I have written the following from an English perspective but much may have wider application. There’s rather a lot left out, but you will probably be grateful. My Economic Forecast for 2018 My forecast is different from most of what you will be hearing or reading on the run up to the New Year. It is not about a dramatic event, but about something bigger and longer lasting. 2018, I judge, will be the year when dialogue about our economic future shifts in a new direction; when we finally take on board something that almost all our popular economic commentators have been ignoring. (This is not to dismiss all the alarms we are already aware of: the impact of immigration on our limited housing stock, the Government’s unfunded pensions liabilities, the unsustainable cost of expectations on the NHS, etc.) The past forty years and more have seen unparalleled economic growth in many countries as the technologies chiefly developed in Western Europe and North America have been unrolled across much (but not all) of the world. This spreading of wealth has benefited developing countries without robbing the developed countries. At least so it appears. Sharing knowledge of techniques of production does not deprive the originators of that knowledge. It is different from the sharing of a finite and limited resource. We have not until now been conscious of the increasing wealth of (say) South-East Asian countries diminishing in any way the wealth of (say) England. Indeed, their increased wealth may enable them to buy more Rolls-Royce aeroengines, for example. Our trade with countries where wage rates are much lower appears, at first sight, to be beneficial by giving the consumer products at lower prices. But we are also in competition for commodities with many more countries than used to be the case. This has, to a degree, been hidden from us by two factors. [1] In the case of many minerals (iron ore, copper, zinc, etc) suppliers were geared up for increasing demand that was delayed by the economic shocks of 2008, so we did not see the rising prices that might otherwise have eventuated. Whilst, in the case of oil and gas, the development of shale deposits has curbed prices for the present. [2] In the case of foodstuffs, in England we never talked much about the Green Revolution which quadrupled and quintupled yields in many parts of the world. Years ago few thought that the world could sustain its present population without famine, even as new land was brought into cultivation. Grain prices have not been driven up as might have been expected. Thus far, then, we have not been confronted with the rising commodity prices we might have expected. However, things are about to change. [1] China has only been the well publicised leader of the pack in its demand for the minerals of Australia, Africa, South America and elsewhere. Countries with an aggregate population of about double that of China are following. Some of these have their own resources, but their own industries will now be consuming them and so they will not go to export. It seems overwhelmingly likely that the prices of some minerals will break into higher bands. England will have to pay the price or go without. [2] The gains of the Green Revolution are petering out. Plant breeders have resorted to genetic engineering as the only way to make further progress, but this invites suspicion as well as skepticism about its real potential. Also, drought is becoming of increasing concern in many countries, more often because of an increasing demand for water and because of falling water tables than because less rain is actually falling. England will be increasingly in competition with other (no longer impoverished) countries that like itself fall well short of being able to feed their populations. That competition will drive prices higher producing a fall in real incomes. Added to the above, developing countries will increasingly be able to manufacture the advanced and/or specialised products that are the export goods of countries like England. Their premium value will evaporate. Moreover, new manufacturing techniques like 3D printing create a level playing field between all countries as plant and machinery representing industrial heritage are rendered obsolete. Insofar as there is advantage, it will most often go to the country with the lowest energy costs -- a department in which England with its commitment to overpriced Chinese nuclear energy is appallingly placed. To sum it all up. We shall no longer be able to imagine we live in a cosy neighbourly world of international cooperation. The young in particular are over fond of a we-can-all-be-friends-together vision of the world. The natural state of the world is one of competition and antagonism. In an increasingly overpopulated world, one man’s wealth will be another man’s poverty. 2018 will see the dawning of a colder New Reality.
