Today’s Three Important Megatrends

When Peter Berezin, Chief Global Strategist at BCA Research, looks at three largely non-consensus megatrends shaping society, he doesn't engage in "happy talk," as he describes it. He sees global migration with open borders for skilled workers benefiting the developed world, but also notes that if the delicate issue is not properly managed rising economic stability. He considers social fragmentation that is rife across the developed world brandishing a populist flag and sees the unanswered rage as threatening democracy itself, which millennials don't seem to particularly care for anyway. Then he looks at aging trends across the developed world and doesn't think deflation, but rather inflation.

This isn't likely to be good for the business climate.

Providing open borders for skilled workers benefits an economy, but not unskilled workers

There are many trends that appear to unite a rage that is spreading around the developed world, with immigration being a key hot button.

If properly managed, however, open immigration can benefit a society.

Pointing to several studies that concluded the removal of all restrictions on labor mobility would more than double global GDP in advanced economies, Berezin notes a double-edged sword. Migration is a net economic positive in the developed world when they are educated and have useful skills. "The problem is that many migrants today are poorly skilled," he writes, a trend that has been documented in Germany to various degrees.

Looking at the issue from an unemotional, economic angle, Berezin recognizes the political powder keg. He observes that opening up borders to labor can hurt the existing unskilled labor force, forcing wages lower. Allowing for unfettered migration for the most skilled workers, however, further creates a global society of haves and have nots, which likely isn't expected to end well for capitalism in the long run.

Social fragmentation and class division hurts all

There is a trend of social fragmentation that can be seen, in part, through the eyes of open borders. Such measures create a further economic divide between the skilled and educated and the unskilled.

Further societal fragmentation and a deep, darker divide among social classes, which has a multi-facetted performance driver. He notes on the left the harang for income inequality is fraying society while on the right calls that "cultural elites" no longer instill middle-class values has resulted in "underclass" behavior being normalized.

It is not just open borders that divide society, but technology, a cause for recent Congressional hearings, that is exacerbating social fragmentation.

The internet is not expanding people's minds through divergent thoughts but rather "has allowed like-minded people to self-segregate into echo chambers where members of the community simply reinforce what others already believe."

The problem with social fragmentation is that a lack of a common value system, when divergent demographics no longer see eye to eye, is that established institutions lose legitimacy. Berezin notes that that has resulted in a collapse of trust in the media, particularly among right-leaning voters, and "most worrying, support for democracy itself has dwindled around the world."

Aging is inflationary, not deflationary

Looking at demographic trends, younger "millennials" don't think living under a democratic form of government is essential.

The youth trend could see a reversal of several trends, including the one that keeps urban areas vital. If the trend towards less crime is reversed -- as it has in Chicago -- young people could leave urban areas in droves.

While the trend for a population has at times been associated with deflation, Berezin thinks the opposite might occur. Spending increases as population ages.

He notes an approaching "inflection point" where aging trends morph from being deflationary to inflationary. This is largely due to the global trend of the "support ratio -- the ratio of workers to consumers – peaking after a forty-year climb. Ultimately this could lead not to deflation, but inflation.