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Scenario 2025 Broken Edge

Scenario 2025 Broken Edge

The century began with a series of bad frights, but the enforced rebalancing of the stock markets in the industrial world was, essentially, completed by 2005. Issues of terrorism had faded into the background after the resolution of at least some of tensions in the Middle East, a firm global hand from the US and its partners, and an effective international clampdown on suspect sources of finance. Agricultural commodity prices improved as subsidised food exports from the wealthy world were reduced, and a gradual pattern of lowered tariffs present good prospects for the economies of the middle income nations.

Japan, too, was seen to be taking strategic steps to reform. The effective insolvency of its banks had been taken in hand, and lending to business had begun once more to flow. Japanese interest rates returned to meaningful rates of return, the Yen strengthened and huge volumes of Japanese savings were repatriated.

European interests, alarmed by the halving of German asset values and by the weakness of and evident rigidities around the Euro, by the implications of enlargement and the facts of demographics, had begun an equally painful process of public re-evaluation of the overall project. Important sources of misdirection and sclerosis had, therefore, begun to be taken out of the world system. In addition, however, these processes had four important outcomes.

Confidence - in the future, in governance, in global security - had been somewhat restored. The United States and its NAFTA partners found themselves in a fine environment. The enormous investment in information technology of the previous century was open to exploitation at low cost. Upward pressure on the dollar remained a powerful force, but improved conditions in the rest of the industrial world somewhat relieved this, as did a booming home market. The ocean of technical capability that decades of investment in science and technology had already created was supplemented by an endless flow of astounding breakthroughs.

US dominance in the security environment was essentially assured by its successes in what was once called the war on terrorism. With exceptional instances of dissent, the other industrial powers fell into line with procedures which they saw to be in their best interests. A consensus was developed around the management of areas of strategic importance, such as the resource-rich regions. There was broad agreement around the techniques, legal basis, agency and funding of interventions both here and in the chaotic regions of the world. A set of criteria were developed, covering the priority of such an intervention and the ability of the industrial powers to deliver a timely improvement in the situation. Interventions were increasingly planned, based on such criteria, rather than undertaken in response to crisis and media pressure. In particular, international companies were increasingly required to act as arms of the state in this respect, reporting intelligence and making (often subsidised) dispositions that assisted in stabilisation plans. Thus the choice of location for a plant might be expected to take into account the need to stabilise - provide income and employment - in a region. Not all firms accepted these strictures, but pressure on US-domiciled companies was intense, and many found themselves carrying both a burden and walking with a powerful friend. Non-US companies found themselves at a loss in access to intelligence - to name but one area - and so had to balance independence of action against the advantages of compliance.

The effective hegemony that developed over the first ten years of the century had the ability to damp virtually any sources of conflict that threatened the world's equanimity. A series of international agreements were developed under the auspices of the WTO that greatly reduced impediments to trade. Each of these were based on the view that economic growth was ultimately good for all, and that impediments to this - to trade, to the free flow of capital, to information flows and to access to knowledge - were all matters to be set aside. Gestures were made in this legislation to environmental issues, to impact management in poor nations and to workers' rights, but the speed of events made these issues hard to implement fully, and the entangled nature of state and commerce led to many special cases being developed where extralegal issues were paramount. The upshot of this was, however, that industries which were open to international integration - such as everything from vehicle manufacture to broadcast entertainment - therefore underwent swift consolidation, often doing so around US corporate frameworks.

The situation in the 2008-2010 period, during the second business cycle into the new millennium was, therefore, a strikingly positive one. Economic growth was reaching levels seen only in the post W.W.II glory days. True, there were more or less acute issues of demographics in some nations, but technology was enabling people to work from their homes, and markets were supporting the assets needed for old age. Extremely tight IT-based systems of guest-worker management permitted the flow of many low-wage earners to come into the industrial world from elsewhere in the world. Economic growth was providing the taxes needed for a vast range of public works, including care of the elderly. Health technologies promised to at least manage the leading ailments of old age.

This period of "fast forward" had, however, concealed some profound problems which the pragmatic, fragmented world of 2010 was poorly suited to handle. National statistics for important regions were, in effect, as poor in 2010 as they were in 1998, when the Asian collapse showed nations to owe up to ten times as much as had been thought.

In the rich world, political institutions had changed little in several generation, and the sheer complexity and the modern environment made effective decision-taking a matter of compromise and opportunistic horse-trading, usually amongst the articulate. Capital markets continued to pursue their zero-sum game with the same avidity as before, but with sharper tools and shinier teeth. Business managers were pressed ever-harder for results, and having to perform in a world where life cycles were shorter, and where the difference between the best and the inadequate was next to marginal.

Corporate governance was typically weak in the international environment, despite sweeping US-based regulation after the scandals of the millennium's end. Much multinational business activity was anyway effectively conducted "offshore" to the highly regulated regions. The mix of interests forced on the international companies by the war on terror provided further instances where misdirection, hidden income flows and false accounting developed unchecked.

