Italy’s love for life? Apparently, it's gone. Italians are now the least happy people in Western Europe.

Italians are older, poorer, and more in debt, contributing to their unhappiness. Italians' average age is 42, and they’re not having kids (there is a 0% growth rate). This year, Italy dropped three places to 20^th on the Human Development Index. The unemployment rate (7%) is high for a World 1 country. Italians have 106% public debt in proportion to their GDP (the sixth highest in the world). Even Italian staples aren’t selling well: sales of pasta and bread were down in 2007.

The Italian economy has relied on small, family-owned businesses that use cheap labor and produce high-quality products. But with competition from countries like China, these firms aren’t prospering in a globalized economy.

The nation seems angst-ridden and unsure how or whether to change. One Italian has devoted his entire blog to his country’s demise. At one level, it seems like Italy is just in a funk, but will it be able to get out? And, more importantly, is this what is going to happen to all aging World 1 countries? Or is Italy an outlier, while most of World 1 will adapt to new global realities?

Image: José Goulão (Flickr)

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A recent New York Times article posed the question: is a sightseeing trip to a slum tourism, or voyeurism?

Reality tourism—travel that is intended to immerse the traveler in authentic, non-tourist experiences—now includes guided tours through slums in destinations like India, Kenya, Mexico, and Brazil.

The trend has its opponents—critics of the slum visit tourism call it “poorism,” and argue that it is exploitative and voyeuristic. However, advocates of the slum visits claim that these tours raise awareness—tourists will come away wanting to help, and with a better understanding of how to do so. Some organizers of slum tours cite a responsibility to give back to the community; one guide has built a community center and pledged 80% of his profits to the Brazilian favela where he operates.

The visits can offer opportunities. The New York Times said:

“At first, the tourists were besieged by beggars, but not anymore," said Kevin Outterson, a law professor from Boston who has taken several favela tours. Mr. Fantozzi has taught people, Mr. Outterson said, "that you’re not going to get anything from my people by begging, but if you make something, people are going to buy it.”

This is an interesting new twist. Reality tourism, done right, could allow the poorest direct access to wealthy tourists while at the same time granting tourists the authentic experiences they crave.

Image: Alicia Nijdam (Flickr)

At our November Futures Consortium meeting on discontinuities, Barry Lynn, senior fellow at the New America Foundation, spoke about the dangers to the world economy posed by today's globalized, single source, just-in-time manufacturing system. Lynn stated in his presentation that “because globalization is so bound up, catastrophe is inevitable … a globalized system with no redundancies is at greater risk to be unsettled by negative discontinuities.”

A perfect example of this phenomenon came this week. Because of a March 3rd fire at the second-largest laptop battery manufacturer in South Korea, HP and Dell are reporting shortages of replacement batteries, and prices for existing batteries are starting to climb. Asustek, Taiwan’s second-largest computer maker, said the shortage would likely affect 40% of its orders in the second quarter of the year. The Korean battery factory won’t be back online for another 2-3 months.

A global battery constraint will not cripple the computer industry, but it serves as a reminder of how our entangled, globalized economy is vulnerable to random events—discontinuities—and how important it is, as Lynn stated, to build resiliency and redundancy into our economic system.

Link via Engadget.

India is known as the land of outsourced IT departments and call centers, but the latest outsourced service raises the bar: pregnancy. Infertile couples in wealthy countries are beginning to turn to India for surrogate mothers to bear their own biological children because of the high quality of Indian medical personnel and low costs relative to commercial surrogacy programs in World 1 countries. It is entirely legal, and the industry appears to be growing rapidly, with each success story prompting dozens more inquiries.

On the surface, it seems to be a win-win situation: the aspiring parents get the baby they'd hoped for, and the surrogate mother gets generously compensated, by Indian standards. The surrogate typically receives $4,500-7,500, the equivalent of 3-15 years' salary, which enables her to buy a house or pay for her children's education. The lower cost of surrogacy ($10,000 to $30,000) allows middle-class couples in World 1 an affordable chance to have a child of their own.

Critics have raised moral issues, however. What's a "fair" price for a child? What happens if the surrogate wants to keep the baby? For the time being, the price issue is left to the clinics, and surrogates must sign a contract agreeing to give up the child at birth. Each pregnancy clinic has its own policy on meetings between parents and surrogates: Rotunda prohibits contact between the two parties, and the surrogate does not know she is working for foreigners, while others clinics allow the surrogate mother and parents to meet. These issues are compounded by the astounding inequalities, both economic and educational, between the foreign parents and Indian surrogates: the money exchanges represents a "bargain price" for the parents, and a life-changing sum for the mother. Educational disparities are also apparent: "On some contracts, the thumbprint of an illiterate surrogate stands out against the clients’ signatures."

