Fernando MonteiroLooking into the Next 50 Years
February 5th 2010 02:05
Our world is changing fast and the assumptions of today may not be valid tomorrow. What sectors of the economy are changing; what will we be facing in the future? I approach below the topics on the ageing of the population and the growth of population, but also fossil fuels and renewable energies and the future of Asia. This is not an exhaustive list of future evolving events but just an appetiser to the topic.
In the next few decades, in areas such as Australia, the US/Canada and Europe, a large part of the population, the so called baby boom generation born after WWII, will increasingly be attaining old age status. If the reader considers that this generation could be around 40 per cent of the total population, it will be easy to understand that the impact in the society and the economy will be great. Great because their needs, as baby boomer elderly citizens, will be much different than the needs of the younger population.
Some of the needs of the ageing population are: more aged care housing and nursing homes, greater medical care, greater need to join like-minded people in clubs such as RSL clubs and other, a greater need to play physically softer activities such as soft-gymnastics, Yoga, Pilates, Tai Chi, dancing and so on. But not only this, elderly people in the baby boom category will increasingly need also expertise services in estate planing, in funeral planing and also in superannuation and government benefits planing.
With regards to retirement financing, in Australia we have superannuation which is a system by which employers pay 9 per cent of an employee’s salary into a super fund which is invested and the employee can access on retirement. Yet, and according to super industry sources, at current levels a large part of elderly people will have not enough super to retire on. This means that the government will have to pay pensions to a large part of the ageing population.
All the above brings up the question on where is the government going to find enough tax revenue to pay for such things as increase needs for health care and pensions. One of the ways to obviate this is by increasing the economy’s productivity and it can get inspiration on what was done in that area in Australia in the 80s and 90s when the banking sector was deregulated, the dollar was floated and micro-economic reform ensued.
The other way to increase tax revenue is by increasing the population base. This can be done in Australia in two ways: by increasing new births and by increasing migration. Either of these will require investments in infrastructure such as kindergartens, schools, but also new roads, water, electricity and so on. In any case the debate on whether the Australian land mass can cope with a much greater population will resurface.
After the above consideration it’s easy to see where the business opportunities will be in the future in this area.
Another interesting topic is the one of fossil fuels such as oil, petrol and natural gas which are on an extinction path. Oil and associated products are doomed: world deposits, even after the discovery of large deposits in Brazil, are decreasing and will be fully depleted in the not so distant future. From a speculative point of view, could it be said that oil/petrol/gas will increase in price given its progressive rarefaction and short supply?
Our economic health will depend, I suppose, on the evolution in the use of alternative energies such as biofuels, solar and wind energy, seawave energy, volcanic energy, but also nuclear energy and others. I think that if significant scientific/technical progress is achieved in these areas, they might sooner substitute for fossil fuels and so the overall costs of energy will be contained within certain limits.
When you look into the business landscape associated with the shift in energy source type, you know that electric/biofuel cars and industry are on the way up while large petrol engines are fated. This shift will affect also the transportation industry from trucking to aviation and it’s noticeable that Virgin Blue Europe is already using biofuel in its airplanes with success.
But, basically, the emergence of alternative energies will bring upon a new and large industry. Initially, technical development costs will be greater and risks higher and some new energy companies will fail and others will be gobbled up by existing utilities. But, eventually, once the economic need and demand is felt, much progress will be achieved in this area.
With the emergence of climate change and greenhouse effect many more storms, hurricanes, heavy rain, floods, bushfires and droughts, melting of the ice caps are on the way. There are also increasingly non-weather related events such as tsunamis and earthquakes. One can ask what kind of effect this could have on the economy. It certainly represents great losses in human lives and infrastructure costs. It always occurs to me to think when considering this that weather related insurance business is on the way up to lose a lot and increasing in claim payments.
The above events also mean that the needs for reconstruction are going to be greater and so it will boost business in the areas of civil construction and infrastructure construction.
Finally, consider Asia. In the next few decades the area of the globe that will grow the fastest will be Asia. Asia’s demand for infrastructure of all kinds, energy, transportation means, but also banking and insurance services and education together with tourism needs will be exponential. To this list should be added the needs for military equipment and communications.
