Where will the global economy be in 10-15 years

It's all doom and gloom at the moment. Surely in 10-15 years time it will all be fine.

Will it?

Look at the lost decade in Japan. Zero interest rates but still no growth during the 1990s.

We could be in for a similar scenario.

However I have doubts that the situation will be the same for the West - it might be worse.

What do you think has driven the global economy over the last 20 years. What single thing? The single European market? Growth of the Asian markets? Increased affluence in the West? Post Cold War benefits? I'd argue that of course these are all important but there is one thing even more important.

Think back further. What changed the world economy during the 1800s and early 1900s? Clearly the Industrial Revolution. Essentially a massive increase in productivity by replacing humans with machines.

Recently we have seen UK and US companies increase productivity by outsourcing to China and India. That will probably continue but what is driving that outsourcing is cheaper wages not the need to use less humans. So that can only continue until Indian and Chinese wages rise to a level where it no longer becomes sensible to outsource any more. Perhaps 10 years away?

What I would argue HAS driven the West is increased productivity due to the silicon chip. Costs have been significantly lowered by machines being very much cheaper than people. Computerisation has replaced business processes and created new markets and given new insights into business. All making more money for companies everywhere.

Computer chips have got smaller and faster. They will continue to get smaller and faster. But so what? Is your home PC really that much faster than the one you had 3 years ago. In reality it is not - despite the marketing hype. Of course there will also continue to be new technological innovations that use computer chips but is someone going to invent something even better than a mobile phone; and even then, again, so what? Mobile phones alone won't continue to let our economies grow at 2%pa. Look at SAP (an accounting software company) they have been focussing on mid-size companies and selling value added add-ons to their other existing clients - their core market that caused their phoenomenal growth is saturated. Is someone going to invent a whole new way of accounting? I think not.

How about a new internet? The internet is probably the final growth large phase available to Western firms. Essentially it is still computers that underly this cheaper and perhaps sometimes more effective business process medium.

A new google or a new facebook may well come along but that will just give a new channel to market for the marketeers. It won't create millions of jobs and extra percentage points of GDP.

Green issues. That all boils down to saving energy and switching from finite oil reserves.

So where will the economy be in 15 years time?

Let's hope someone invents working Nuclear Fusion. Limitless, safe and inexpensive energy now that could make a difference. Then we could go mining on Mars (currently quite expensive).

Maybe nanotechnology could produce a step change in productivity improvement.

China will have caught up. There will have been some new and unexpected innovations using variations on existing technologies. But the next BIG thing will probably not have come along. UK and US comapnies will have to innovate broadly within the current innovative frameworks and exploit the new developing markets of the East and new incremental technologies.