Media Contact: Dr. Mike Walden, 919.515.4671 or firstname.lastname@example.org
By Dr. Mike Walden
North Carolina Cooperative Extension
Attempting to predict the future is an endeavor likely as old as just about anything. We want to know next week’s weather, who will be the new American Idol, if last night’s date is “the one” and will our favorite team win the championship?
Of course, in financial affairs, questions about the future are always on our mind. Will we get a raise, will our stocks gain or lose, will our daughter or son be accepted to their favorite college and when will my home finally sell?
As a professional economist who travels the state, I’m asked my share of fortune-telling questions. Usually they have to do with big picture economics, like trends in jobs, the direction of interest rates and if inflation is about to takeoff.
Of course, I give it the old college try, with a dash of humor (frequently I say, “I’d really like to predict the past rather than the future!”) in answering these questions. But to be honest, economists haven’t been very good — especially in recent years — in their predictions.
So what help are economists? Well, I think we can help, but maybe not in making specific predictions, such as “50,000 jobs will be created this month.” Instead, I think our assistance may be best in identifying the factors behind the economic future. In other words, if we can predict the drivers of the economy, then we are better able to know where the economic car is headed.
So what factors will steer tomorrow’s economy? I think there are six factors — indeed, I dub them the “significant six.” Here they are.
Education and training: All the economic studies of the last several decades indicate that people, states and nations with higher levels of education and superior training earn more and have higher standards of living. Brains trump brawn. The U.S. and North Carolina know this, but so does the rest of the world. Rather than a weapons (arms) race, we are in a “head race” for the best and brightest workforce attracting the top-paying and most exciting jobs.
Technology: Technology may well be the economic game-changer of the future, just as it has been in the past. Whenever there have been massive changes in the economy, technology has usually been behind them. The tractor increased farm productivity and pushed workers off the land and into the factory. Today’s computers and smart phones are giving unprecedented flexibility in how and where products are made and delivered.
But technology may be the most unpredictable of the significant six. It’s hard to know what the next technology is, and that’s the scary thing. Whatever it is will be a big determinant of what we do and earn.
Demography: If people are economic power, than demography may be the most fundamental of the six factors. Demography simply refers to the number and ages of a country’s or state’s population. Two issues in many of today’s societies are the rapid aging of the population and the increasing “dependency rate,” the ratio of the very young and very old to the working age population. Determining ways to allow workers to support the young and old — while still maintaining work incentives — is a tall but necessary order to achieve.
Energy and natural resources: Increased worldwide population and economic growth are expanding the use of conventional energy resources such as oil and natural resources like basic commodities and water. Experts predict these pressures will continue. There’s no question that regions and countries will be forced to adapt. The adaption will be a combination of more frugal and efficient use of conventional and natural resources, the development of technologies to achieve more from less of these resources and the creation of alternative resources to take the place of the increasingly scarce ones. Regions and countries able to make these adaptations will have a more positive economic future.
Global markets: It’s a cliché, but a correct one, to say the economic world has shrunk. In fact, it has been doing so — but not in a straight line — for over a century. But with the emergence of modern technology — air travel, cell phones and the internet — we’re effectively closer to our world neighbors than ever before
For companies and workers, the growing world market has pluses and minuses. On the plus side are more potential sales. But on the negative side are more competitors that can come to your turf and take away customers and sales! To compete, countries and regions will have to stay on their collective toes in education, training, technology and efficient use of resources (in effect, all of the above).
International geopolitical relations: Although this factor is definitely above my pay grade, it nevertheless is still crucial to our economic future. Simply put, this factor refers to the political and military position of the U.S. relative to key countries and regions in the world. It encompasses what we spend on national security, our strategic world alliances and our possible world flashpoints. Business persons and investors intensely dislike uncertainty, but geopolitical relations are fraught with them. Nothing could send the stock market plunging like a hot war involving the United States in some foreign theater.
This is my list of major league movers of our economic future. You decide if they’re your list too.
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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The College of Agriculture and Life Sciences communications unit provides his You Decide column every two weeks. Previous columns are available at http://www.cals.ncsu.edu/agcomm/news-center/tag/you-decide
Related audio files are at http://www.cals.ncsu.edu/agcomm/news-center/category/economic-perspective/