These objective problems were, however, as nothing to the social issues which had been building up, partly in the industrial world but chiefly beyond it. Periods of prosperity may provide the platform from which discontent finds a voice. Stringency, by contrast, focuses minds on essentials. Education and the media provide the means to articulate discontent. In the wealthy world, and elderly traditionalist group find fast change and technological wizardry increasingly alienating. All low-skill jobs that can be taken by low-wage immigrants or exported to low-wage areas are now inaccessible to the poorly educated, and a further cadre feel aliens in their own societies. "World" cities had achieved populations which were now of predominantly foreign extraction - as opposed to having a third to a half of their population made up of foreigners, as was the case at the turn of the millennium. Some citizens who relished pluralism and a cosmopolitan environment enjoyed this, but a significant voting majority felt that their country has been stolen from them. A potent thread of rejectionist politics developed in Western societies, taking erratic and unexpected action against paradigms of modernity. Commerce, and leaders who embrace the cutting edge, were frequent targets for more or less orderly interventions.

These issues were minor, however, when compared to what was happening in the world at large. An elite had been doing well, a middle class had been straining every sinew to keep up, but a significant fraction of those living even in countries which are doing well - and virtually everyone in the countries which had not accepted the world order - had been seeing their world becoming less understandable, less orderly and above all, less a place in which they felt at home.

Traditional institution rely on tacit rules, on trust and on reputation. These were being diluted or eroded by a fluid, urbanised society. Traditional sources of authority derive their power from consent, trust, unquestioned tacit rules, undisturbed continuity and from their ability to deliver. Don-client networks are a common form or traditional authority in almost all developing countries. These consist of nested pyramids, where one "cell" consists of a powerful figure - the don - and a layer of clients. Clients owe the don respect and obedience, and the don provides them with opportunities, a source of power in the event of conflict and a means of dispute resolution. Each person of power is a client in their own right in a higher pyramid, and they appeal up the structure in order to access the power that they need in order to help a client. Dons who are unable to do this are deserted, so they must never be seen to be weak or to back down. Such structures maintain many societies where national civil mechanisms cannot reach. They can be weakened when, for example, clients can see opportunities elsewhere, due to their improved education and general levels of wealth. Equally, they can fail when economic circumstances or new, more virile networks make the system unable to deliver advantage and retaliation to offence. In such circumstances, civil systems must take over or all order is lost.

Old informal structures are mitigated by long-term relationships, a certain noblesse oblige and by a mutual interest. The new raw systems that replace during rapid economic and political shifts are short-term, invariably exploitative and unilateral. As with Russia after the fall of communism, Mafia and corrupt elites crush the middle classes and exploit the society in ways which are identified less with the lack of institutions and good public governance than with the external forces of 'modernisation'. Rural systems of order are destroyed and replaced by urban exploiters, whose relationships with the unskilled, inarticulate people whom they control is merciless. The result is distress, bewilderment, the destruction of well-understood order and its replacement with mutual predation.

Proportion of people living in various regimes, 1900-2025. (non-linear scale.)

Around four billion people lived in such societies in 2000. Around 750 million lived in the industrial nations, with their impersonal and transparent institutions. Something over one billion lived in an equivalent environment. They did so either in nations which were in fact undergoing industrialisation, or else by living on conditions where they were were able to transcend local limitations through their elite status. The numbers in the former industrial nations remain static or declining, with many moving into a post-industrial "gradualist" state that has already been discussed, in which change is resented. By 2010, however, the rise of the global consuming classes was everywhere apparent. This group greatly outnumbered the wealthy people in the rich world. They may have lacked the national consolidation of the former elite - and they certainly lacked it individual purchasing power - but they nevertheless became a formidable force in the world.

By 2010, therefore, seven billion people lived in a very different world from that of 2000. The old, rich world remained extremely powerful but was becoming a degree arthritic. Its writ, its paradigm and its insights continued to set the agenda for much of the world. This said, its institutions were stretched by the ad hoc and pragmatic way in which complexity had been managed: entwined systems had been ignored and compromises stitched together to meet urgent needs. International agreements had been as much imposed as they had been negotiated.

The interests of the new consuming class had begun to shift away from the generic acquisition of possessions to issues of individual identity and individuation. In addition, the pursuit of local identity, of "roots" and ethnic identity had become strong, driven as much by brand differentiation amongst marketers as by the yearning for stability. States that were host to large numbers of these consumers found that issues of external and consumer debt, inflation and economic instability grew and, as a consequence, the 2010 period was marked by increasing numbers of bank collapses and currency crises in these emergent economies. As already indicated, state reporting of statistics remained dismal and few knew the scale of the problems that were building up. Behind this was, however, a growing political movement that resented the hegemonic dominance of the old industrial powers, and which was more than a little fearful of the forces - technical, social, industrial - which they had so casually unleashed.

