| 1. |
The process of globalization will continue. Low transportation costs and free-trade policies will continue to shift manufacturing facilities to regions and countries where they can operate most cheaply. International trade will continue to increase both in absolute terms and as a percentage of world commerce. Tourism will continue to grow. Many of the world’s poor will continue to migrate— legally and illegally— to richer countries. |
2. |
Many economies that for generations relied on central planning will continue to loosen economic constraints and allow entrepreneurs to profit from their ideas and industry. Marketplace incentives and rewards will raise standards of living and give rise to new economic elites. |
| 3. |
Mature, developed, traditionally capitalistic economies will adopt more socialistic policies and programs such as government subsidized healthcare and extended employment leave for childbearing and elder care. Such policies and programs will erode the personal incentives that spurred earlier capitalist growth of these economies. Overall standards of living will decline accordingly. |
4. |
As capitalistic economies grow more socialistic and centrally planned economies grow more capitalistic, differences among them will shrink. Narrowing differences among economic systems will narrow differences between the standards of living that they produce. |
| 5. |
Central banks around the world— in particular, the U.S. Federal Reserve Bank, the European Central Bank, the People’s Bank of China and the Bank of Japan— have become more adept at controlling inflation and at dampening the business cycle. |
6. |
In the 1990’s and early 2000’s, the global rate of inflation fell from double digits to 4%. Hence, in most industrial nations, disinflation has run its course. Industrialized economies are likely to enjoy a long period of stable prices and then go into another inflationary period.
By controlling the cycle of boom, slowing, recession and recovery, central banks sharply reduce both business and investment risk. Developing economies such as China’s may never have to endure the boom and bust cycles that Western economies went through at similar stages of industrial development. |
