Leading experts and researchers deliberate transformational policies and new approaches to economic development for the future during Future TRENDS Forum: The World in 2071
ABU DHABI, January 21 – Megatrends such as technology, climate change, trade, and demography could change the global economy, business, and society but they take time to develop, are difficult to stop, and interact with each other, an expert participating in the TRENDS Research & Advisory’s inaugural Future Forum said on Tuesday.
Dr. Hector Pollitt, Director and Head of Modelling at the Cambridge Econometrics, UK, who addressed how ongoing megatrends could shape future employment, said some megatrends are more relevant to employment than others. For example, some studies in Europe have suggested that low-carbon transition could boost employment.
“Technology is the largest threat to jobs if it is all about automation and not new products. The path of demographic change will also impact jobs, and climate policy could increase employment in some countries. In contrast, the impact of trade policy (globalization) and resource availability have less impact on jobs,” said Dr. Pollitt.
He said that the Cambridge Econometric Schematic Model (E3ME) tries to capture these megatrends and create interactions among them, building scenarios that will impact a strategic question in the coming 50 years. “At present, it looks like automation will be the biggest factor in shaping future labor markets,” Dr. Pollitt said. Mohammed Hamdaoui, Economic Researcher at the TRENDS Research & Advisory, moderated the session.
The e-symposium was moderated by Mohamed Hamdaoui, an economic researcher at TRENDS Research & Advisory. He emphasized that the world is witnessing rapid changes and traditional economic models that succeeded in driving global growth in the past decades are no longer suitable. Economists have to develop new development models that are future-proof and account for all technological advancements.
Dr. Simeon Djankov, Deputy Prime Minister and Former Minister of Finance in Bulgaria, and Senior Fellow at the Peterson Institute for International Economics, US, pointed to increased state intervention in managing the economy. He highlighted the need for policies and incentives and investing in research, development, and digital transformation as the most prominent features of a possible future economic change.
Dr. Djankov said the state’s increasing role in implementing economic and financial policies is very different from what has been prevalent during the past decades. “The state’s role has grown following the Covid-19 pandemic, which required countries to provide financial stimulus packages to achieve economic recovery. This new trend is expected to continue for decades to come,” he said.
“There is also a trend that emerges regarding the cities in which a majority of the population resides and in which most economic activities happen. Cities that represent an essential part of the global economy are undergoing many transformations in light of the Covid-19 pandemic. The question is whether this trend will continue after the pandemic or not?” Dr. Djankov said.
Speaking at the Forum, Bader Alabdulqader, Senior Economist with the Sharqia Development Authority, Saudi Arabia, said globalization has allowed easier access to foreign knowledge and has enhanced global competition, thereby spurring innovation and productivity. “These two factors (innovation and technology) will have a significant impact on future economic development,” he said.
In his presentation focusing on the educational gap, labor market, and social policy, Dr. Jose Ronaldo Junior, Director of Macroeconomics Policy and Research, IPEA, Brazil, said transformational policies are needed for future economies. According to him, the accumulation of human capital and technological progress drives economic growth.
“Earlier, it was possible to industrialize a country without major investment in education (e.g., Brazil in the 1970s). However, new technologies, especially related to the so-called Second Machine Age today, makes it impossible for a country to catch up with the developed countries without large investments in education,” he said.
Dr. Jose also emphasized the improvement of productivity through agriculture 4.0. It is defined as a farming management model based on observing, measuring, and responding to inter and intra-field variability in crops. “The goals are mainly to increase crops’ productivity while ensuring a higher environmental sustainability,” he said.
Addressing the energy component of future economic growth, Dr. Giacomo Luciani, Scientific Advisor of the Master in International Energy Program at the Paris School of International Affairs of Sciences, said oil and gas would continue to form the basis for power generation for the foreseeable future. He noted that G20 leaders acknowledged the importance of Circular Carbon Economy (CCE), and solutions such as “blue hydrogen” and “green hydrogen” have been proposed.
“The more urgent task is to redefine the model for economic growth, to effectively promote cleaner power generation such as those through nuclear and hydrogen and further utilization of carbon capture and sequestration (CCS),” Dr. Luciani said. He said Global CCS is technologically feasible, economically viable, and considered essential and indispensable by international energy agencies.
Highlighting the broader challenges related to demography, Dr. Dan Mitchell, Chairman of the Center of Freedom and Prosperity, USA, said demographic trends suggest populations are aging and the number of the elderly is increasing. At the same time, younger tax-paying generations are relatively smaller. “The fiscal implications in such countries are potentially catastrophic for social stability,” he said.
“This is a very serious issue that politicians are currently failing to address. Electoral cycles mean that there is an insufficient focus on the need to redress the likely negative effects of the current demographic imbalance,” he said. According to him, advanced countries’ age-dependency ratio is decreasing and could have profound implications.
“Replacement rates in Europe and Japan, in particular, are raising the possibility that there will not be enough working-age people to pay the taxes needed to support retirees. The challenge is whether nations can successfully deal with this problem; there is a likelihood that some will not,” he said.
According to Dr. Mitchell, in many countries, spending on pensions is likely to increase to the extent that it raises severe economic pressures. Raising the retirement rate could help, though the current trend is for people to retire earlier. New policies are needed to prepare for a potential economic shock wherein states cannot generate the funds to support older people. The E-Symposium was live-streamed at TRENDS YouTube channel and its other social media platforms.