a lot,” said Goujon. “We’re already seeing that avalanche towards bonds now, which is driving yields down.”
Another major force in play is urbanization. “People move to cities for education, jobs, opportunities… and often that’s to coastal cities, the same ones already experiencing the most climate stress,” said Goujon. “We’ll see this pick up pace in Asia, and infrastructure challenges will become more intense.”
As megacities cities become less affordable and we experience the stresses from urbanization, there will be a drive to address those issues with technology. New innovations will facilitate remote work, establish shared workplaces, and more to allow employees greater flexibility.
Goujon also touched on tech development and the implications for property markets: augmented reality applications, increasing focus on sustainability, more efficient construction including modular housing, self-healing concrete and more.
Wealth inequality was another trend Goujon highlighted. Income distribution in the U.S. more closely resembles that of China, Russia and India than it does Western Europe. American wages have stagnated since the 1970s, and young Americans graduating with advanced degrees aren’t seeing wage growth, so they’re adjusting their lifestyles. Many are having children later, spending less on consumer goods, and utilizing the sharing economy.
As the conversation turned to the biggest geopolitical risks of the day, the U.S.-China trade war was front and center. The competition between the U.S. and China for power globally has caused continued shifts and recalibrations of relationships between countries.
“China is developing a form of digital authoritarianism and that is appealing to more and more countries that may be tired of getting the human rights lectures they’ve heard from the U.S. for decades,” said Goujon.
Many countries continue to be affected by President Donald Trump’s tariffs and sanctions. “As we’ve seen, trade battles are not easy to win – and there can be a lot of collateral damage,” Goujon said.
China’s economy was slowing down before the trade war, and the country wants to see if the political pressures on Trump will create a more pliable president who will agree to more concessions. “Trump has to show now that the trade war has been worth it,” Goujon said. “The performance of the U.S. economy will be the major factor driving his reelection bid. He’s on much more fragile ground here.”
Next, Goujon pointed to the recent conflict in the Persian Gulf, where “Iran is trying to hold the global economy hostage.”
The Iranians have exposed the fact that Trump wants to avoid a war in the Middle East at all costs. “That works to the Iranians’ advantage,” she said. “As they engage in more brazen attacks, all of the countries involved are motivated to de-escalate and avoid military action. Iran is pushing things to the brink with the White House, to the edge of conflict, and using that de-escalation strategy to hopefully break the sanctions stalemate.”
At the session Q&A, the question at the top of attendee minds was the U.S. election in 2020. How could that outcome affect the current climate?
“The U.S. competing with China is a very popular bipartisan issue,” said Goujon. “China is being cast at the adversary – I call this a ‘manic moment’ for the U.S. We are waking up to this competition with China. Regardless if the Democrats or the Republicans are in the White House in 2020, the tech war is here to stay, so I don’t see much of a shift when it comes to the fundamental issue of where geopolitical risk is coming from,” she added.