Analysis
This
is the fifth Decade Forecast published by Stratfor. Every five years since 1996
(1996, 2000, 2005, 2010 and now, 2015) Stratfor has produced a rolling
forecast. Overall, we are proud of our efforts. We predicted the inability of
Europe to survive economic crises, China's decline and the course of the
U.S.-jihadist war. We also made some errors. We did not anticipate 9/11, and
more important, we did not anticipate the scope of the American response. But
in 2005 we did forecast the difficulty the United States would face and the need
for the United States to withdraw from its military engagements in the Islamic
world. We predicted China's weakness too early, but we saw that weakness when
others were seeing the emergence of an economy larger than that of the United
States. Above all, we have consistently forecast the enduring power of the
United States. This is not a forecast rooted in patriotism or jingoism. It
derives from our model that continues to view the United States as the
pre-eminent power.
We
do not forecast everything. We focus on the major trends and tendencies in the
world. Thus, we see below some predictions from our 2010 Decade Forecast:
We
see the U.S.-jihadist war subsiding. This does not mean that Islamist militancy
will be eliminated. Attempts at attacks will continue, and some will succeed.
However, the two major wars in the region will have dramatically subsided if
not concluded by 2020. We also see the Iranian situation having been brought
under control. Whether this will be by military action and isolation of Iran or
by a political arrangement with the current or a successor regime is unclear
but irrelevant to the broader geopolitical issue. Iran will be contained, as it
simply does not have the underlying power to be a major player in the region
beyond its immediate horizons.
The
diversity of systems and demographics that is Europe will put the European
Union's institutions under severe strain. We suspect the institutions will
survive. We doubt that they will work very effectively. The main political
tendency will be away from multinational solutions to a greater nationalism
driven by divergent and diverging economic, social and cultural forces. The
elites that have crafted the European Union will find themselves under
increasing pressure from the broader population. The tension between economic
interests and cultural stability will define Europe. Consequently,
inter-European relations will be increasingly unpredictable and unstable.
Russia
will spend the 2010s seeking to secure itself before the demographic decline
really hits. It will do this by trying to move from raw commodity exports to
process commodity exports, moving up the value chain to fortify its economy
while its demographics still allow it. Russia will also seek to reintegrate the
former Soviet republics into some coherent entity in order to delay its
demographic problems, expand its market and above all reabsorb some territorial
buffers. Russia sees itself as under the gun, and therefore is in a hurry. This
will cause it to appear more aggressive and dangerous than it is in the long
run. However, in the 2010s, Russia's actions will cause substantial anxiety in
its neighbors, both in terms of national security and its rapidly shifting
economic policies.
The
states most concerned — and affected — will be the former satellite states of
Central Europe. Russia's primary concern remains the North European Plain, the
traditional invasion route into Russia. This focus will magnify as Europe
becomes more unpredictable politically. Russian pressure on Central Europe will
not be overwhelming military pressure, but Central European psyches are finely
tuned to threats. We believe this constant and growing pressure will stimulate
Central European economic, social and military development.
China's
economy, like the economies of Japan and other East Asian states before it,
will reduce its rate of growth dramatically in order to calibrate growth with
the rate of return on capital and to bring its financial system into balance.
To do this, it will have to deal with the resulting social and political
tensions.
From
the American point of view, the 2010s will continue the long-term increase in
economic and military power that began more than a century ago. The United
States remains the overwhelming — but not omnipotent — military power in the
world, and produces 25 percent of the world's wealth each year.
The Decade Ahead
The
world has been restructuring itself since 2008, when Russia invaded Georgia and
the subprime financial crisis struck. Three patterns have emerged. First, the
European Union entered a crisis it could not solve and which has increased in
intensity. We predict that the European Union will never return to its previous
unity, and if it survives it will operate in a more limited and fragmented way
in the next decade. We do not expect the free trade zone to continue to operate
without increasing protectionism. We expect Germany to suffer severe economic
reversals in the next decade and Poland to increase its regional power as a
result.
