The global trends that will shape the world of 2030: My long-read Q&A with Mauro Guillén

By James Pethokoukis and Mauro F. Guillén

How will the world have changed by 2030? Will climate change cripple future economic progress? How will aging populations affect the economy? Is the next century going to be a Chinese century or an American one? Recently on the podcast, Mauro Guillén and I discussed these topics and more.

Mauro is the Zandman Professor of International Management at the University of Pennsylvania’s Wharton School. He is also the author of 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything, released in August of last year.

What follows is a lightly edited transcript of our conversation, including portions that were cut from the original podcast. You can download the episode here, and don’t forget to subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet. Tell your friends, leave a review.

Pethokoukis: If I tried to sum up your entire book in a sentence, it would probably be something like “The next decade will be complicated.” But ultimately, what you’re offering is a message of optimism about the future while we manage the anxieties of the present. Do you think that’s a contrarian message these days?

Guillen: It probably is, but I’m a realistic optimist. I see opportunity in all of the big transformations that we’re going through. It’s important for us to be aware of the fact that things are changing and look for ways in which we can prosper from them. So I’m an optimist from my point of view. I think human beings have the ability to adapt, so I am confident that we will be able to manage the transformations ahead of us.

Let’s talk a bit about some of these trends and transformations. Your book basically makes a forecast about the future. What are the common mistakes people make when they’re trying to give a sense of what’s possible a decade or more in advance?

There are essentially three big mistakes that one can make. One is, as I said earlier, not recognizing that things are changing, thinking that, “You know what? This shall pass. We will go back to where we were a year ago or two years ago.” That’s self-defeating and fundamentally wrong.

The second mistake is being so excited about the present that you fail to lose sight of the shore or explore new horizons. We need to be adventurous. When so many things are changing, we need to think outside of the box and pursue new horizons.

The third big mistake is making irreversible decisions. When so many things are changing, irreversible decisions are bad because the state of the world may be different tomorrow, in a week, or in a month. You need to be able to build flexibility into your life. If you make decisions that run you into a corner and then things change because of all the global trends going on, you may find yourself in a situation in which you cannot go into reverse. You need to be able to course-correct.

Regarding your first point, do you think sometimes it’s actually the opposite? Over the past year, people have seemed almost too willing to extrapolate from changes into the future. For example, people claim that, because of the pandemic, nobody will want to live in cities or go to the office anymore. Though some things might just be a phenomenon of the past year, we seem quick to think current changes are going to last forever into the future.

You’re putting your finger on something that I think is really important. We need to be able to tell which trends will become permanent and which ones will perhaps create a hybrid situation. Let me give you an example. I think the current use of technology is a permanent change. If you remember before the pandemic, some categories of people weren’t very comfortable with technology, but now out of necessity they have become accustomed to using technology for shopping, working, and so on and so forth. So I think that it’s really important to understand the trends we’re seeing.

Remote work is a good example — I don’t think we’re going to stay the way we are now, which is half of the population working 100 percent of the time from the home. I think we’ll go into a hybrid model whereby maybe we commute to the office a couple of days a week and work from home the rest of the week.

Via Twenty20

So you’re absolutely right. In the midst of a pandemic such as this, we need to understand which trends are just being accelerated by the pandemic — like the use of technology — and which have been triggered by the pandemic but perhaps, at some point in the future, might evolve into something else, like remote work.

In the book, you mention two trends that we can feel pretty confident in: declining birth rates and longer life expectancies. How do those change the economy that we’re looking at in a decade or so, thinking broadly among advanced economies or rich nations?

They will change it to a very large extent, but first let me commend you on actually doing what I’m asking people to do in the book, which is to not consider one trend in isolation from the others but rather to connect the dots across trends. You mentioned longevity — people are living longer — and the declining birth rate. These have huge implications for consumer and labor markets. For consumer markets, to put it simply, by the year 2030 the largest segment of the markets in Asia, Europe, and here in the US will be the population above age 60.

