Four economists discuss the trends in the global economy they are tracking in 2024.
Emily Blanchard, Associate Professor, Dartmouth Tuck School of Business
Contingency planning is in overdrive. Since the COVID-era disruptions of a few years ago, businesses and organizations have diversified supply chains, built out customer bases, and reworked their inventory strategies. Many are reconsidering where and how they make things in the world, and some have already reorganized their global footprints. This year promises more of the same but with greater urgency as uncertainty crescendos amid geopolitical conflict, powerful new (and likely disruptive) technologies, and increased climate shocks including an unusually severe El Niño cycle. This is not to mention a series of major elections around the world in the next twelve months. Savvy leaders will be waiting, watching closely, and putting in place not only Plan B, but Plans C, D, E, and F.
Davin Chor, Associate Professor and Globalization Chair, Dartmouth Tuck School of Business
I make this prediction with a sense of trepidation and even loathing. But speaking as a trade economist, I fear that protectionist sentiment and policies will intensify around the world as 2024 unfolds. It has been more than five years since U.S.-China trade tensions spilled out into the open in 2018 in a series of tariff escalations. Today, public views in the U.S. toward international trade remain lukewarm at best. This is due to longstanding concerns over how trade with China has impacted manufacturing jobs, as well as over the supply chain disruptions that have filled the economic headlines since the Covid-19 pandemic. To date, the Biden administration has responded by actively exhorting businesses to rethink their international supply chain strategies —to switch toward “friendshoring” or “nearshoring”—while at the same time embarking on an ambitious set of industrial policies to promote U.S. manufacturing—especially in such critical goods as semiconductors. With the U.S. presidential election cycle rolling into full swing in 2024, anti-global sentiment is poised to ratchet up on both sides of the political aisle, especially as the issue of international trade has become entwined in the public eye with national security concerns and geopolitical competition with China.
These reservations are not just confined to the U.S. Across the Atlantic Ocean, there is a growing sense of unease over China’s aggressive use of domestic subsidies for electric vehicles and how these might set back European car manufacturers’ ambitions in this sector, whose strategic importance has been magnified amid the ongoing climate transition. On its end, China will not stand idly by—and will likely engage in policy retaliation—if the U.S. or EU were to enact trade policy measures that are perceived to target China’s national interests. Meanwhile, the World Trade Organization remains powerless to mediate these disputes, as appointments to its appellate body have been frozen out for several years. This is hardly a pretty picture. Unfortunately, it means that voices that speak out in defense of free trade—and the shared prosperity it enables—are at risk of being drowned out.
Esteban Rossi-Hasnberg, Glen A. Lloyd Distinguished Service Professor, University of Chicago
2024 will be deeply affected by one of the most dramatic recent changes in modern economies: the continued consolidation of work-from-home. Since the COVID pandemic, we have seen a dramatic shift to remote work in many large cities in the world. People living in small cities, in contrast, seem to have mostly returned to work at their workplaces. The implications on worker productivity, commuting patterns, housing prices, amenities, and the environment are large.
Will these trends continue? Will the gaps in remote work across cities close? Probably not. Commuting patterns in 2023 were relatively stable already, and they are likely to continue at similar levels across cities in 2024.
What we might start to experience is the associated changes in productivity. Even though, in the short and medium run, productivity levels might not be impacted much, or even benefit, from remote work, the longer impact of remote work on productivity growth could be quite large. The gains from personal interactions among workers, when they meet in the office or downtown areas, have been diminished. Their value is the cornerstone of the value of cities, and the reason why firms are willing to pay large rent premiums to locate in downtown areas. Once individuals work remotely, not only do firms move out of downtown areas, but those valuable interactions are lost. Eventually, we should start seeing these effects reflected in lackluster productivity growth. 2024 might be the year when we start experiencing these effects. Of course, disentangling them from the positive effects of automated innovations due to the new general-purpose technology that resulted from AI, will be challenging.
Albert Saiz, Daniel Rose Associate Professor of Urban Economics & Real Estate and Faculty Director of the Urban Economics Lab, Massachusetts Institute of Technology
While some countries, like China, will continue to experience housing price deflation, the issue of affordability will remain a top priority for economic policies elsewhere. Housing is the ultimate non-tradable good and holds a significant place in family budgets. The factors that have driven up home prices and rents will persist in 2024: the lack of productivity growth in the construction sector, a slowdown in the inflation rate of tradable goods, increased NIMBY opposition, anti-development local policies, the concentration of demand in popular cities, and a resurgence in the availability of financial capital.
The good news is that anti-supply denialism appears to be on the wane. Awareness is growing regarding the need for more housing development as a response to local affordability crises. Yet, rational policymakers still have some homework to do if they want to counter the resurgence in populist shortcuts. Fortunately, housing policies based on activating land for new construction can garner support from across the political spectrum. On one hand, supply-side housing economic policies advocate for affordability against entrenched incumbents—older and wealthier individuals—who try to limit access to younger and less affluent market entrants. On the other hand, these policies also curb excessive interventionism from over-regulatory municipal governments, empowering housing markets to fulfill their role. Framing pro-housing development activism as the rare multi-partisan issue that it is represents both sound economics and smart politics. Facilitating new construction is the way to achieve more affordable housing for all, and 2024 could be an inflection point for more aggressive pro-development efforts.
In 2024 and beyond, we will witness renewed efforts applied to the optimal design of housing policies. Economists excel at criticizing poor policies—such as rent control. While such criticism is warranted, we need to dedicate more time to engineering real-world solutions for housing policymakers. In highly dense urban areas worldwide, the sale of air rights by municipal governments—setting a market price for increased floor-to-area ratios (FAR)—can make tearing down existing properties and the redevelopment of brownfields more attractive, while also generating revenues for infrastructure investments. In transitional areas, large-scale master-planned developments will require a combination of financial engineering, air rights, and well-calibrated impact fees. In the suburbs, we need to find ways to partially compensate existing neighbors for the hassles associated with new real estate development.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.