The
current confrontation with Russia over Ukraine will remain a centerpiece of the
international system over the next few years, but we do not think the Russian
Federation can exist in its current form for the entire decade. Its
overwhelming dependence on energy exports and the unreliability of expectations
on pricing make it impossible for Moscow to sustain its institutional relations
across the wide swathe of the Russian federation. We expect Moscow's authority
to weaken substantially, leading to the formal and informal fragmentation of
Russia. The security of Russia's nuclear arsenal will become a prime concern as
this process accelerates later in the decade.
We
have entered a period in which the decline of the nation-states created by
Europe in North Africa and the Middle East is accelerating. Power is no longer
held by the state in many countries, having devolved to armed factions that can
neither defeat others nor be defeated. This has initiated a period of intense
internal fighting. The United States is prepared to mitigate the situation with
air power and limited forces on the ground but will not be able or willing to impose
a settlement. Turkey, whose southern border is made vulnerable by this
fighting, will be slowly drawn into the fighting. By the end of this decade,
Turkey will emerge as the major regional power, and Turkish-Iranian competition
will increase as a result.
China
has completed its cycle as a high-growth, low-wage country and has entered a
new phase that is the new normal. This phase includes much slower growth and an
increasingly powerful dictatorship to contain the divergent forces created by
slow growth. China will continue to be a major economic force but will not be
the dynamic engine of global growth it once was. That role will be taken by a
new group of highly dispersed countries we call the Post-China 16, which
includes much of Southeast Asia, East Africa and parts of Latin America. China
will not be an aggressive military force either. Japan remains the most likely
contender for the dominant position in East Asia, both because of its geography
and its needs as a massive importer.
The
United States will continue to be the major economic, political and military
power in the world but will be less engaged than in the past. Its low rate of
exports, its increasing energy self-reliance and its experiences over the last
decade will cause it to be increasingly cautious about economic and military
involvement in the world. It has learned what happens to heavy exporters when
customers cannot or will not buy their products. It has learned the limits of
power in trying to pacify hostile countries. It has learned that North America
is an arena in which it can prosper with selective engagements elsewhere. It
will face major strategic threats with proportional power, but it will not
serve the role of first responder as it has in recent years.
It
will be a disorderly world, with a changing of the guard in many regions. The
one constant will be the continued and maturing power of the United States — a
power that will be much less visible and that will be utilized far less in the
next decade.
Europe
The
European Union will be unable to solve its fundamental problem, which is not
the eurozone, but the free trade zone. Germany is the center of gravity of the
European Union; it exports more than 50 percent of its GDP, and half of that
goes to other EU countries. Germany has created a productive capability that
vastly outstrips its ability to consume, even if the domestic economy were
stimulated. It depends on these exports to maintain economic growth, full
employment and social stability. The European Union's structures — including
the pricing of the euro and many European regulations — are designed to
facilitate this export dependency.
This
has already fragmented Europe into at least two parts. Mediterranean Europe and
countries such as Germany and Austria have completely different behavioral
patterns and needs. No single policy can suit all of Europe. This has been the
core problem from the beginning, but it has now reached an extreme point. What
benefits one part of Europe harms another.
Nationalism has already risen significantly. Compounding this
is the Ukrainian crisis and Eastern European countries' focus on the perceived
threat from Russia. Eastern Europe's concern about Russia creates yet another
Europe — four, total, if we separate the United Kingdom and Scandinavia from
the rest of Europe. Considered with the rise of Euroskeptic parties on the
right and left, the growing delegitimation of mainstream parties and the
surging popularity of separatist parties within European countries, the
fragmentation and nationalism that we forecast in 2005, and before, is clearly
evident.
These
trends will continue. The European Union might survive in some sense, but
European economic, political and military relations will be governed primarily
by bilateral or limited multilateral relationships that will be small in scope
and not binding. Some states might maintain a residual membership in a highly modified
European Union, but this will not define Europe.