We’re living longer, but each new generation is also smaller in size because of the falling birth rate. Up until now, we’ve been used to the idea that the younger generation was always the biggest. That’s no longer going to be the case. Brands are going to have to rethink the way they approach the market because, up until now, they’ve been focusing on people in their twenties and thirties, as we know from watching advertisements on TV.

This also has effects on the labor market. People are living longer — there are 12,000 people celebrating their 60th birthday in the US today. On average, they will live another 24 years. That’s another lifetime. They cannot be in retirement all of that time. They don’t have enough savings. So the labor market is also going to change because many people above the age of 60, 65, or 70 will likely continue working.

Another trend is that we now stay in good mental and physical shape much longer. So a 60 year old today is a much more dynamic, active person than a 60 year old three generations ago. So once again, once you start connecting the dots across all of these trends, you realize that the economy will absolutely change with respect to consumption and the labor market.

Do you think there’s a chance that government policy — rather than encouraging people to work longer — might instead encourage people to retire earlier? In the US, I certainly see people saying, “We should expand social programs like Medicare to younger ages so people won’t work longer.”

Well, I am in favor of providing a social safety net in terms of healthcare, among other things, for people of all ages, not just children or people in retirement who are, as you know, the beneficiaries of Medicare. But what’s important to realize here is that something’s got to give. We cannot have most people above the age of 60 or 65 being retired because they don’t have enough savings. Their investment portfolios have been battered by the crisis, and they have, on average, another 24 years to live. That’s a very long time.

But I want to put an optimistic spin on this. People have already been changing. On average, Americans now retire at age 64, whereas just 10 years ago the average age of retirement was 61 or 62. So people have already been adjusting to this. But now, in the wake of this pandemic, I think we are keenly aware of the fact that we’ve got to change even more because the environment is changing and things are challenging.

There’s nothing wrong with continuing to work, especially if you can work remotely at least part of the week or if you work part-time. And while the gig economy has been criticized very heavily, I think it will actually provide people above the age of 60 with so many flexible options for employment. Most people say, “I don’t want to commute to the office. I don’t want to work five days a week. But hey, if it’s part-time, I can make some money on the side, and I can continue to be connected to people, I’d love to do that.”

What do we know about how economies function when birth rates are declining? Will the labor force shrink? Is this phenomenon going to spread, kind of like the Japanese phenomenon?

Once again, you’re raising a very important topic, and it’s true. Since the Industrial Revolution almost 300 years ago, population growth has gone hand-in-hand with economic growth for the very reasons you just stated — you need young people for a dynamic economy. You need people of working age for the economy to grow. Now, the situation now is different. You mentioned Japan. Over the last 25 years, Japan has been completely unable to overcome the burden of a rapidly aging population. They’re trying to revitalize the economy by asking women who withdrew from the labor force when they got married to go back.

Many of them are doing so, but you also see that Japan — which is the poster child of these issues — is very closed to immigration. I believe that part of the solution to this demographic problem is to allow for orderly immigration. I’m not arguing for a completely open-door policy in the US, but I think immigration has to be part of the solution because it will help us rebalance the aging structure.

Beyond that, let’s watch China. China has been doing wonderfully over the last 30 years, but by the year 2030, they will have 110 million more people above the age of 60. Moreover, as a result of the one-child policy, they’ve been having very few babies for the last 30 years, and their population is just living longer and longer. So perhaps the US is lucky in that we can watch whatever happens in China with this process of population aging and hopefully avoid the mistakes that I’m sure they’re going to make. They’ve actually just phased out the one-child policy precisely for this reason. They’ve gotten really scared that about 40 percent of their population will be above the age of 60 if they don’t do something about it.

By the year 2030, the 21st century will be about a third over. At that point, will we be able to say, “This is a second American century after the 20th century,” or will we be saying,” Well, now it looks like we’re in the Chinese century?”

