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Global Trends to 2035 Economy and Society

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Global Trends to 2035 Economy and Society Global Trends to 2035 Economy and Society STUDY EPRS | European Parliamentary Research Service Global Trends Unit PE 627.126 - November 2018 Global Trends to 2035 Economy and Society Abstract This study maps and analyses current and future global trends in the fields of economics and society, covering the period to 2035. Drawing on and complementing existing literature, it summarises and analyses the findings of relevant foresight studies in relation to such global trends. It traces recent changes in the perceived trajectory of already-identified trends and identifies significant new or emerging trends. It also addresses potential policy implications of such trends for the European Union. EPRS | European Parliamentary Research Service EPRS | European Parliamentary Research Service AUTHORS This study has been written by Daniel Gros, Director of the Centre for European Policy Studies (CEPS), at the request of the Global Trends Unit of the Directorate for Impact Assessment and European Added Value, within the Directorate-General for Parliamentary Research Services (DG EPRS) of the general secretariat of the European Parliament. Additional contributions came from: Cinzia Alcidi, Matthias Busse, Milan Elkerbout, Nadzeya Laurentsyeva, Andrea Renda. The authors thank Christian Egenhofer, Aurelie Faure, Steven Blockmans, Jacques Pelkmans, Eamonn Noonan and the participants of the focus group held at CEPS in July 2018: Linda Yueh, Samir Saran, Eli Noam, Nikolaas Baeckelmans, Kong Dejing, Daniele Rechard, Natacha Faullimmel, Giovanni Grevi, Stjin Hoorens, Sandra Parthie. ADMINISTRATOR RESPONSIBLE Eamonn Noonan, Global Trends Unit, EPRS ABOUT THE PUBLISHER This paper is published by the Global Trends Unit of the Directorate for Impact Assessment and European Added Value, within the Directorate–General for Parliamentary Research Services (DG EPRS) of the general secretariat of the European Parliament. To contact the Unit, please e-mail [email protected] LINGUISTIC VERSIONS Original: EN This document is available on the internet at: http://www.europarl.europa.eu/thinktank DISCLAIMER AND COPYRIGHT This document is prepared for, and addressed to, the Members and staff of the European Parliament as background material to assist them in their parliamentary work. The content of the document is the sole responsibility of its author(s) and any opinions expressed herein should not be taken to represent an official position of the Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. © European Union, 2018. Manuscript completed in September 2018. Brussels © European Union, 2018. Cover image: Signorini, Mercato_Vecchio_a_Firenze, public domain. PE 627.126 ISBN: 978-92-846-3354-8 DOI:10.2861/19165 CAT: QA-03-18-357-EN-N II Global Trends to 2035 - Economy and Society Contents List of figures .............................................................................................................................................. VI List of tables .............................................................................................................................................. VIII List of boxes .............................................................................................................................................. VIII List of acronyms ........................................................................................................................................ IX Executive summary ............................................................................................................................... XI 1 Introduction...................................................................................................................................... 1 2 Demographics and Growth ....................................................................................................... 3 2.1 Demographics .......................................................................................................................... 3 2.1.1 Global population growth to continue .............................................................. 3 2.1.2 Ageing ............................................................................................................................ 4 2.2 Global growth: from G7 to E7? ........................................................................................... 5 2.2.3 Recent developments and near-term outlook ................................................ 5 2.2.4 The medium term outlook ...................................................................................... 6 Prospects for long-term convergence ............................................................................. 8 Growth spurts, commodity exports and the BRICS .................................................. 10 Will the two giants continue to catch up? ................................................................... 14 Competing projections ....................................................................................................... 16 What growth model? ........................................................................................................... 18 2.3 World income distribution ................................................................................................. 20 2.4 Immigration in the EU ......................................................................................................... 21 3 Vulnerable globalisation and an ‘economic G3’ ........................................................... 31 3.1 The global trading system ................................................................................................. 31 3.2 Intellectual property, the new battleground for trade wars? ............................... 33 3.3 Key role of China … and potentially India in the long run..................................... 35 3.4 What future for the Global Multilateral Trading System? ....................................... 36 3.5 Changing weights in the global monetary system ................................................... 42 3.6 Shifting weights in the global financial institutions: the case of the IMF ......... 43 3.7 Geo-strategy and the global economic order ............................................................ 44 III EPRS | European Parliamentary Research Service 4 Industrial and technological transformation ................................................................. 46 4.1 Technological transformation .......................................................................................... 50 4.2 Hardware: the end of Moore’s law, the rise of quantum computers and bio- computers ................................................................................................................................ 50 4.3 The ‘blockchain/AI/IoT stack’ ............................................................................................ 54 4.4 AI, productivity and growth .............................................................................................. 57 4.5 Technology, jobs and inequality ..................................................................................... 60 4.5.1 Job creation and job destruction ........................................................................ 60 4.5.2 Jobs and income in the quantum age .............................................................. 62 4.6 Geopolitics and global competition .............................................................................. 63 Europe as a global norm leader in AI ............................................................................. 63 Future-proof competition policy ..................................................................................... 64 A “Mission AI” in Europe ..................................................................................................... 64 5 Climate change and resource competition ..................................................................... 66 5.1 Trends in low carbon supply ............................................................................................. 66 5.2 Riding the downwards cost curve: three different cases ........................................ 66 Solar ......................................................................................................................................... 67 Offshore Wind ........................................................................................................................ 69 Batteries (storage) ................................................................................................................. 70 5.3 Impact on fossil fuel demand ........................................................................................... 72 5.4 The outlook for emissions and climate change ......................................................... 72 5.4.1 The cost of no action ............................................................................................... 75 5.4.2 Too little too late? ..................................................................................................... 75 5.5 Climate change and its impacts ....................................................................................... 76 5.6 Resource competition ........................................................................................................
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