Two billion people continued to live in absolute poverty, but half of them were now urbanised and consequently accessing more education and insight. Around three billion were seeing their traditional world turned upside down, and not usually to their advantage. They resented this bitterly and, as the European underclass turned more or less sequentially to religion, Luddism, socialism and totalitarianism during the nineteenth and early twentieth centuries for an explanation of the world and a relief from it, so deep currents of explanatory bitterness ran everywhere through the world during the 'teens of the century. Where the pace of change was seen to be excessive, so challenges were mounted to local governance, and many states fell to populist-rejectionist movements. As such separatism spread, so it found common cause and so , too, it discouraged the talent, capital and predictability which were necessary to cope with the alarming external world. Rising oil prices both permitted Arab separatism and created crises for the poor and indebted nations.

The scene was set for the reactive phase that has so marked subsequent history. The downturn in the business cycle in the industrial world served to trip many of the over-extended middle income states, each affected by high commodity and energy prices, internal demand and over-borrowing. Sprawling systems of outsourcing found themselves affected by this, such that industrial world companies experienced sharp problems. A stock market readjustment - overdue after the boom of the late 2000s - exposed significant corporate irregularities, and an estimated 15% of gross book value evaporated off world bourses in the course of two months. Confidence was heavily undermined and two years of drifting and economic misery affected the lives of billions of people. This proved the catalyst that had been needed to bring the many rejectionist movements into practical alignment.

The "war on terror" had been coupled with ten years of military and economic-diplomatic pressure on states that encouraged illegal trade or violence. This had made the phenomenon of terrorism chiefly a local phenomenon, in which only small organisations or those with little to lose tended to engage. Its orchestrated return came as a considerable surprise to most, and a confirmation of what they had always believed to many. The world was an unsafe place, the foreign was dangerous, it was best to bolt the door and be safe at home. Coupled to the now-apparent economic instability of the industrialising nations, the political prescription seemed inevitable: to pull supply chains back to 'safe' environments and, wherever possible, to rationalise global manufacturing activities. This, of course, worsened conditions in the industrialising countries. It confirmed many in the poor nations in the views that they might already have formed as to the capricious and selfish nature of the old, wealthy countries. The poor nations were, of course, hurt even more, yet oddly heartened by the palpable failure of the wealthy nations.

In the rich nations, many systems that had relied on continued economic expansion and buoyant markets - such as, in particular, the support of the elderly population - were now seen as unsustainable. A concerted howl arose from the dependent population, aimed at much the same targets as the criticism from abroad: at over-fast change, at modernism, to demonise individual fast-buck merchants and the like. As turbulence and violence became a feature of the poor and industrialising world, so the isolationist tendency - to slow down, to slow 'them' down, to keep them out - became a strong political voice. As this seemed a pragmatic move, and one which fitted with the commercial motives of the time, at least some major states moved in this direction. Trade weakened, agreements were not honoured, institutions were challenged and ignored.

A growing tide of lawlessness developed in the poorer, chaotic states. This has its impacts in the wealthy world in strangely indirect ways. Public health was allowed to slip in the poor nations and so disease control and disease reporting lapsed. Epidemics of novel viral diseases swept through crowded and poorly sanitised cities, and thence to the susceptible wealthy world. Dangerous and forbidden technologies - such as manipulation of human foetuses during pregnancy in order to alter the child's capabilities, or the use of xenotransplantation - quickly found homes in these nations, serving foreigners. Kits that allowed the choice of a child's gender during conception became cheaply available, having formerly been banned. The reason for this ban now became apparent, as four out of five births in wide regions of central Asia were male. More pertinently, perhaps, intellectual property rules were flouted and many knowledge products on which western companies relied for their existence were sold globally on networks. Environmental and human rights accords, laboriously enforced during the boom years, were swiftly dumped.

In effect, the world had gone at integration too fast and with too little concern for the systems, institutions and social habits which this needed. Angry groups now huddled behind their respective barriers, shouting insults and tossing rocks. Wiser voices began to council a new approach.

It has not been easy to deliver this, and it is far from clear how we are to progress from 2025. Technological potential is unsurpassed, and a huge cadre of capable people now exist. It is issues such as trust, continuity and reciprocity that are at a premium. The period of aggressive entry into other people's domestic problems is past us, yet we are at a loss how to tackle the managerial and institutional issues which harm billions in the aggressive, violent and rejectionist countries with which the world is peppered. Africa appears irredeemable, even after the abating of the HIV epidemic. Central Asia is a complex network of warlord-dominated enclaves, and the areas between the Mediterranean and India seem intractably withdrawn. China and India are holding together as political entities with the gravest difficulty. Coastal China, southern east Asia and Latin America are, in their very different ways, relatively bright spots nut none are of themselves the engine of growth that is needed to return vibrancy to the rather gray scene.

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