I’m very skeptical when forecasts predict that China will dominate the 21st century. I’m skeptical because China still has a very long way to go. Let’s not forget that they still have 350 million people who are poor/below the poverty line living mostly in rural areas. They also have a political system that can’t continue on like it is forever because sooner or later people will demand that their government be more transparent and accountable.

Plus, unlike the US, China is a country that has a lot of problems with its neighbors. There are 17 countries that share a land border with China, and China has a territorial dispute with each one of them. But more importantly here, India is also growing. India, I think, will be a counterweight to China and the US.

Our economy is now roaring back after a year of declines in economic activity. We continue to be the most technologically advanced economy in the world. So I’m very skeptical of that focus. However, I do think this situation is different from the 20th century. The US will not be able to impose its will on other countries in the same way that it could in the 20th century. Instead, the US will have to work with its allies to accomplish things in the world. So I believe the second two-thirds of the 21st century will essentially be a multipolar world in which the US, China, India are going to be the big actors. If Europe can get their act together they might be a player as well, but that seems unlikely. So, a multipolar world — I don’t think it’s going to be dominated by any one country.

What’s the optimistic Africa story for the next decade?

Africa is changing by leaps and bounds. The middle class is growing and, for me, that is the single most important thing. If you travel to Nairobi, Lagos, or some of the other big cities in Africa, you will see that, while there are poor people, the middle class is already 20 percent of the population. And that’s just the beginning — Africa will continue to grow.

Via Twenty20

For example, they are ahead of the curve when it comes to mobile payments because they never had banks or ATMs. So they leapfrogged all the way to mobile payments using their phones. They’re also leaders in telemedicine. We’re discovering telemedicine now in the US because we couldn’t go to the doctor during the pandemic. Meanwhile, they’ve been practicing telemedicine in Sub-Saharan Africa for the last 20 years. So Africa is innovative, plus it’s a young place. Yes, they have a growing population, but the rate of that growth is slowing down. It’s a good thing that they have young people.

I think the challenge for Africa is the following: 70 percent of the population still lives in the countryside. But I wouldn’t want those people to move to the city — I would want to create jobs for those people in the countryside. I think there’s a very easy solution for that, which is to start producing more food more efficiently. This would create jobs for those in the countryside. If Africa has a twin agricultural and industrial revolution over the next 20 years, I think they will become the largest market in the world. That’s why Chinese companies are investing so heavily in Africa — not because of the oil and minerals, which, of course, they have. Truthfully, they’re investing in Africa because they believe it’s going to become a very big consumer market.

If I were to paint a gloomy picture about the coming decade, I’d first predict the decline or retreat of liberal democratic values, partly due to China. Whatever progress they made towards those goals seems to have reversed, and — because they’re so big and have had rapid growth — I worry other countries may look at them as an alternate model of governance.

Secondly, I’d address climate change. A lot of people think it’s an existential threat that will influence everything, one we’re not addressing appropriately. But this book isn’t pessimistic about climate change. Why?

Well, I agree with your first point. We need to be very vigilant because liberty is at stake in the world. When you have a competing power such as China that doesn’t believe in liberal values — or at least their government doesn’t — then I think that poses a threat to the rest of the world. We need to promote democracy and freedom, but we need to do so in collaboration with others, not just by ourselves as the United States of America.

Now, climate change. I devote an entire chapter in the book to climate change in the context of cities because of three facts: Cities occupy 1 percent of the dry land in the world; they’re home to about 55 percent of the population (by 2030, it will be 70 percent); and, though home to only 55 percent of the population, cities contribute 80 percent of the carbon emissions. So there’s no solution to the problem of climate change unless we fix the cities. We need to make cities more energy-efficient and less wasteful.

And while governments, companies, and technological innovation all have roles to play in this, I believe that consumers — you, I, and our fellow Americans — all need to change. We have to become less wasteful. We waste too many things — including plastics and food. According to the US Department of Agriculture, we waste 30 percent of the food that reaches our table. We need to become more environmentally conscious as consumers. If we can do that, then — combined with technological breakthroughs and the action of governments and companies — I’m optimistic that we can still save the world from the very serious problem of climate change.

