!VAR HAGENDOORN

US Global Trends 2025 Report: A Comment

Last week the U.S. National Intelligence Council, a government body aimed at fostering long-term strategic thinking, published its most recent report, Global Trends 2025 (or large file). The Global Trends reports are published every four or five years to coincide with the inauguration of a new U.S. administration. This is the fourth of its kind. The previous reports are also available online so you can see how far-off the outlook for 2010 and 2015 looks today. The reports are based in part on consultations with academics and non-governmental experts around the world.

The current 2025 report foresees the emergence of a multipolar world in which power will shift from West to East. The U.S. will remain the most powerful country but it will become less dominant. Economic growth, population growth, climate change and various environmental challenges will put increasing pressure on water, food and energy sources. Sub-Saharan Africa will remain the region most vulnerable to economic disruption, population stresses, civil conflict, and political instability. Latin-America, while politically stable, will continue to lag behind Asia in terms of economic growth. The appeal of al-Qaeda will wane and the threat of global terrorism will decrease, but regional conflicts will become likely in what the authors term a “great arc of instability stretching from Sub-Saharan Africa through North Africa, into the Middle East, the Balkans, the Caucasus, and South and Central Asia, and parts of Southeast Asia”.

Scenario analysis was one of my favourite subtopics when I studied econometrics, because it involved more than just doing a regression. It is also key to some of my current work and interests about which I will have more to say later.

It is easy to dismiss outlooks such as these as mere science fiction. However, large scale projects such as airports, power plants, the Three Gorges Dam and the Chunnel connecting Britain and France require long term planning and take many years to complete. Anyone planning to build a skyscraper needs to have a vision of what the world will look like not just in five years time, when it will be completed, but also in 10 or 20 years time.

I don’t have time to read the entire document. I only browsed through it, reading a few sections here and looking at a few graphs there.

To add a word of criticism to the Global Trends 2025 report, it primarily extrapolates from the present and does not include any unlikely discontinuities and all current trends are taken for granted. For example, it is assumed that economic growth in the BRIC countries will continue apace. But while this may be likely I would like to argue that it is by no means certain. An environmental catastrophe may severely imperil Chinese growth and demographic imbalances may jeapordize social stability and economic growth in both China and India. China faces an aging population and both China and India have a skewed population because of people's preference for male children and the abortion of unborn girls. India also continues to face friction between its Hindu and Muslim population. I would therefore have included a scenario in which the consequences of these conditions are thought through.

Even so, the report provides for grim reading if you look at, for instance, water scarcity, a serious problem as diagnosed by various authors. This is also why I am sceptical about development projects in Las Vegas and Phoenix, two of the fastest growing cities in the U.S. of the past few years, in two of the most environmentally challenged states in terms of water resources. Apparently not all investors take a long view. I would also hope that oil producing countries in the Middle-East invest in alternative energy so as to decrease domestic consumption, but I’m afraid that is wishful thinking. So here’s my own outlook: the next report will be even grimmer.

Links

Shell Energy Scenarios to 2050. Royal Dutch Shell is one of the few companies that for a long time has had a long-term scenario planning unit.

Dreaming with BRICs: The Path to 2050. A report by Goldman Sachs.

The end of the growth era by physicists Anders Johansen and Didier Sornette uses timeseries analysis to predict a singularity (=breakdown) at or around 2050 (+/- 10 years). Technical version