What
will define Europe in the next decade is the re-emergence of the nation-state
as the primary political vehicle of the continent. Indeed the number of
nation-states will likely increase as various movements favoring secession, or
the dissolution of states into constituent parts, increase their power. This
will be particularly noticeable during the next few years, as economic and
political pressures intensify amid Europe's crisis.
Germany has emerged from this mass of nation-states
as the most economically and politically influential. Yet Germany is also
extremely vulnerable. It is the world's fourth-largest economic power, but it
has achieved that status by depending on exports. Export powers have a built-in
vulnerability: They depend on their customers' desire and ability to buy their
products. In other words, Germany's economy is hostage to the economic
well-being and competitive environment in which it operates.
There
are multiple forces working against Germany in this regard. First, Europe's
increasing nationalism will lead to protectionist capital and labor markets.
Weaker countries are likely to adopt various sorts of capital controls, while
stronger countries will limit the movement of foreigners — including the
citizens of other EU countries — across their borders. We forecast that
existing protectionist policies inside the European Union, particularly on
agriculture, will be supplemented in coming years by trade barriers created by
the weaker Southern European economies that need to rebuild their economic base
after the current depression. On a global basis, we can expect European exports
to face increased competition and highly variable demand in the uncertain
environment. Therefore, our forecast is that Germany will begin an extended
economic decline that will lead to a domestic social and political crisis and
that will reduce Germany's influence in Europe during the next 10 years.
At
the center of economic growth and increasing political influence will be
Poland. Poland has maintained one of the most impressive growth profiles
outside of Germany and Austria. In addition, though its population is likely to
contract, the contraction will most probably be far less than in other European
countries. As Germany undergoes wrenching shifts in economy and population,
Poland will diversify its own trade relationships to emerge as the dominant
power on the strategic Northern European Plain. Moreover, we expect Poland to
be the leader of an anti-Russia coalition that would, significantly, include
Romania during the first half of this decade. In the second half of the decade,
this alliance will play a major role in reshaping the Russian borderlands and
retrieving lost territories through informal and formal means. Eventually as
Moscow weakens, this alliance will become the dominant influence not only in
Belarus and Ukraine, but also farther east. This will further enhance
Poland's and its allies' economic and political position.
Poland
will benefit from having a strategic partnership with the United States.
Whenever a leading global power enters into a relationship with a strategic
partner, it is in the global power's interest to make the partner as
economically vigorous as possible, both to stabilize its society and to make it
capable of building a military force. Poland will be in that position with the
United States, as will Romania. Washington has made its interest in the region
obvious.
Russia
It
is unlikely that the Russian Federation will survive in its current form.
Russia's failure to transform its energy revenue into a self-sustaining economy
makes it vulnerable to price fluctuations. It has no defense against these
market forces. Given the organization of the federation, with revenue flowing
to Moscow before being distributed directly or via regional governments, the
flow of resources will also vary dramatically. This will lead to a repeat of the
Soviet Union's experience in the 1980s and Russia's in the 1990s, in which
Moscow's ability to support the national infrastructure declined. In this case,
it will cause regions to fend for themselves by forming informal and formal
autonomous entities. The economic ties binding the Russian periphery to Moscow
will fray.
Historically,
the Russians solved such problems via the secret police — the KGB and its
successor, the Federal Security Services. But just as in the 1980s, the secret
police will not be able to contain the centrifugal forces pulling regions away
from Moscow this decade. In this case, the FSB's power is weakened by its
leadership's involvement in the national economy. As the economy falters, so
does the FSB's strength. Without the FSB inspiring genuine terror, the
fragmentation of the Russian Federation will not be preventable.