I tend to be skeptical of solutions that require 1) big changes of behavior and 2) are built around becoming more efficient. When I look at the world, it seems to me that, while there’s nothing wrong with being energy efficient, our global economy will need more energy — we are a high-energy planet. So if we want the prosperity that we enjoy, advanced economies everywhere, and economic growth for ourselves, it seems like we’re not just going to have to become more efficient, but we’re going to need more energy.

Do you agree with that? If so, where’s that energy going to come from?

Absolutely. I share your skepticism, and I think that skepticism is always good because it hopefully prevents us from becoming complacent. There is a steep mountain we have to climb here in terms of overcoming climate change.

As to energy, do you remember the oil crisis of ’73 in Europe and US? That was a long time ago, nearly 50 years. Well, since then we have reduced the carbon intensity of the economy by 80 percent, meaning we’re using 80 percent fewer carbon emissions to produce one unit of gross domestic product of the goods and services that we make every day, every year. We’ve become so much more efficient. But now we need to make another transition, which isn’t just becoming more efficient but also replacing fossil fuels with something else.

Recently, for instance, there was an article about how the price of lithium batteries has dropped by 97 percent. So we are now making batteries and all of the other components needed for electric vehicles much more efficiently and with better technology. So I think we’re getting there, but we just need to make that quantum leap from where we are now into a future where we have disconnected ourselves from fossil fuels.

It’s difficult, but we need to do it because, as you said, there’s only so much we can do just by reducing carbon emissions or using fossil fuels more efficiently. We’ve already done a lot of that, with an 80 percent reduction since the first oil shock in 1973 when Nixon was president. When it comes to energy, we need to switch it up and embrace solar, wind, and other sources of renewable and green electricity. Of course, we should also continue to invest in biomass, fuel cells, and all of these other technologies that, hopefully in the very near future, may help us overcome this problem.

Another gloomy story of the future is the idea that the jobs are going away because of AI and robots, so we should just start planning our universal basic incomes because more and more people won’t be working. What do you think will be the impact of technology on labor markets?

Well, technological change destroys jobs — it even destroys entire occupations or professions. There’s no question about that. But it also creates jobs, and we shouldn’t forget that. So really, what I think we need to worry about — which we didn’t do over the last 20 years — is taking care of those who are displaced by technology. They lose their jobs at a time when it’s very difficult for them to retool and learn a new occupation or profession. I’m talking specifically about people in their forties or fifties. We need to create mechanisms so that those people can go back to school, maybe online even, and find new ways of living.

The time has also come for the US to have a national debate about basic income. We are a consumer-oriented economy. And if not everybody has a job, then that creates an issue. I would drop the “universal” aspect of the basic income because I don’t think everybody deserves it. In fact, it would be counterproductive. I think only those who are displaced by technology should be getting a basic income during the time that it takes them to prepare or train for another occupation or profession.

So you are not giving an apocalyptic view on AI. Rather, you think that technological changes are always disruptive, but over the longer run it will be like many technological revolutions — jobs will be created, jobs will be destroyed.

We’ve gone through so many of those waves over the last 300 years — really even over the last 50 years — and we’ve always prevailed. But, once again, what we cannot do is forget about the people, mostly in their forties or fifties, who are severely affected by this. Because if we forget about them, they will get angry and frustrated, and they will feel that there’s nothing for them in the system. Then, of course, they will vote for extreme political options and turn into a source of instability. So we need to anticipate the problem and deal with it before it becomes too big.

But you’re absolutely correct. There will be job losses because of technological change. There’s no question about it. The problem is that you cannot stop technological change. We cannot say that, here in the US, we’re going to stop innovating while the rest of the world continues to do so. We have to keep moving, but we also have to pay attention to those who are being displaced.

Why do cryptocurrency and the blockchain merit a whole chapter for you?