Although (mostly) restricted to couples with proven fertility problems, there is a fear that upper-income women would choose to "rent a womb" out of convenience rather than necessity, just as they are choosing C-sections. Ultimately, Dr. John Lantos warns, "It raises the factor of baby farms in developing countries."

Image: Meena Kadri (Flickr) 

A recent article in the New York Times profiled Randy Newsom, an enterprising young minor-league relief pitcher who came up with an innovative scheme to supplement his low income (about $8,000 for five months) as a bush leaguer: Twenty bucks would get you one of 2500 shares worth 0.002% of his career earnings. Newsom had sold 1800 shares before the SEC shut down his website in January. (Newsom had shortsightedly failed to register his website offering with the SEC.) After refunding the money he raised to his investors, Newsom plans to reintroduce the venture in accordance with regulations.

Such an investment--motivated as much by fandom as finance--is an extreme longshot to pay off (with $2 million in career earnings as the break-even point--and 90% of minor leaguers never making it to the majors). As fellow minor-league pitcher Jon Searles, who earned an economics degree from Wharton, notes:

Don’t get me wrong — $50,000 can be everything to a player in the minor leagues. But the risk of them committing 5 percent in perpetuity for a quick $50,000, there’s a break-even point where only players who aren’t characterized as prospects might do it. And rational investors will assess those percentages.

Although Newsom was forced to shut down his operation, I wondered whether this minor league entrepreneur might have unwittingly come up with the solution to the rapidly rising cost of a college education. Next fall, my oldest daughter will be entering college. Given the elite liberal-arts colleges to which she has applied, we anticipate that--without financial aid--the cost of her four years at college will be in the range of $180 to $200 thousand. And we have three other kids!

So, tongue planted firmly in cheek, here's the deal: If my daughter sells shares of her future earnings for a fair price (say, $90 for 0.005%), she could easily raise enough funds to make college much more affordable.

Click to read more ...

China's economy just shrank 40%, according to the World Bank. India's did the same.

It's not a catastrophic pan-Asian depression, however. The Bank has recalculated the size of the world's economies based on new and evidently more accurate estimate of the effects of purchasing power, or how much people can actually buy. (Measured by exchange rates, economies in the developing world are typically much smaller, sometimes by a factor of three.)

By the older method, the world looked like this in 2005. China is rapidly closing in on the US, with the rest of the world relegated to secondary orbits around the two giants:

This is how the world looked in 2005 using the new methodology, after the Chinese economy has "lost" about $3.4 trillion (nearly the size of Japan, the world's third-largest economy), and India has been shorn of $1.4 trillion (the whole Brazilian economy):

The US is far more dominant, and Japan and Germany remain near-rivals to China in the size of their economies.

We can take two preliminary conclusions from this:

• The day when China will surpass the United States in economic power -- and the things that flow from it, such as military might -- may just have been pushed back by some years.
• It always pays to remember that models are not reality. They may help to explain it, but are often more about a way of seeing the world than about hard facts.

(Graphics generated with IBM's Many Eyes)

Image: BeketChai (Flickr)Social Technologies' Josh Calder spoke recently to Elisabeth Braw, a reporter for the Swedish newspaper Sydsvenskan, about poll results that revealed that more Americans feel their society is divided by class.

"Increasingly, more are feeling they are on the losing end of that divide," Calder notes.

He told Braw:

"The American mentality is that everybody is middle class and you lift yourself up through hard work, so these results are striking ... The division into 'haves' and 'have-nots' is a psychological phenomenon, but sometimes the loss they are feeling is very real, by the standard of a modern society."

Read the entire article (if you can read Swedish).

© 2007 Jupiterimages CorporationThe US media turned its glare this week on the normally unexciting Social Security office in Washington, where Kathleen Casey-Kirschling was signing up for retirement benefits. Casey-Kirschling is, as far as anyone knows, the first US baby boomer, thanks to her birth a few seconds after midnight on January 1, 1946--and, as the nation’s reporters gloomily predicted, potentially one of the last beneficiaries of a golden age of American retirement.

Casey-Kirschling’s own comment--“I’m thrilled to think that after all these years, I’m getting paid back the money I put in”--may never be echoed by younger members of her own generation, let alone by Generation X-ers or Millennials. Eighty million retiring boomers might drive both Medicare and Social Security into debt well before 2020. Meanwhile, most American companies have stopped the defined-benefit pension plans that provided safety nets for earlier generations of retirees.