To
Russia's west, Poland, Hungary and Romania will seek to recover regions lost to
the Russians at various points. They will work to bring Belarus and Ukraine
into this fold. In the south, the Russians' ability to continue controlling the
North Caucasus will evaporate, and Central Asia will destabilize. In the
northwest, the Karelian region will seek to rejoin Finland. In the Far East,
the Maritime regions more closely linked to China, Japan and the United States
than to Moscow will move independently. Other areas outside of Moscow will not
necessarily seek autonomy but will have it thrust upon them. This is the point:
There will not be an uprising against Moscow, but Moscow's withering ability to
support and control the Russian Federation will leave a vacuum. What will exist
in this vacuum will be the individual fragments of the Russian Federation.
This
will create the greatest crisis of the next decade. Russia is the site of a
massive nuclear strike force distributed throughout the hinterlands. The
decline of Moscow's power will open the question of who controls those missiles
and how their non-use can be guaranteed. This will be a major test for the
United States. Washington is the only power able to address the issue, but it
will not be able to seize control of the vast numbers of sites militarily and
guarantee that no missile is fired in the process. The United States will
either have to invent a military solution that is difficult to conceive of now,
accept the threat of rogue launches, or try to create a stable and economically
viable government in the regions involved to neutralize the missiles over time.
It is difficult to imagine how this problem will play out. However, given our
forecast on the fragmentation of Russia, it follows that this issue will have
to be addressed, likely in the next decade.
The Middle East and North Africa
The
Middle East — particularly the area between the Levant and Iran, along with
North Africa — is experiencing national breakdowns. By this we mean that the
nation-states established by European powers in the 19th and 20th centuries are
collapsing into their constituent factions defined by kinship, religion or
shifting economic interests. In countries like Libya, Syria and Iraq, we have
seen the devolution of the nation-state into factions that war on each other
and that cross the increasingly obsolete borders of countries.
This
process follows the model of Lebanon in the 1970s and 1980s, when the central
government ceased to function and power devolved to warring factions. The key
factions could not defeat the others, nor could they themselves be defeated.
They were manipulated and supported from the outside, as well as
self-supporting. The struggle among these factions erupted into a civil war —
one that has quieted but not ended. As power vacuums persist throughout the
region, jihadist groups will find space to operate but will be contained in the
end by their internal divisions.
This
situation cannot be suppressed by outside forces. The amount of force required
and the length of deployment would outstrip the capacity of the United States,
even if dramatically expanded. Given the situation in other parts of the world,
particularly in Russia, the United States can no longer focus exclusively on
this region.
At
the same time, this evolution, particularly in the Arab states south of Turkey,
represents a threat to regional stability. The United States will act to
mitigate the threat of particular factions, which will change over time,
through the use of limited force. But the United States will not deploy
multi-divisional forces to the region. At this point, most countries in the
area still expect the United States to act as the decisive force even though
they witnessed the United States fail in this role in the past decade.
Nevertheless, expectations shift more slowly than reality.
As
the reality sinks in, it will emerge that, because of its geographical
location, only one country has an overriding interest in stabilizing Syria and
Iraq, is able to act broadly — again because of its geographical location — and
has the means to at least achieve limited success in the region. That country
is Turkey. At this point, Turkey is surrounded by conflicts in the
Arab world, in the Caucasus and in the Black Sea basin. But Turkey has avoided
taking risks so far.
Turkey
will continue to need American involvement for political and military reasons.
The United States will oblige, but there will be a price: participation in the
containment of Russia. The United States does not expect Turkey to assume a
war-fighting role and does not intend one for itself. It does, however, want a
degree of cooperation in managing the Black Sea. Turkey will not be ready for a
completely independent policy in the Middle East and will pay the price for a
U.S. relationship. That price will open the path to extending the containment
line to Georgia and Azerbaijan.
