I’m happy to be back again, reaching out to each and every one of you, after a long gap.
We are passing through a period in time in which pessimism is gripping the world view on most aspects of life. True to form, leading this sentiment is the negativity regarding macro-economic fundamentals. The forecast on many economic and financial parameters are indeed gloomy.
As is the norm led by some people, who unfortunately have not kept themselves abreast of the current scenario, seem to lead the narrative that the US-China trade war is the root cause of all that ails the world economy. To my understanding, it is not as if the whole world economy is getting drained because of the China issue.
One fine morning, Xi Jinping will shake hands with Donald Trump as it would be in the interest of the two largest economies of the world to make peace with each other. Issues like sanctions will settle as these things have, of seeking their own space culminating to closure. The real issue is related to two major areas that I want to point out in this blog:
1. The impact of the current economic downturn on retail in the long run
2. The ramifications thereof on the kind of employment opportunities across the globe
I am not an amazon.com fan. I do know many people who love to go to a store to touch the piece of textile they wish to buy, feel it and then go for it. Most people pick up jewellery from the store, try it on and ask around how it looks on them and only then, buy it. So where has the world gone today?
We see companies going bankrupt or are on the verge of collapse, a trend that seems to be on the rise. We see retail space shrinking. Macy’s cut their space area. Forever 21 seems to be almost out of business. In every mall you visit, you see stores closing shutters, to be replaced by new ones, which again close shop. And this is something one sees mushrooming across the cities.
The hard core real estate owners who have rented these properties right from Manhattan’s Fifth Avenue to Nariman Point in Mumbai, will never adjust the rentals to suit the economy. I don’t think there is a single kind hearted real estate owner who will shed tears on account of the downfall of his lessee.
High rents, online sale and shipping of products are directly going to impact the economy by reducing the volume of labour and managers required in the brick and mortar stores to manage human sentiments and emotions.
I don’t think there is much emotion involved in buying online. It is only a decision, and a credit card which supports the decision. Well, of course one has to make sure the card does not get declined.
Some of the leading logistics companies like FedEx and UPS will benefit and we could see growth in jobs in such sectors. But Artificial Intelligence (AI) is changing this game to a huge extent. Right from the conveyors, it identifies packages - by gender, name of street, content on the package, intended weight to be loaded and so on. Yes, AI is fast eliminating human involvement in this sector as well.
India has a population of more than 1.3 billion and China is a kissing distance from 1.5 billion. With technology efficient nations like Japan and most of the Scandinavian countries in Europe shrinking in population, what I see happening is a huge imbalance in terms of skill and quality gripping the world.
I am not saying India and China are unskilled, but when they together move towards the 3-billion population mark, quality may invariably get compromised. Because, going forward, quantity may take over from quality as the key economic driving force.
That means new generation ships, airplanes will have relatively low priority as the stress will be on items of mass consumption, ending up as a survival economy. A huge problem rearing is the one regarding production of food for the 3 billion population.
Today, a farmer would pray that his children don’t end up being farmers. A lady working in a seafood processing unit, peeling shrimp for around 8 hours would never wish her children to be in the same condition. Similarly, a truck driver would never want his children to follow suit.
To wind up, it does not augur well for the world economy to hide behind the façade of a trade war between the US and China; as the reason for all that is wrong with the fundamentals, in my book, is too simplistic a view point and a totally unreal one, at that.
I will be back soon with more blogs. Keep watching this space. – Jose Thomas
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