This post is a little bit of prediction – pretending we can see the future clearly, and describing what it will be like. Specifically, I will make some predictions for the global economy in light of the Russian invasion of Ukraine, climate change, and the supply chain issues arising from COVID-19.
How the economy will change: EU and Brexit
Let’s get the elephant in the room packed up in his trunk and moved into another room which better suits its needs: Brexit. Brexit is the name given to the United Kingdom’s exit from the European Union. The European Union is, in all but name, a country. It has free movement of people, free trade, a currency, a flag, an anthem, a government, laws, a court, and patriotic citizens. There are issues with it that some argue make it undemocratic, but one thing it definitely is, is good for the economies of the constituent members. Some people voted for Brexit despite the economic impacts, and others were misled about whether there would be positive economic impacts of the UK leaving the European Union. Either way, we can be sure that EU membership is good for countries’ economies.
In many ways the EU is a better country than the USA. While the citizens of the US fight over what the constitution means for religion in schools, and for abortion rights. US lawyers make millions debating amongst themselves whether this State government, or that Federal Act are enforceable. At the same time, the EU passes regulations and directives and, because it is done democratically, the citizens largely accept the rules and implement them like grown ups might. Overall: The EU is more a country than is the USA.
Anyway… It is difficult to imagine a future where the UK re-enters the EU, but just because it’s hard to imagine, doesn’t mean it won’t or can’t happen. In my opinion, the creation of a European Army, and an elected European Head of State, would finish the countrification of the European Union. With that in place, and with precedent for countries like France and Germany continuing to compete as ‘nations’ in FIFA and at the Olympics, I believe much of the resistance to EU-membership from Britons would disappear. This might sound odd, given that the so-called “ever closer union” was cited by many as a reason to leave, but I think the fact that the union is in a half-way state is a problem for those averse to change (conservatives). Once the union is completed, there will be no doubt about the direction of travel and leaving the EU for any of its constituent nations would be as unthinkable then as it is for New York state to secede from the United States now.
I predict that when the EU admits that it is a nation and behaves as one, and as the more risk-averse alive today age out of the electoral system (by becoming deceased) EU membership will be reconsidered by the UK and it will gladly accept that it will not have the carve-outs that it had negotiated previously.
How the economy will change: Africa
I am going to treat Africa here as a homogenous continent without any complexity and without any nuance. I want you to know this going in, so that you know that I know it’s not as simple as this. But my point is more easily made without caveats and I do not believe my argument is made worse for having the caveats omitted.
A bit of history: A little while ago companies in the West realized that they could get things manufactured in China, Taiwan, India, or Vietnam much more cheaply than they could in Germany, the UK, France, or the USA. During the last few decades, manufacturing has largely left the Western countries and has moved either to the former Soviet bloc countries in the east of Europe, or to the Far East. In the UK, which has done more of this outsourcing than other countries, services (intellectual property and other intangible products) make up over three quarters of the whole economy. In 1964, it made up just over half (Source: Oxford Royale Academy).
Unfortunately, as developed countries started to outsource their manufacturing to the Far East, Africa was not ready to take advantage. As countries like Vietnam and China started to be able to modernize their infrastructure using new funds, countries like Zimbabwe continued much as they were despite a growing population.
The war in Ukraine instigated for no apparent reason by a belligerent dictator in Russia is going to have wide economic impacts. The Economics Intelligence Unit predicts that there are three major things putting pressure on the world’s economies currently:
- the desire to detach Russia from the global economy;
- the pressures of climate change; and
- the supply-chain problems made apparent by the COVID-19 pandemic.
These three things combined will lead companies and countries to try to improve manufacturing closer to home. At the time of writing, the cost-efficiencies of Chinese manufacturing are disappearing as [and this is a good thing] Chinese workers get richer and are unwilling to work for low enough wages. China and similar countries will reorient their economies towards a larger service mix at exactly the same time as the West starts to relearn some of its past manufacturing capability (Source: EIU).
Unfortunately for Africa, unless the Far East [and maybe Latin America] decide to outsource to them, African countries may have permanently missed out on the opportunity to use manufacturing to ‘level-up’ their population’s citizenry.
I predict a large increase in manufacturing, especially automated manufacturing, in Europe, Japan, and similar economies, even as China, South East Asia, and India reduce manufacturing as a proportion of their overall economies.
How the economy will change: Meat
60% of the food grown in the European Union currently goes to feeding non-human animals (Source: EIU). For reasons mentioned in the Africa section above, food security looks likely to become something we all care about deeply. And if climate change continues to be something that humanity wishes to stop – which morally it should be – then meat consumption will likely be reduced by concerned citizens as well as government action.
In the future I expect that there will be an increase in the amount of meat that is grown in factories, fake-meat (such as Impossible Burger), as well as increased mushroom and insect consumption. I suspect that companies like Impossible Foods and Beyond Meat (conflict of interest: I am a shareholder in Beyond Meat) will continue to grow and will largely replace the meat industry. The price of Impossible Burger, for example, is already lower than ethical beef and it is only a matter of time before it is lower than feed-lot and rainforest beef. At that point, the typical consumer will stop buying real hamburger (UK: minced beef). Similar things are happening with chicken with the wonderful Oumph which is indistinguishable from chicken.
I do not expect insects to become a large proportion of the Western diet, but I do predict that factory-grown meat as well as fake meat are likely to be much more common than real meat products in order to stabilize the food supply chains, to remove reliance on unstable regimes, to reduce climate change, and because it’s cheaper.
I am predicting a change in human diets, increased automation, a return of manufacturing to the West, a reconciliation between a future United States of Europe and the United Kingdom, and continuing problems for Africa. What do you think? Do I have it right? What do you predict will happen as a result of the larger events of today?
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