We
expect the instability in the Arab world to continue through the decade. We
also expect Turkey to be drawn in to the south, inasmuch as its fears of
fighting so close to its border — and the political outcomes of that fighting —
will compel it to get involved. It will intervene as little as possible and as
slowly as possible, but it will intervene, and its intervention will eventually
increase in size and breadth. Whatever its reluctance, Turkey cannot withstand
years of chaos across its border, and there will be no other country to carry
the burden. Iran is not in a position geographically or militarily to perform
this function, nor is Saudi Arabia. Turkey is likely to try to build shifting
coalitions ultimately reaching into North Africa to stabilize the situation.
Turkish-Iranian competition will grow with time, but Turkey will keep its
options open to work with both Iran and Saudi Arabia as needed. Whatever the
dynamic, Turkey will be at the center of it.
This
will not be the only region drawing Turkey's attention. As Russia weakens,
European influence will begin inching eastward into areas where Turkey has
historical interests, such as the northern shore of the Black Sea. We can foresee
Turkey projecting its power northward certainly commercially and politically
but also potentially in some measured military way. Moreover, as the European
Union fragments and individual economies weaken or some nations become oriented
toward the East, Turkey will increase its presence in the Balkans as the only
remaining power able to do so.
Before
this can happen, Turkey must find a domestic political balance. It is both a
secular and Muslim country. The current government has attempted to bridge the
gap, but in many ways it has tilted away from the secularists, of whom there
are many. A new government will certainly emerge over the coming years. This is
a permanent fault line in contemporary Turkey. Like many countries, its power
will expand in the midst of political uncertainty. Alongside this internal
political conflict, the military, intelligence and diplomatic service will need
to evolve in size and function during the coming decade. That said, we expect
to see an acceleration of Turkey's emergence as a major regional power in the
next 10 years.
East Asia
China
has ceased to be a high-growth, low-wage economy. As China's economy slows, the
process of creating and organizing an economic infrastructure to employ
low-wage workers will be incremental. What can be done quickly in a port city
takes much longer in the interior. Therefore, China has normalized its economy,
as Japan did before it, and as Taiwan and South Korea did in 1997. All massive
expansions climax, and the operations of the economies shift.
The
problem for China in the next decade are the political and social consequences of that shift. The coastal region has been built on
high growth rates and close ties with European and American consumers. As these
decline, political and social challenges emerge. At the same time, the
expectation that the interior — beyond parts of the more urbanized Yangtze
River delta — will grow as rapidly as the coast is being dashed. The problem
for the next decade will be containing these difficulties.
Beijing's
growing dictatorial tendencies and an anti-corruption campaign, which is actually
Beijing's assertion of its power over all of China, provide an outline of what
China would like to see in the next decade. China is following a hybrid path
that will centralize political and economic powers, assert Party primacy over
the military, and consolidate previously fragmented industries like coal and
steel amid the gradual and tepid implementation of market-oriented reforms in
state-owned enterprises and in the banking sector. It is highly likely that a
dictatorial state coupled with more modest economic expectations will result.
However, there is a less likely but still conceivable outcome in which
political interests along the coast rebel against Beijing's policy of
transferring wealth to the interior to contain political unrest. This is not an
unknown pattern in China, and, though we do not see this as the most likely
course, it should be kept in mind. Our forecast is the imposition of a
communist dictatorship, a high degree of economic and political centralization
and increased nationalism.
China
cannot easily turn nationalism into active aggression. China's geography makes
such actions on land difficult, if not impossible. The only exception might be
an attempt to take control of Russia's maritime interests if we are correct and
Russia fragments. Here, Japan likely would challenge China. China is building a
large number of ships but has little experience in naval warfare and lacks the
experienced fleet commanders needed to challenge more experienced navies,
including the United States'.
Japan
has the resources to build a significantly larger navy and a more substantial
naval tradition. In addition, Japan is heavily dependent on imports of raw
materials from Southeast Asia and the Persian Gulf. Right now it depends on the
United States to guarantee access. But given that we are forecasting more
cautious U.S. involvement in foreign ventures and that the United States is not
dependent on imports, the reliability of the United States is in question.
Therefore, the Japanese will increase their naval power in the coming years.