But is the future really so grim? In one of a three-brief series about boomer retirement published by our Global Lifestyles multiclient project (GL-2006-6: Boomers in Retirement—A Financial Forecast), we reported that boomers are actually about 50% better off today, in absolute terms, than their parents were at the same ages, by the yardstick of assets and income. And when incomes are adjusted to account for the smaller average size of boomer households, they are 65% better off.

However, as boomers age we found that they are likely to diverge into three distinct tiers: about 20% who will be very well off in retirement (including a segment who will be very, very well off: the top 1% of boomers hold more wealth than the bottom 80%); a middle tier of about 50% of boomers who will muddle through on savings, retirement accounts, and home equity; and a vulnerable 25% or so who face seniorhood with few assets--and more exposure to the vagaries of Social Security that Casey-Kirschling has so neatly sidestepped. Many in this last group could see declines in their standard of living once they stop working.

Which is exactly why so many boomers intend to continue working--76%, according to a Merrill Lynch survey. The business implications of this surge in older workers are fascinating, as we detail in another brief (GL-2006-19: Boomers in Retirement—A Lifestyle Forecast). For one thing, older boomer workers are much more likely than average workers to become entrepreneurs or temporary employees. Many companies could find themselves with two large, divergent groups of employees: senior boomers and 20-something millennials, potentially with little in common.

In short, boomers look set to reshape the US workforce yet once more before they exit the national stage. Now if they could only do the same for healthcare….

The sudden collapse of the I-35W bridge in Minneapolis, together with the explosion of a steam pipe on Lexington Ave. in New York City, have brought the important issue of America’s aging infrastructure to the forefront of public discourse.

Diversey (Flickr)In TF-2007-35: Lights! Water! Motion! (a brief from our Technology Foresight multiclient project), the authors project that necessary upgrades to world urban infrastructure by 2050 will total over $40 trillion, with the U.S. and Canada accounting for $6.5 trillion of that total. These numbers cover road and rail, power grids, water distribution, air travel and sea travel, so the cost of upgrading just one of these sectors would be manageable—which is exactly the problem.

Kamal H. (Flickr)The immediate reaction to the Minneapolis bridge collapse will likely be legislation aimed at improving this single component of infrastructure. These costs would be manageable and politically feasible. However, infrastructure is tightly intertwined—great bridges aren't much use if roads are deteriorating, or if the bridges lead to cities where underground pipes are bursting. The broader infrastructure debate will require more holistic planning, including international cooperation. Even if the US develops the most advanced air travel system in the world, the recent airline crash on a Brazilian runway highlights the need for global repairs and upgrades.

Infrastructure is not as exciting as war, terrorism, or even hedge fund loopholes, but it is truly the backbone of a tightly-integrated, just-in-time global trade system—and signficant breaks in the supply chain due to infrastructure failures could have worldwide repercussions.

Two of the top 20 trends impacting global consumer lifestyles are time pressure and spreading consumerism (i.e., buying consumer products is becoming central to the life priorities and personal identities of more people). We've also noted that these trends are mutually reinforcing. A recent report in Science by Princeton Nobel Laureate Daniel Kahneman and coworkers, “Would You Be Happier If You Were Richer? A Focusing Illusion,” sheds light on both of these trends.

The authors cite various measures of moment-by-moment happiness of people in a variety of life circumstances. They conclude that “the belief that high income is associated with good mood is widespread but mostly illusory.” Higher income does impact a different measure – namely individuals’ overall assessment of life satisfaction – although the correlation is weaker than many people predict.

The authors point out that material goods provide little joy for most people, and we adapt to their presence over time. Thus consumerism, though a very real trend, may not offer the payout in life satisfaction that many people expect. But subjective well-being is a function of how we spend our time. Ironically, individuals with higher incomes spend more time on activities like work and commuting that are associated with slightly higher tension and stress but not with greater moment-by-moment happiness.

Both trends have created at least some backlash in World 1 (the developed world), often combining the two concepts. Reactions against time pressure, such as the slow food movement, are based both on the perception that spending time on meals as social and creative activities is inherently pleasurable. Consumerism falls under suspicion both for its negative environmental impact and its supposed corrosive effect on society and quality of life. Kahneman and his colleagues suggest that such concerns could combine with much more fundamental doubts, with significant consequences for World 1 economies.