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Four forces transforming the world: 'A speed and scale we've never seen before'

Aaron Task
Editor in Chief

The global economy is undergoing such a major transformation it takes not one...not two...but three directors of the McKinsey Global Institute to write a book about it.

But seriously folks...

No Ordinary Disruption: The Four Global Forces Breaking All the Trends is that book.  One of its co-authors, Richard Dobbs, joins me in the accompanying video to explain why he beleves these forces will have 3,000 times the impact of the Industrial Revolution.

"We've built up an intuition about how the world works over our lives... we're now getting these disruptions happening at speed and scale we've never seen before," Dobbs says. "And they're all happening at same time. Such that our intuition about how the world works...a lot of that intuition could be wrong."

The four 'global forces' detailed in the book are:

Emerging markets growth and urbanization: McKinsey predicts that emerging markets will grow 75% faster than the rest of the world in the next decade. Between now and 2025, just 440 emerging market cities -- such as China's Tianjin, India's Surat and Brazil's Porto Alegre -- will generate nearly 50% of additional global GDP growth, the authors estimate.

Technological breakthroughs and disruption: One example of the rapid pace of technological adoption; it took radio 38 years to get to 50 million users vs. just nine months for Twitter. McKinsey predicts 140 million service sector workers could be replaced by computers by 2025 and 75 million (more) jobs will done by robots.

Realignment of global trading: 'Interconnectivity' isn't just about mobile communications and social networks. The global trading system is expanding far beyond the traditional post-War hubs of Europe and Asia, with China's plans to build a 'New Silk Road' through Central Asia to Europe being one obvious example. McKinsey predicts Central Asia will be the world's center of economic activity by 2025, "just north of where it was in the year 1 A.D."

Aging global population: It's not just Russia, Japan and Western Europe...China's population is aging too and McKinsey predicts the global workforce will shrink two-thirds by 2030. By 2050, the book projects developed countries will have twice as many elderly people as children, a mirror image of the trend in 1950.

These trends have major potential implications "for policymakers, investors, families, for how long you have to work, your children's education," Dobbs says.  

The bad news is most businesses, policymakers and individuals "know it's happening but [are] not reallocating resources or efforts nearly enough given the scale" of the transformation, he continues. Furthermore, many workers are ill-trained for the coming shifts and the U.S., particularly, faces a shortage of grads in the fields of science, technology, engineering, and mathematics, aka STEM.



















The book also warns of potential inflation in food prices, which have already risen by nearly 120% since 2000 after falling for much of the 20th Century.

With America already having underdone a massive and wrenching transformation away from manufacturing to service sector jobs in the past 40 years -- and that's before the Great Recession hit -- it's tempting to view this as another harbinger of doom for the U.S.

But Dobbs believes the rise of a middle class in emerging markets will create major export opportunities for American businesses, seemingly buttressing President Obama's push for the Trans-Pacific Partnership (TPP), a massive trade pact with 11 other countries. In addition to the U.S., New Zealand, Australia, Brunei, Chile, Malaysia, Peru, Singapore, Vietnam, Mexico, Japan and Canada have committed to the TPP, which would create a trading bloc encompassing 40% of the [current] global economy.  

"This is an opportunity," he says. "America hasn't had to export as much because of its big domestic market. This is now about realigning the U.S. to say 'we can play in this export game in a big way.'"

Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.