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The scenarios for 2030.

The scenarios for 2030.

We present the scenarios, in as brief a form as is possible. They are set in mutual contrast here. This text assumes a familiarity with the concepts which have been published in the working papers that led up to this point, but should be straightforward to read without this briefing. You may, however, wish to read the introduction, which gives some of the deeper structure that underpins this analysis. You can find this introduction here.

Carrying the Torch.

Carrying the Torch.

Economic imbalances in the US have been carried for well over a decade and room for manoeuvre has been greatly reduced. Internal and external deficits, consumer debt and weak stock market performance serve to damp confidence.

Corporate profitability is strained in the US, and receipts from overseas operations are also reduced in the general cyclical slow down. Oil prices remain high. The adventure in Iraq has led to ever greater difficulties and actions elsewhere are at best inconclusive. The US population are not at ease with themselves, and the end of the Bush administration leaves a vacuum.

Europe, too, realises that it has lost its momentum. There is a general sense of stock taking, and of the baby boom generation handing on the torch to new hands. There is also a widespread belief that this is a quiet before the storm, and policy makers and the general public begin to take the message that a major realignment of effort is needed in order to cope in a changing world. A number of environmental and public health issues make it clear that laissez faire will not do.

The machinery by which the new consensus is arrived at is complex and multi-facetted. Capital markets and corporate analysts and regulators drive for the new, more ambiguous style of management that handles complexity and delivers innovation, forward-looking regulatory compliance and customer integration. Vastly complex networks of interaction develop around centres of expertise, and along physical and social supply chains. A nucleus of major economies take a joint, expert and pragmatic stance in respect of a number of areas of concern, setting out to avoid future problems through timely interventions. Expenditure of research - and particularly in the social sciences, which may hold the key to many of these issues - is increased to much above historical rates. There is much emphasis on developing and maintaining human resources, notably in a world in which demographics work against the large economies. A "cradle to grave" approach to optimising individual potential becomes central to many states.

This is a gradual process. It builds out from a core of nations and social groups. By 2020, however, an ethos of self-help and self-betterment, of graceful emulation and of agile awareness of what is happening elsewhere is commonplace. This extends from nations to individuals, from commercial organisations to customer groups and activists.

By 2030, the nations of the world spread themselves out along a continuum. At one end, nations, firms and individuals are caught up in an approach which is provably successful in delivering economic prosperity, social balance and sustainability. At the other, nations and social groups are not prepared or able to adapt themselves to this regime. They may reject modernity altogether, or they may be unable to make the leap to the extremely expert and complex forms of operation that have caught on in the advanced nations.

Nations and organisations which have adopted the governing style are caught up in what seems an unambiguous current flowing into the future. Not only does there seem to be no alternative, one can prove that there is no alternative. Social science has come of age: government and the economy, commerce and social policy are all tractable to analysis and policy fine tuning. The state is directive, for if there is a demonstrable "best way", then why follow any other path? The state sees itself as an investor on behalf of the society, and its role is to maximise the flow of knowledge and capability, the ability to manage complexity through institutions and information. This is a world inundated with insight, and there is scant privacy in it. Performance is scrutinised at all manner of levels, in individuals, firms, the state itself and lessons drawn. Reputation is extremely important, and at least one component of this records achievement through the timely adoption of best practice.

The international arena is characterised by a dominant group of major countries which work actively to enlarge their number. That is, they coach and otherwise bring on board nations which are able to play by their rules. Within this community, considerable effort is made to avoid surprises, to analyse and solve problems and to act foresightedly. Research is funded jointly into appropriate solutions to the energy needs of the poor nations, for example, but any such program is developed in concert with the institutional and related structures which will make the implementation of such solutions feasible. An element of central planning, and indeed of more or less gentle inducement on companies to fit in with such plans, is used to avoid foreseeable crises. Companies use state institutions as tools, and the state sees no problem in returning the favour. Increasingly, however, this is done as a hegemony of the influential rather than as a nation-by-nation activity.

The Age of Anxiety.

The Age of Anxiety.

The model of success that dominated the previous case does not properly emerge. In part, this is because people are not prepared to accept that the answers that it offers are the whole story. The rejectionists and obfuscators are deeply embedded in the old rich nations, and firmly in control elsewhere in the world. In part, too, it is because the very unstable economic conditions that dominated the early part of the period led to painful consequences for many. Debt took a long time to 'sweat' out of the western economies, and asset price inflation meant that savings were chronically devalued.

One fundamental factor in this is the mismanagement of the emergence of China. After a flying start and a general welcome, this begins to be seen as the source of intolerable impact - once again, we must read "China" as a short hand for the high growth regions of all of the successfully industrialising nations. Low-skill jobs continue to be lost in the wealthy world, and wages are not sustainable. This has intense regional consequences, and both the left and populist right call for protectionist measures.

There are, however, some specifically Chinese issues of which to be aware. An element of triumphalism emerges amongst Chinese companies overseas, and in official statements. Occasional sharp recessions in China caused ripple effects in financial markets, in neighbouring economies and in the energy market - at one stage bringing the Russian economy into major recession. Despite diplomatic urgings, however, China refuses to moderate its growth plans or lessen its exposure to such instabilities. China also behaves aggressively in its foreign policy, attempting to redress its internal dissent during instabilities and general rural disturbances by taking a hostile stance to Japan, Taiwan and - ultimately and in reciprocity to much provocation from American politicians - to the US itself. Its behaviour towards a prostrate Russia in respect of Siberian gas fields is also a cause for concern.

The narrative that Western politicians tell themselves about China begins to shift. From being a source of cheap and high quality goods, it becomes a menace to the social order, to international stability. People begin to talk of 'disciplining China'. The erection of barriers and other constraints to trade, against China in particular and its peers in general, is seen as increasingly mandated by the need for social tranquility.