Fighting
over the minor islands producing low-cost and unprofitable energy will not be
the primary issue in the region. Rather, an old three-player game will emerge.
Russia, the declining power, will increasingly lose the ability to protect its
maritime interests. The Chinese and the Japanese will both be interested in
acquiring these and in preventing each other from having them. We forecast this
as the central, unsettled issue in the region as Russia declines and Sino-Japanese
competition increases.
Post-China Manufacturing Hubs
International
capitalism requires a low-wage, high-growth region for high rewards on risk
capital. In the 1880s it was the United States, for example. China was the most
recent region, replacing Japan. No one country can replace China, but we have
noted 16 countries with a total population of about 1.15 billion people
where entry-level manufacturing has gone after leaving China.
To
identify these countries, we looked at three industries. The first was garment
manufacturing, particularly low-end and of garment parts like coat linings.
Second was the manufacturing of footwear. Third, we looked at cell phone
assembly. These industries require low capital investment, and manufacturers
move their facilities around rapidly to take advantage of low wages. Industries
of this sort, such as inexpensive toys in Japan, served as a foundation for
manufacturing sectors to evolve into broader low-wage products in high demand.
The workforce, frequently women at first, expanded dramatically as new low-wage
industries moved in. The wages were low on a global scale but very attractive
on the local scale.
Like
China during its takeoff in the late 1970s, these countries tend to be
politically unstable, with uncertain rule of law, poor infrastructure and all
of the risks advanced industrial business try to avoid. But companies from
other countries excel in these environments and have built business models
around this.
The
map of these countries shows that they are concentrated in the Indian Ocean
Basin. Another way to look at it is that these are the less developed countries
(or regions) in Asia, East Africa and Latin America. Our forecast is that in
this next decade, many of these countries — and perhaps some not identified —
will collectively take on the role that China had in the 1980s. This would mean
that by the end of the decade, they would be entering an intensifying period of
growth in a much wider array of products. Mexico, whose economy exhibits
potential in both low-end manufacturing and higher-end industry in a
cost-competitive environment, stands to benefit substantially from its northern
neighbor's investment and healthy level of consumption.
The United States
The
United States continues to make up more than 22 percent of the world's economy.
It continues to dominate the world's oceans and has the only significant
intercontinental military force. Since 1880, it has been on an
uninterrupted expansion of economy and power. Even the Great Depression, in
retrospect, is a minor blip. This expansion of power is at the center of the
international system, and our forecast is that it will continue unabated.
The
greatest advantage the United States has is its insularity. It exports only 9
percent of its GDP, and about 40 percent of that goes to Canada and Mexico.
Only about 5 percent of its GDP is exposed to the vagaries of global
consumption. Thus, as the uncertainties of Europe, Russia and China mount, even
if the United States lost half of its exports — an extraordinary amount — it
would not be an unmanageable problem.
The
United States is also insulated from import constraints. Unlike in 1973, when
the Arab oil embargo massively disrupted the American economy, the United
States has emerged as a significant energy producer. Although it must import some
minerals from outside NAFTA, and it prefers to import some industrial products,
it can readily manage without these. This is particularly true as industrial
production is increasing in the United States and in Mexico in response to the
increasing costs in China and elsewhere.
The
Americans also have benefited from global crises. The United States is a haven
for global capital, and as capital flight has taken hold of China, Europe and
Russia, that money has flowed into the United States, reducing interest rates
and buoying equity markets. Therefore, though there is exposure to the banking
crisis in Europe, it is nowhere near as substantial as it might have been a
decade ago, and capital inflows counterbalance that exposure. As for the
perennial fear that China will withdraw their money from American markets, that
will happen slowly anyway as China's growth slows and internal investment
increases. But a sudden withdrawal is impossible. There is nowhere else to
invest money. Certainly the next decade will see fluctuations in American
economic growth and markets, but the United Stares remains the stable heart of
the international system.
