By No Means is it the Same Old World (Part 1)

Article source: CMDGroup

I’m writing this article on May 1, but it’s not an April Fools’ joke. Sure, there have been other times in world history, during war or plague, when turmoil has been so intense as to test, to the limits and beyond, the fortitude of mankind and womankind.

Still, I’m not sure humanity has ever before been on the cusp of so many changes that are already, or are on the verge of, shaking up the ways in which we live and interact with one another; and govern our economic and social affairs; and inspire dreams about really and truly astonishing futures.

The notion for writing this article first came to mind on account of six or so major trends that I’m always mulling over when I write about the economy and the construction sector. Upon deeper reflection, the number of discernible seismic shifts quickly expanded to a dozen.

There may well be more. Feel free to contact me if you believe I’ve failed to mention something equally or more important.

The following 12 sections have also been inspired by the question I’m always asking myself and which I know is of prime concern to you as well. What will be the implications for the construction sector?

I don’t like to use the word ‘huge’ now. It’s been hijacked for a political purpose. Let’s rather say that the repercussions will be awesome.

So without further ado, here they are. These are at least a dozen easily definable ways in which much of the world is transitioning to …

(1) An aging population. Let’s get this rather prosaic one out of the way early, since it’s a trend that’s been known and talked about for a very long time. The post-World War II baby boom generation is moving tortoise-like but formidably into its senior years and, of course, that will have big ramifications not only for entitlement programs such as pensions and health care, but also for construction activity through the building of hospitals, seniors’ home and associated medical facilities.

There’s much more to consider as well. A recent Bloomberg News story pointed out that while most of the major technological advances of our modern age (e.g., mobile phones and gaming systems) have been geared towards an onrushing millennial cohort, and those even younger, one of the next giant advances – driverless cars – will better satisfy an older generation.

One can certainly understand the advantages of fully or semi-autonomous vehicles for those individuals who, on account of an accumulation of years near the allotted ‘four score and ten’, are finding that their reflexes have slowed. Many of them are undoubtedly thinking, “Wouldn’t it be nice to just sit back, relax and let a machine take over?”

There remain glitches to be worked out, though. Insurers are expressing a logical concern. The first-stage advance is likely to be semi-autonomous motorized transport demanding human interaction when unusual situations arise. Snowy conditions, for example, remain a big problem for the new motion sensors being developed. Riders won’t be free to do whatever strikes their fancy while they’re traveling. From time to time, they’ll be called upon for manual overrides.

Already, there have been reports of individuals brushing their teeth and reading newspapers while being mechanically chauffeured along. On a prurient level, there’s speculation about a possible rampant increase in the number of ‘canoodling’ incidents that will take place behind the wheel − or beside it, or maybe even under it, depending on the couple’s capacity for adventure. (See, it’s not really so difficult to insert a mention of ‘sex’ into an economics story.)

(2) A still rising China: Worries about skyrocketing debt levels and slowing growth aside, China’s role in world affairs will become ever wider and more profound. In the middle of the last decade, a suddenly surging Chinese economy absorbed about 40% of all the world’s major raw material output. This initiated the commodity super-cycle.

China’s more recent decent into ennui concerning its economic expansion prospects has depressed commodity markets, sending prices plummeting. Since all building products have a commodity or raw materials base, in one form or another (e.g., hydrocarbons used to make plastic plumbing pipes), material costs of construction have mainly flat-lined.

There is another way, though, in which China is assertively impacting construction − through its aggressive investments in major projects in other nations.

The largest nuclear power plant in the world is currently under development at Hinkley Point in the southwest corner of the United Kingdom. Evolutionary power reactor (EPR) technology will be provided by two French firms, Areva and EDF. France will pony up two-thirds of the necessary total project financing, but the other one-third has been offered by China.

In Canada, Chinese engineers are examining the viability of building a railroad line into the Ring of Fire region in northern Ontario, where there are massive deposits of nickel, copper, chromite and platinum. Chromium is a key component in the production of the stainless steel used in many of the consumer products increasingly in demand by the expanding middle class in the Middle Kingdom.

China’s largest printing company, Sun Publishing, has announced that it will be building a $1 billion-plus pulp and paper plant in Arkansas, not far southwest of Little Rock. Care has been taken to assure the public the new facility will be the most environmentally progressive in its market niche.

Furthermore, several of the tallest upcoming office and residential towers currently being planned for Manhattan, Brooklyn and Jersey City will be undertaken by Chinese developers and financial institutions, including China Oceanwide Holdings, China Overseas America and Greenland Holdings, a state-owned enterprise headquartered in Shanghai.

These investments will give China a vested interest in how well those recipient economies are performing. (Saudi Arabia’s plan to sell shares in Aramco is a different take on the vested interest angle. It will lead to outside investors having a stake in the stability of the Saudi royal-family at the top of the nation’s power structure. For many observers, that’s a harder sell.)

(3) A feistier and less malleable electorate: Globalization and the greater prominence of China, together with the emergence of certain other low-wage nations, with all that has meant for the offshoring of jobs, has left a significant portion of the populace at home feeling dispossessed, alienated and resentful.

It has become abundantly clear what many voters are now thinking. They’ve embarked on a journey into a new political landscape where they can more openly express their testy mood.

Maybe I’m forgetting too easily. Maybe a significant portion of the voting public has always been especially prickly. It does seem, however, that this current caucus and primary season has been quite different – for its level of name calling and aspersion-casting − from all others that have preceded it.

I suspect a survey of political junkies and pundits would verify they’ve reached the same conclusion.

It’s not just in the United States. Political leanings in Europe have also been fracturing into more extreme left and right wing positions. In Brazil, a vote will soon be held about whether or not to impeach that country’s leader, Dilma Rousseff, for misuse of public funds during the most recent election campaign. (Impeachment, however, isn’t exactly a new phenomenon.)

That’s it for now. Transitions (4) through (7) will be covered in the next Economy at a Glance.

What’s particularly fascinating is the manner in which they so readily bleed into one another.

Tags: Alex Carrick, Canada, CMD, CMDGroup, Economy, election, employment, job, market, oil, US

Category: CMD Group

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