Editor’s Note: The following piece, exclusive to GPS, comes from Wikistrat, the world's first massively multiplayer online consultancy. It leverages a global network of subject-matter experts via a crowd-sourcing methodology to provide unique insights.
When Americans are warned that the “era of cheap credit is over,” we’re really being told that the inherent advantage of owning the world’s reserve currency is coming to an end. No, it won’t happen overnight, because China’s renminbi is still far from becoming a serious rival.
But the end is coming all right, and it’ll make all that Thomas Friedman hyperbole about a “flat world” a whole lot more real. America simply won’t have the advantage of being able to float debt - of all kinds - as easily as we did in the past, which means we’ll need to compete more intensely on the price and quality of our goods.
The primary driver here is China’s need to shift from a super-saving economy to a super-consuming economy. It’s gone about as far as it can go with export-driven growth, and now it needs to turn on its domestic consumption big-time, but doing that means China’s willingness to finance the debts of others will decrease - thus the end of cheap credit.
So, accepting all that, what can America anticipate when it comes to new sources of demand in the global economy? What are some of the hot goods and services of the coming years? We asked Wikistrat's global community of strategists for some ideas, and here’s what they chose to highlight:
– Water: With both aquifers and river flows being consumed at unsustainable rates all over the world, big opportunities emerge for water-constrained agriculture growing techniques (to include drought resistant genetically-modified seeds), desalinization plants (turning seawater into drinking water) and companies that help governments manage river flows wisely (something in which the US has plenty of experience).
– Soybeans and corn: Soybeans are already a huge export item for U.S. farmers, and they’ll get even bigger in coming years, as China looks to further increase its beef consumption (using soymeal as feedstock). Ditto for corn, which China has begun buying in sizeable blocks from America. US farmers will be China’s best friend in the decades ahead.
– Nuts: As more middle class consumers come online in China, their demand for lower-calorie, high-quality nuts is going . . . well, nuts! It’s already reshaped the U.S. almond and cashew industry and shows no sign of slowing down in its growth.
– Shale gas “fracking” technology: There is nothing hotter in global energy markets right now, and the U.S. is the clear pioneer in this new “hydrofracturing” drilling technique that liberates natural gas from rock. Today foreign companies are lining up to partner with our firms here, and soon enough, our firms will take this technology global – revolutionizing the industry.
– Demand for LNG: Related to the previous point, global demand for liquefied natural gas (how it gets transported overseas by ships) is skyrocketing, with buyers outpacing sellers by a wide margin. Part of this is Japan and Germany deciding to get off nuclear power, but part is America moving too slow in making its glut of gas available for export. Look for that to change soon, improving America’s trade deficit considerably.
– US coal exports: America is blessed with the cleanest, most energy-rich coal in the world, which has kept our electricity bill cheap. But with natural gas supplies exploding, look for displaced coal to be exported in far larger volumes. Two big drivers of demand will be India and China, whose burgeoning middle class consumers can’t get enough electricity.
– Urbanization: Mostly concentrated in Asia and Africa, we’re looking at 75 million new urbanites each year through 2050. When IBM is talking “smart cities” in its commercials, these are the markets they hope to capture.
– Arctic warms up: Thanks to climate change, the Arctic Circle is rapidly opening up for seasonal shipping and exploration and production of hydrocarbons (oil and gas). But to tap all that potential, massive amounts of infrastructure needs to be built – in part for nations to establish their claims.
– Any time a dictator falls: Iraqis may not love America, but they love our consumer goods. Same for Cuba once the Castros finally depart. Cars are the signature item, along with iPhones and iPads. Point being, democratization waves unleash pent-up consumer demand, so keep cheering on the protestors.
– Japan’s elder laboratory: Nobody’s getting older faster than Japan, so nobody’s experimenting more with selling goods and services to that (generally) well-resourced consumer pool. Japan’s experience here will inform a much bigger future global market.
– Emerging market students: If there’s one thing that new middle classniks the world over can agree upon, it’s that you can never spend too much money on your kids’ education. Good news for U.S. colleges and universities, which continue to attract these students in tremendous numbers.
– New middle class: It doesn’t matter where they hail from, once they have their smart phone in hand, the next thing they all want is a car, which means global demand for cars will continue expanding. The global car fleet has just reached 1 billion, but will quadruple by 2050. That’s why Obama saving Detroit made good sense.
Guns, Hired & Sold
– Arms exports to East Asia: “Rising” China’s expanding defense budget, combined with America’s just-announced strategic “pivot,” guarantee a lively market for the foreseeable future. Vietnam and Indonesia are key targets.
– Ditto to the Persian Gulf: Here it’s Iran that American defense firms need to thank. And if Israel attacks Iran? Then we’re talking a major reloading.
– Private security across Africa: It’s not just the Somali pirates or the remaining insurgencies like the Lord’s Resistance Army. The key driver here is much as it’s been in Latin America for years: a booming middle class population looking for personal protection in societies still ridden with crime.
– Mobile services across Asia: Booming business communities and middle classes, saddled with insufficient infrastructure, clamor for mobile data services that get around those roadblocks. Forget the wires, bring on the wifi.
– Bandwidth across the Middle East: Every time a dictator falls, the number of Internet users skyrockets. So the Arab Spring is unleashing incredible demand for bandwidth in all forms. Expect five-to-ten-fold increases in liberated societies.
– It’s not TV, it’s HBO: Another one we can chalk up to an emerging global middle class. They’ve got their new place and their new flat-screen. Now they want unlimited content to go with it. Hollywood’s revenue is increasingly dominated by overseas box office. This “on demand” trend will only grow.
– Burn your garbage here: Developing economies suffer all manner of refuse disposal issues, along with shortages of electricity. The answer? High-tech biomass burners that can turn garbage into power.
– E-recycling: All those computers and high-tech gadgets that get tossed each year are chocked full of valuable metals. For now, much of that waste gets shipped off to India and China, but look for new U.S.-based recycling companies to start capturing that flow – especially after Congress passes a new law to encourage that.
– The new Medicis: Ready to throw out that tired old Rembrandt? Looking to re-gift that piece of modern art you received last Christmas? Well, China’s noveau riche are becoming the force in global art markets, so everything old is suddenly new again.
We’re sure we missed more than a few, but that’s Wikistrat's crowd-sourced list for this week. Now please chime in with some suggestions of your own.