At
the same time, the Americans have become less dependent on that system and have
encountered many difficulties in managing — and particularly, in pacifying —
that system. The United States will become more selective in assuming
responsibilities politically in the next decade, and even more selective in
military interventions.
For
a century, the United States has been concerned about the emergence of a
hegemon in Europe, and in particular of either an accommodation between Germany
and Russia or a conquest of one by the other. That combination, more than any
other, might be able to muster a force — between German capital and technology
and Russian resources and manpower — capable of threatening American interests.
Therefore, in World War I, World War II and the Cold War, the United States was
instrumental in preventing this from occurring.
In
the world wars, the United States came in late, and though it absorbed fewer
casualties than other countries, it nevertheless suffered more than was
comfortable for it. In the Cold War, the United States intervened early and, at
least in Europe, had no casualties. Based on this, the United States has a core
policy imperative that is almost automatic: When a potential European hegemon
arises, the United States will act early, as in the Cold War, in building
alliances and deploying sufficient force in primarily defensive positions.
This
is happening now against Russia. Though we forecast the decline of Russia,
Russia poses danger in the short term, particularly with its back against the
wall economically. Moreover, whatever we forecast, the United States cannot be
certain that Russia will decline and indeed, if it launches a successful
expansionary policy (politically, economically or militarily), it may not
decline. Therefore, the United States will take measures according to its
imperative. It will try to build an alliance system outside of NATO, from the
Baltics to Bulgaria, encompassing as many nations as possible. It will try to
involve Turkey in the alliance and have it reach to Azerbaijan. It will deploy
forces, proportional to the threat, in those countries.
This
will be the primary focus in the early part of the decade. In the second part,
Washington will focus on trying to assure that Russia's decline does not result
in nuclear disaster. The United States will not become involved in trying to
solve Europe's problems, it will not have a war with China, and its involvement
in the Middle East will be minimal. It will conduct global counterterrorism
operations but will do so with the full knowledge that those operations will be
only partially effective at best.
The
Americans will have an emerging problem. The United States has 50-year cycles
that end with significant economic or social problems. One cycle began in 1932
with the election of Franklin Roosevelt and ended with the presidency of Jimmy
Carter. It began with a need to rebuild demand for products from idle factories
and ended in vast overconsumption, underinvestment and with double-digit
inflation and unemployment. Ronald Reagan's presidency laid the groundwork for
restructuring American industry through a change in the tax code and by
shifting the focus from the urban industrial worker to the suburban
professional and entrepreneur.
We
are now about 15 years from the end of this cycle, and the next crisis will
make itself felt in the second half of the next decade. It is already visible.
It is the crisis of the middle class. The problem is not inequality; the
problem is the ability of the middle class to live a middle class life.
Currently, the median household income in the United States is about $50,000.
Depending on the state you live in, this is actually about $40,000. That allows
the literal middle to buy a modest home and live frugally outside major
metropolitan areas. For the lower middle class, the 25th percentile, this is
almost impossible.
There
are two causes. One is the rise of the single-parent household. Having two
households is twice as expensive. The other problem is that the same incentives
that led to the badly needed re-engineering of the American corporation and
vastly improved productivity also limited job security and income for the
middle class. This is not a political crisis yet. It will become one toward the
end of the next decade, but it will not be addressed until the elections of
2028 and 2032. It is a normal, cyclical crisis, but painful nonetheless.
In Context
There
is no decade without pain, and even in the most perfect of times, there is
suffering. The crises that we expect in the next decade are far from the worst
seen in the past century, and they are no worse than those we will see in the next.
There is always the expectation that what we know now as reality will define
the future. There is also the belief that our pain now is the most
extraordinary anguish that has ever been. This is simply narcissism. What we
have now will always change — usually sooner than we believe possible. The
pains we are having now are merely the normal pains of being human. This is not
a comfort, but a reality, and it is in this context that this decade forecast
should be read.