Well, blockchain is the technology that underlies the original use of Bitcoin. It’s a digital registry where you can essentially store all kinds of information about smart contracts, births and deaths, who owns something, etc. Therefore, it has the potential to make middle management redundant, because middle managers are companies who make sure that contracts are being fulfilled, that the supplier is delivering the goods on time, or that the payments are reaching whoever they’re meant to reach. I don’t think we’ve seen the full impact of blockchain. It’s going to have revolutionary effects on middle management in particular. A lot of white-collar jobs may be destroyed as a result of the blockchain.

Via Twenty20

Cryptocurrencies also use blockchain — crypto is actually a very interesting development. Now, I don’t think cryptocurrencies are going to become widely used by themselves, because the Federal Reserve and governments around the world will never tolerate them. They don’t want to lose control over monetary policy, interest rates, and so on and so forth.

What I think will happen is that governments will start to issue their own digital currencies. China will start doing this in the next few months, and the Federal Reserve already has a project geared towards launching a digital dollar. I think cryptocurrencies will be able to play a role in the future if they are bundled with other things — for example, discount coupons or smart contracts. I would then call those digital tokens, as they enable us to do many different kinds of things beyond just making or receiving payments.

You started writing this book before the pandemic. How significantly has the pandemic altered your view about what the next decade holds?

I did start writing before the pandemic, but I was able to introduce some changes to it during the first two or three months of the pandemic because the book came out in August.

It’s actually relatively straightforward: The pandemic, for the most part, just accelerated pre-existing trends. There are some exceptions, of course, like cities. Maybe some people now prefer to live farther away from the downtown area because they can work remotely and want to be in a more sparsely populated area. But the pandemic has accelerated technological change, automation, population aging, and the rise of the emerging markets in Asia because they haven’t had as many cases and deaths as we have.

Now, in addition to slowing down — or in some cases reversing — the growth of cities, the pandemic has also put on hold the progress that women were making in the labor market as we continue to have this unequal allocation of tasks between men and women in the home. When schools closed and kids started staying home, many working women in the US realized that they couldn’t do everything and thus decided to withdraw from the labor market. In January, the US Labor Department reported that 2.5 million American women had withdrawn from the labor market during the pandemic. Before, women were making steady economic progress both in this country and in many other parts of the world, which was a good trend. Unfortunately, it is also a trend that the pandemic has slowed down or brought to a halt.

Given what we’ve talked about and what else is in the book, what advice would you give policymakers who want to do long-term planning, say for the next decade?

So let me first make a distinction that I think you’re going to find amusing. I really like the fact that you asked the question about policymakers, because if you had asked me the question about politicians I would have had to give you a completely different answer. Politicians don’t have a long-term orientation, they just think about the next election. Policymakers, especially if they have worked for the government for quite some time, do have a longer-term perspective, which is exactly what we need now. We need to raise our perspective and see where the world is going to be — not tomorrow, but rather in about 10 years. Then we need to take action based on the kinds of analysis that we can do with that 10-year perspective.

I would tell policymakers not to fool people. Rather, try and tell us the truth about what’s going on. Yes, automation is a threat. Yes, technological change can put our people out of work. Let’s acknowledge that’s going to be the case and then see what we can do now before that happens. Let’s figure out how to take care of those people. The same would go for climate change. Let’s stop fooling ourselves — climate change is real but, more importantly, we can do something about it. We can change our behavior. More importantly, we can continue to invest in scientific discoveries and technological breakthroughs that may help us overcome our problematic fossil fuel dependence.

So I’m optimistic. I think a pandemic like the one that we’re going through could be a call to action. It’s like we need to be prepared for the next big thing. We cannot just wait and see what happens. So even on that count, I am realistically optimistic about it.

My guest today has been Mauro Guillen. Mauro, thanks for coming on the podcast.

Thank you so much for inviting me!

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, “Political Economy with James Pethokoukis.” Mauro Guillén is the Zandman Professor of International Management at the University of Pennsylvania’s Wharton School.

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The global trends that will shape the world of 2030: My long-read Q&A with Mauro Guillén