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#203 McKinsey Long Range Outlook

Since its founding 30 years ago, the McKinsey Global Institute has explored key trends shaping business and the economy. In 2020, COVID-19 paused some of those trends, accelerated others, and added a new set of risks and challenges. 


As average temperatures rise, acute hazards such as heat waves and floods grow in frequency and severity, and chronic hazards such as drought and rising sea levels intensify. The impact of these hazards is non-linear and can have severe knock-on effects. Global average temperatures are expected to increase between 1.5 and 5 degrees Celsius relative to today in many locations by 2050.

Economic outcomes in the past 20 years have varied widely. While employment rose, wages stagnated for many, and the rising cost of housing, healthcare, and education eroded income gains. More expensive: Large increases in the cost of basics including housing, healthcare, and education absorb income gains for many. Housing accounts for about 24% of household consumption and its cost has risen faster than general consumer prices. Less expensive: Prices of discretionary goods and services such as communications and clothing fall significantly.

Even early in the crisis, the economic of COVID impact in the United States could exceed any event since World War II.
CEO surveys suggest that the pandemic has accelerated adoption of digitization and automation. Job growth in the United States and Europe is concentrated in a small number of dynamic cities and counties. Automation could accelerate the unemployment trend.
The burst of remote work during the pandemic is unlikely to continue at the same level, but some occupations have considerable potential to work from home in hybrid models several days each week without losing productivity. Three-quarters of the time spent on activities in finance and insurance can be done remotely without a loss of productivity.

Women make up 39 percent of global employment but account for 54 percent of pandemic-related overall job losses. The pandemic had an especially significant effect on certain demographic groups. For example, our analysis showed that women’s jobs were 1.8 times more vulnerable to this crisis than men’s jobs. One reason: the virus significantly increased the burden of unpaid care, which is disproportionately carried by women.

Fewer health conditions and expanded participation in the labor force could increase global GDP by about 8 percent by 2040. The global disease burden could be reduced by about 40% through broader application of known interventions.

Biology-based innovation is transforming what we eat, what we wear, and the way we build our physical world. Science already feasible today could transform sectors from agriculture and consumer goods to energy and materials. A visible pipeline of ~400 applications could deliver direct annual economic impact of up to $4 trillion over the next ten to 20 years.

How Asia can boost growth through technological leapfrogging Asia has been building its technological capabilities and infrastructure. More is to come based on the scale of markets and investment and the speed of technology adoption, as well as through intellectual property creation. Asia has a strong presence in 11 technologies in startup investment, ten in IP creation, and four in both.

Beyond the 5G revolution, an evolution in connectivity is boosting digital access worldwide The next generation of connectivity technologies and upgrades to existing networks worldwide could create trillions of dollars in major sectors across advanced economies while bringing two billion new internet users online in the developing world. The share of global population remaining unconnected or under-connected should be reduced by half by 2030. Greater flows of information, communication, and services could add another $1.5 trillion to $2 trillion to global GDP.

#202 Dollar as the Dominant Global Currency


#201 Balancing the Budget Trough Tax Reductions

The prospects that the US national budget would rebalanced depends on a cut in federal spending. The current budget deficit would have to be reduced. Is that possible?

The current prospects for the US economy is to cut the taxation levels. Such cuts would not be feasible because the current levels of tax revenue are already the lowest among advanced economies.

The USA has the world's largest GDP and the ratio of its public debt to GDP remains at  tolerable levels. However the public debt of China is even lower and its external debt is already the lowest in the world.

Although the total tax revenue of $3.5 Trillion can not substitute for the post COVID GNP gap, increasing individual taxes and some payroll tax reductions will be on the agenda for the new administration. Only 7% of corporate taxes from corporations show a disproportionate allocation of taxation for the dividend-earning part of the high earning population that is not likely allocate income to the growth of the economy.

The top income quintile and particularly the top 1% will be targets for increased taxation of incomes. However, the large accumulation of assets (> 50% of wealth) will be among the top 1% will most likely be the targets. As the workforce declines there will be no incentives to raise payroll taxes.