The reader could invest in the upcoming Asian wealth and needs by associating with businesses that have a presence there. An example is ANZ Banking which aims at creating a “super-regional” presence in Asia.
Together with Asia, the Middle-East is also an area for future growth, especially in construction and infrastructure.
In the next few decades, in areas such as Australia, the US/Canada and Europe, a large part of the population, the so called baby boom generation born after WWII, will increasingly be attaining old age status. If the reader considers that this generation could be around 40 per cent of the total population, it will be easy to understand that the impact in the society and the economy will be great. Great because their needs, as baby boomer elderly citizens, will be much different than the needs of the younger population.
Some of the needs of the ageing population are: more aged care housing and nursing homes, greater medical care, greater need to join like-minded people in clubs such as RSL clubs and other, a greater need to play physically softer activities such as soft-gymnastics, Yoga, Pilates, Tai Chi, dancing and so on. But not only this, elderly people in the baby boom category will increasingly need also expertise services in estate planing, in funeral planing and also in superannuation and government benefits planing.
With regards to retirement financing, in Australia we have superannuation which is a system by which employers pay 9 per cent of an employee’s salary into a super fund which is invested and the employee can access on retirement. Yet, and according to super industry sources, at current levels a large part of elderly people will have not enough super to retire on. This means that the government will have to pay pensions to a large part of the ageing population.
All the above brings up the question on where is the government going to find enough tax revenue to pay for such things as increase needs for health care and pensions. One of the ways to obviate this is by increasing the economy’s productivity and it can get inspiration on what was done in that area in Australia in the 80s and 90s when the banking sector was deregulated, the dollar was floated and micro-economic reform ensued.
The other way to increase tax revenue is by increasing the population base. This can be done in Australia in two ways: by increasing new births and by increasing migration. Either of these will require investments in infrastructure such as kindergartens, schools, but also new roads, water, electricity and so on. In any case the debate on whether the Australian land mass can cope with a much greater population will resurface.
After the above consideration it’s easy to see where the business opportunities will be in the future in this area.
Another interesting topic is the one of fossil fuels such as oil, petrol and natural gas which are on an extinction path. Oil and associated products are doomed: world deposits, even after the discovery of large deposits in Brazil, are decreasing and will be fully depleted in the not so distant future. From a speculative point of view, could it be said that oil/petrol/gas will increase in price given its progressive rarefaction and short supply?
Our economic health will depend, I suppose, on the evolution in the use of alternative energies such as biofuels, solar and wind energy, seawave energy, volcanic energy, but also nuclear energy and others. I think that if significant scientific/technical progress is achieved in these areas, they might sooner substitute for fossil fuels and so the overall costs of energy will be contained within certain limits.
When you look into the business landscape associated with the shift in energy source type, you know that electric/biofuel cars and industry are on the way up while large petrol engines are fated. This shift will affect also the transportation industry from trucking to aviation and it’s noticeable that Virgin Blue Europe is already using biofuel in its airplanes with success.
But, basically, the emergence of alternative energies will bring upon a new and large industry. Initially, technical development costs will be greater and risks higher and some new energy companies will fail and others will be gobbled up by existing utilities. But, eventually, once the economic need and demand is felt, much progress will be achieved in this area.
With the emergence of climate change and greenhouse effect many more storms, hurricanes, heavy rain, floods, bushfires and droughts, melting of the ice caps are on the way. There are also increasingly non-weather related events such as tsunamis and earthquakes. One can ask what kind of effect this could have on the economy. It certainly represents great losses in human lives and infrastructure costs. It always occurs to me to think when considering this that weather related insurance business is on the way up to lose a lot and increasing in claim payments.
The above events also mean that the needs for reconstruction are going to be greater and so it will boost business in the areas of civil construction and infrastructure construction.
Finally, consider Asia. In the next few decades the area of the globe that will grow the fastest will be Asia. Asia’s demand for infrastructure of all kinds, energy, transportation means, but also banking and insurance services and education together with tourism needs will be exponential. To this list should be added the needs for military equipment and communications.
The reader could invest in the upcoming Asian wealth and needs by associating with businesses that have a presence there. An example is ANZ Banking which aims at creating a “super-regional” presence in Asia.
Together with Asia, the Middle-East is also an area for future growth, especially in construction and infrastructure.
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