CBRE exec: Globalization is changing the economic rules

Richard Barkham, global chief economist/head of Americas research at CBRE, is scheduled to speak at the opening day of the International Hospitality Investment Forum in March, presented by Questex, parent company of Hotel Management magazine.

In the session entitled,  “2020 Vision: Hospitality Investment Outlook on 2030," industry analysts will highlight the major trends that will affect hospitality investment, profitability and performance in the future, touching on hospitality concepts, deal structures, ESG (environmental, social and governance) issues and demographics.

Barkham is a specialist in macro- and real estate economics who joined CBRE in 2014 as executive director and global chief economist. He has extensive consulting experience and is a visiting professor in the department of construction and project management at the Bartlett School, University College London. He holds a Ph.D. in economics from the University of Reading where he taught in the departments of economics and land management between 1987 and 1998.

Ahead of the conference, Barkham discussed globalization, migration and other factors affecting business trends.

How is globalization impacting the traditional rules of economics?

The main impact is on inflation. Low unemployment, as we have now, used to generate rising inflation. Globalization has weakened that relationship, because the vast labor resources of the emerging markets (Central Europe, China, Southeast Asia) have been brought into play. 

Migration also has been a factor, with labor flowing to the developed economies. There have been many benefits: cheaper goods for consumers, lower interest rates and lower mortgage rates and more opportunities for skilled workers. However, there have been problems, particularly in the advanced economies, where low-skilled workers have not seen material wage rises. This has fueled political discontent, now reflected in the trade war between the U.S. and China, and Brexit, which is undermining global growth. 

But we should be clear, globalization is not the only force for change at the moment. Demographics and technology also are key megatrends.

There appears a divide between activity in relation to the global economy with consumers and households generally upbeat and continuing to spend but caution among businesses. Why do you think this is?

The decline in business confidence is a direct result of the trade war and Brexit. No one really knows how these will turn out, and because of that businesses are reluctant to invest. On the other hand, this slow-but-steady economic expansion has created a lot of jobs and house-prices gains, which consumers like. Moreover, in the most recent economic slowdown, central banks—the Fed in particular—have reacted quickly to cut rates, because inflation is very low. Consumers like this as well.

Commentators cite the lack of wage growth among Western workers as one of the reasons for the rise of populism. What are your thoughts and views on this political unrest as we go into 2020?

I think that is partially correct, but we also are reaping the consequences of poor political leadership. Migration is almost entirely beneficial and has been, for instance, the “secret weapon” of the U.S. economy for many decades. Migrants are, in general, highly skilled and entrepreneurial and this is to the benefit of host economies. 

However, politicians in Europe, particularly the U.K., have not made the case for migration, nor have they ensured that public services, including housing, have been expanded to cope with higher population. Migration has occurred “under the radar” and that—at a time of broader economic and technological change—has created a backlash.

The decline of productivity is an increasing issue. What measures can be taken to improve productivity among workers?

Education, particularly intermediate education and IT-related education needs to be improved in Europe; however, low levels of productivity also are the result of weak demand. There has been way too much austerity in the wake of the financial crisis, particularly in the U.K. and Europe. The German influence on the fiscal policy of the Euro Area is highly problematic. Governments need to spend much more on infrastructure. The German emphasis on balanced budgets is holding Europe back.

You’re Santa. What Christmas present would you buy Donald Trump and the next Prime Minister of the United Kingdom? (We’ll stretch the fantasy budget to a gift each.)

I’d get both a copy of Adam Smith’s Wealth of Nations with yellow stickers on the pages covering trade.

Finally, with the exponential advancements in digital connectivity, why is there still an importance to gather together, face to face, at conferences and events?

First, business is about relationships. Second, face-to-face contact is still the best way of communicating new ideas.

Barkham will speak on the opening day of the International Hospitality Investment Forum, which runs from March 2-4 at the InterContinental Berlin. Visit IHIF.com for more information and to register.