The consequence of all of this is that the international environment rapidly becomes one that is not at all conducive to collaboration. There are many barriers to trade, to mobility and to the free transmission of ideas and cultural artifacts. Few active measures are put in place to manage foreseeable crises and the world undergoes financial, energy-related and health accidents with increasing frequency. Grand institutional responses - such as the UN agencies of the previous century - lack enough fundamental common ground to be effective, and are more a ritual than a meaningful response. They do, however, generate enough oversight and information to increase anxiety amongst the thoughtful, and they have a fine role in managing the many brush fire conflicts which characterise the times.

There are, in fact, four approaches in play. Only one of these sees the world in terms of analysis, optimisation, economic growth and maximising human potential. The other three see this is robotic and repulsive, or at any rate unrealistic and unattainable for them.

The demographically-hampered elements of the formerly rich powers have hunkered down behind tariff barriers, often disguised under humanitarian or environmental flags of convenience. Disturbing technologies are either tightly regulated or banned altogether, although there is a hearty appetite for anti-geriatric treatments. They cordially hope that the rest of the world will go away and leave them in peace. Most live lives of sheltered tranquility, but standards are slipping, an underclass has been unemployed for four generations and the cries from beyond the park gates are getting louder and louder. This does not sit well with aging populations which are paying for their former lack of saving by mortgaging the future.

A number of states have become firmly rejectionist. Just as the West has seen China as a problem they see everyone else, the West included, as the source of their difficulties. Those with oil manage their interface with care, and arm themselves behind it. Those without resources sink into internal conflict or economic stasis.

Finally, there are the poor nations. They are blocked from participation by trade barriers and the vast obstacle of the industrial countries, including China. There is no real appetite amongst the wealthy nations to intervene in their affairs in a concerted manner, and they are unable to raise capital or manage their affairs as matters stand. There are many flavours of blame flying around, and many of these stick, mutate and are passed on once again. One must recall that virtually every person on Earth will have constant access to telephonics by 2030, and the services that these provide will be vastly more competent than anything imagined today.

The acute phase of this is ended by 2020, not least as China's own demographic issues become acute, and as the European rejectionists powers see the impracticality of their ways. Whilst the path does not lead to the certainties of Carrying the Torch, it certainly does point to a more collaborative future.

The scenarios compared.

The scenarios compared.

The figure shows exemplary - and not definitive! - economic growth lines for the world under the two scenarios. The short run for Age of Anxiety has some features in common withthe 1960s. Carrying the Torch reveals a much smoother pattern of evolution, initially underperforming and then picking up to high rates.

The consequence of these growth rates is shown in the following figure, which contrasts two constant money evolution patterns for global GNP.

  The Age of Anxiety Carrying the Torch
Growth to 2020 Rapid - world product averages 5% growth - but broken with repeated checks and crises, which become increasingly systematic in their affects. Trade barriers begin to slow growth to 4% after 2012. Slower than the recent past, averaging 3.5% globally, but with the developed nations performing much below average.
Growth after 2020 Significantly slower than 1980-2005, perhaps averaging 3% but with some areas in deep recession. Picking up after 2025 as some of the problems are addressed. Picking up towards a global rate of 6% per annum by 2030, with many of the industrialising nations achieving up to 10%.
International ethos before 2015 Aggressive competition, pursuit of national self interest, expectation of and fact of energy and economic shocks. Extended supply chains are increasing perceived as vulnerable. Increased tendency to blame others for internal problems. General sense of deflation, of 'What next?' but with quiet and sustained growth in many industrialising nations. Disconcerting pointers to health and environmental issues; general awareness of changing economic and political ground rules.
International ethos after 2015 National sentiment aggregated into blocks of like minded nations; with many trade and other barriers within such blocks and major ones between them. Concerted attempt by a nucleus of nations to build the institutions and technologies of intervention that will allow something approaching sustainable development.
Energy environment High prices and supply uncertainty lead to investment in conservation and alternative energies; but this is episodic, often nationally idiosyncratic and not often cost effective. Emission abatement is not a universal priority, and technologies do not develop well. Supply scarcities become acute in the later period of high growth, but this has been anticipated both by investment in conventional energy sources and the development energy effective technologies and of cost effective alternatives. There is a drive from international standards to which manufacturers must aspire, and mechanisms to encourage investment in the poor nations.
Life in the rich nations Something of a siege mentality develops as the period matures, for many avenues appear to be blocked and the outside world is presented as both bleak and hostile. National differences are emphasised over similarities, and the portability of solutions to common problems are blocked by appeal to national "models". Whilst locally normative, the overall picture is very heterogeneous. The application of "best practice" should generate similarity, but in fact enables - indeed, forces - differentiation. Regions, individuals, firms, cities all play to their strength and the dynamics of competition enforce differentiation. Underlying this, however, are clear-cut policy structures which virtually dictate the proven way of operating (or living a life) within any one of these. People who seek support form the state - in education, adversity, health care - find themselves under firm management.
Recipes for commercial success The world economy is full of niches. Nations are separated by trade barriers, customers define themselves in ethnically or nationally distinctive ways, labour forces and supply chains are much segregated from each other. Firms which are able to negotiate this maze - and retain permission to operate - are extremely profitable. Capital markets are global only with great constraint, and the ability to manage volatility and risk are at a premium. Nothing survives for long in the corrosive world in which billions of capable minds can access any information or scrutinise any investor at will. The explosive advance of integration, and the flood of knowledge and technology enable very rapid innovation, however, and firms which avoid commodity rates of return are those which innovate just ahead of the flow. The premium is on awareness, internal and external communication and information flows, making use of the global infrastructure through which any idea can quickly be executed.
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