Contours of the Economy of the Future
Yaroslav Lissovolik
The Eurasian Development Bank’s chief economist
This year the Sochi forum discusses, in addition to its traditional regional agenda, some global topics, including the most important issues that are relevant today and long-term economic benchmarks. One of the sessions at the forum debated about the contours of the economy of the future, which will form in several decades and require that Russia devise new approaches in its economic policy.
It could seem that the discourse about how the economy of the next decades can look like has no sense as most short-term forecasts (for several months or a year) for oil prices or foreign exchange rates often turn wrong. However, as paradoxically as it may sound, long-term forecasts by economy visionaries are often significantly more precise than short-term predictions by economic and financial market gurus.
Probably one of the most successful attempts to look into the future of economic development, Alvin Toffler’s The Third Wave described, to a significant extent, the future contours of the American and global economy of our time. Toffler believed that global economic development was shaped by three waves: the first was determined by the leading role of the agrarian sector, the second by industries, and the third was the period of post-industrial development.
Toffler foresaw tendencies of the recent decades such as knowledge and human capital development as key development factors, the advancement of the “consumption economy,” and the growing role of services in employment. Toffler also warned about the possible resistance on the part of the second-wave industrial society to post-industrial developments, emphasising that even the U.S. could become exposed to the risk of disregarding social controversies generated by the “third wave.” Last-year events in developed countries have demonstrated the importance of these risks.
It is quite possible that the key characteristics of Toffler’s “third wave” such as the priority of the “knowledge economy” and human capital will continue to develop in the coming decades. The world’s leading countries such as the U.S. and China are preparing for that future, promoting long-term human capital development and competing for highly qualified specialists from other countries. International organisations are also preparing for such a future. In doing so they adjust their previous standard economic indicators such as wealth indexes for the human development factor.
In 2012, for example, the United Nations invented the Inclusive Wealth index comprising three kinds of assets: manufactured, or physical, capital (machinery, buildings, infrastructure); human capital (the population’s education and skills); and natural capital (including land, forests, fossil fuels and minerals). The leader in the per capita Inclusive Wealth index is Japan, which is one of the most deprived nations among developed countries in terms of natural capital. The U.S. and Canada occupy the second and third places, respectively.
The global economic development model’s transformation and the transition to the “fourth wave” will be promoted not only by further advancements of the “knowledge economy” or the “fourth technological revolution” of the Internet of Things and 3D printing. The necessary component of a sustainable future will also be changes in global economic relationships, characterised by greater multipolarity and diversity of economic structures and models in contrast to almost twenty years of countries’ economic convergence towards a single standard or model. The global economy of the future will have new centres of concentration of trade and investment flows, with East Asia most probably occupying one of the leading positions in them. New development institutions, new reserve currencies, and new global and regional financial centres will emerge and concentrate, to a significant extent, in developing countries. More equal opportunities will be created, allowing countries to use their economic potential to a greater degree. This scenario will open new opportunities for Russia and we’ll be able to make use of them if we understand the challenges of the future at an early stage and manage to respond to them in our own way.