“Policy makers aren’t prepared for what this will do to people old and young who aren’t going to be supported anymore in the labor force,” Moyo said. “As economists, we can take a positive view and say just because we’re not sure what sector will eventually absorb this workforce, especially the unskilled, today doesn’t necessarily mean it won’t happen. But a public policy maker can’t afford to not have a plan.”
Moyo believes the scarcity of natural resources will create new competition between regions, countries and peoples that could spill over into conflict.
As these structural issues deepen, many institutional managers are already beginning to de-risk, and individual investors are finding fewer places to seek low-risk growth and income, Moyo noted.
“Many asset managers earlier in the year decided to sit on the sidelines. [They] moved out of equity and looking back people are saying that they were kind of dumb to do so because the market moved to record highs,” she said. “It’s a little too simplistic to say that given the global political and economic challenges and the structural headwinds we’re dealing with.”
The world is turning away from globalization during a period when international cooperation and coordination is crucial, noted Moyo. More than 600 discriminatory trade polices have been introduced in the past 10 years, many of them by the U.S. and Europe, she said.
The United Kingdom’s vote to leave the European Union and the election of nationalist figureheads like President Donald Trump are accelerating the anti-global push, said Moyo. Many countries once engaged by the U.S. are beginning to turn inward and, according to the World Trade Organization, global trade has been in decline for the past decade.
“The rhetoric around protectionism has reached a fever pitch,” she said. “[French President Emmanuel] Macron has pushed the idea of Europe first. ... There’s been an increase in home bias, and that trend should continue in a world that’s more uncertain, where growth is more precarious.”
At the same time, the West is beginning to raise interest rates, which may cause American investors to keep more of their money at home, she said. As a result, the flow of money in and out of the U.S. is in a persistent state of decline, as is international lending, and Western money is flowing out of emerging markets.
“Companies are becoming more siloed. They’re moving away from the globalized model,” she said. “Companies heavily focused on being disaggregated, like a Unilever Pakistan or an Anheuser-Busch Belgium, will do better than those who are still backfooted in a globalization agenda.”
Moyo warned that developed market debt is an issue that must be addressed with a long-term solution. While the Congressional Budget Office predicts that the national debt will double over the next 30 years, debt held by private companies has also ballooned during the recent period of low interest rate policies. Simultaneously, American consumers have racked up higher credit card, student loan and auto loan balances.