Taking a long view, Merrill forecasts top trends to 2031

Taking a long view, Merrill forecasts top trends to 2031

Taking a long view, Merrill forecasts top trends to 2031

A rising global middle class

Merrill Lynch sees a critical demographic shift is the continuing mass migration from rural to urban environments. Although the gulf between rich and poor will remain wide in many regions, the net result of this movement into cities will be an expanding global middle class. According to the Global Trends 2030 report, within 20 years a majority of the world’s population will, for the first time in history, have risen out of poverty. By conservative estimates, the number middle class people will likely double to 2 billion by 2030.

This will produce disruptions as radical as those wrought by the Industrial Revolution in the 18th century, it said. A disproportionate amount of that middle-class expansion will occur in developing and frontier markets, and those nations will account for an even larger portion of global economic growth.

Spending by middle-class consumers in North America and Europe is expected to rise by just 0.6% per year over the next 20 years, while middle-class consumption in Asia is expected to increase by 9% annually. If developing countries are perceived as having more promising opportunities for middle-class growth, that could attract the skilled workers necessary for further prosperity.

Food and water security

A growing middle class will place unprecedented strain on the planet’s resources. With higher household incomes, more people will eat meat more often. As protein-heavy diets become more prevalent, demand for food and water will increase.

“It takes 15,000 liters of water to produce a kilogram of beef. It takes 1,500 liters to produce a kilogram of grain,” Nahal said. “And this puts increasing pressure on global food security and water security.” If current trends continue, within 30 years water demand will exceed water supply by 40%.

The problem will only be worsened if global temperatures continue to rise, and if the extreme weather cycles predicted by many climate scientists threaten crop yields. By the end of August 2012, 65% of the continental U.S. was in a state of moderate to exceptional drought. As of November 2012, the average global temperature in each of the previous 333 consecutive months has been higher than the 20th-century average.

According to Nahal’s team’s calculations, if the status quo remains and no efficiency gains are made, the world’s diminished freshwater supply could cut the forecast for 2050 global GDP almost in half.

But as with all these large trends, the issues of food and water security will create opportunities for innovative problem solvers. Says Nahal, “Water today is probably a $500 billion market." We think that’s going to grow to $1 trillion by 2020.” This will include new technologies and new infrastructure that allow for more efficient treatment and re-use of water, both residentially and industrially.

Do such long-term forecasts factor in to the advice you offer your clients? Sound off in the comments.

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