Thursday, May 16, 2013

Megashift: Mapping Future Scenarios

About a year ago I started to write a blog on the shape of the future. Some of my blogs I let sit to mature so leaving it a year isn't unusual. Anyway I had started to think of future scenarios as being constructed around three enormous tectonic plates that were colliding and pulling apart along the fault lines of technologies. 

But across the year this now doesn't seem nuanced enough. It is nevertheless, I think, a good place to start a discussion. So I will start with the tectonic plates concept and then move to the matrix concept.

The Tectonic Plates of Scenario Building

We are seeming facing an interesting future with three continental plates in our global landscape on the move.

1. Economic geography
2. Social economic equality (in advanced economies)
3. The state of the environment and natural resource use.

The fault lines for these plates are created by technology.

The fault lines between these three plates is technology. Just as in global geography tectonic plates push against each other along the fault lines and where plates are pushed apart or sucked under. So in our social world technology is playing a similar role.

What amazes me is the lack of ability of commentators and journalists to link only two of these at a time.
So there will be amazing stories of growth and change particularly in India and China aided by technology - which if extrapolated will mean that they have such and such an economy in 20 years. The problem is the world doesn't work this way. Everything is linked and always has been.

The Roman Empire grew on the back of resource expansion, the British Empire grew on the back of resource access / cheap resources. However, today we don't have cheap resources anymore. China and India will have to grow while resource costs rise. Their growth will indeed be the main driver of those resource prices. So is growth even possible in conventional terms in this model?

This is megashift and this is the challenge before us.

Economic Geography

Development studies of the late 1980s were unanimous that up to that point there had probably only been one country to transition up the development ladder and that was Japan. Today, a number of countries are dramatically improving their standard of living. More importantly if we look at cities rather than nation states we see even bigger changes.

Korea and Taiwan improved first but now parts of Brazil, Russia, India, China and South Africa are doing much better as well. Watch any of Hans Rosling's talks on TED for more illumination. This in many ways is a great thing. Too many people for too long have lived in great poverty and moving towards a world where more people can live better lives is to be welcomed. One of the leading drivers of such change is the geographic split in production that has been enabled by current technological trajectories.

So reducing global poverty - doing better than ever before.

But with that comes costs like the tragic building collapse recently in Bangladesh, poor pay and conditions for the workers and increasingly poorer quality clothing in the OECD countries.

Large Scale Growing Inequality in 'Wealthy' Countries

So wealth is being distributed downward to the very poor, but is wealth becoming more equal - no.

There have been any number of reports over recent years on the growing inequality in advanced economies. While the poor and the middle class tread water the rich have been getting richer - fast. The Conference Board of Canada 2011, the OECD (Divided We Stand 2011) and other organisations have all reported in the last few years on this issue. It Matters because the more uneven a society the greater the likelihood there is for the bonds of societal cohesion to breakdown. Note that the rich can also evade taxes in a phenomenal way.

In an article last year Hay and Muller  (2012) ‘That Tiny, Stratospheric Apex That Owns Most of the World’ – Exploring Geographies of the Super-Rich' Geographical Research 50(1):75–88, had this to say.

Capgemini and Merrill Lynch (2010) identify two wealthy groups. The first, who currently number 10.9 million globally are described as High Net Worth Individuals (HNWI). These people hold financial assets in excess of $1 million. This figure includes the book value amounts of private equity holdings, as well as publicly quoted equities, bonds, funds, and cash deposits. It excludes primary residences, collectibles, consumer durables and consumables. In 2010, HNWI wealth totalled $42.7 trillion (compared with World Gross Domestic Product in 2009 of $58.26 trillion [World Bank, 2011]).
So 10.9 million people hold assets [note that is not income in any year] that is equal to 72.8 per cent of the planet's gross income in a single year.   

Long term social / economic inequity is not good for economies or the people themselves.

Natural Resources and Ecological Services 

Because we still do national accounts in a way that only poorly represents the natural wealth of nations it is very challenging to discuss the situation globally for the environment. But let us just say here that massive economic growth as is being driven in China and India particularly is simply not sustainable under current conditions. That is not t say development is impossible but development is a pressure on resource use and global innovation adoption that is very different to rapid development. I hope to explore more this topic in an upcoming blog series on Marco-Innov-nomics.

A recent Economist article notes that we are just about to pass the 400ppm (parts per million) Co2 level. In 1958 the reading at the key observatory at Mauna Loa was only 315ppm. That is a rise of a third in atmospheric carbon in 55 years.

A Matrix approaches to scenarios

The issues analysis depicted above while true does not capture the complexity or the dynamic interactions.

In the diagram below I have three categories; trajectories (such as existing economic development pathways), technologies and economic consequences.

Now, for each of these categories what I have listed are only a sample. All three categories can interact in unpredictable ways.

For example, continued development in China will increase the demand for energy, raising the price. That can lead to a general economic stagnation for everyone because as soon as growth starts the price goes up.  It can drive innovation as we have seen for new ways of exploiting existing resources (fracking natural gas), but this then as negative consequences for climate change which may then start to genuinely effect economies - with less predicable weather and crop failure / water resource issues - which may slow fracking because it needs water. Lastly it can and will induce greater uptake of alternate energy innovations.

Although I scan the scenario and foresight literature, I only recently came across an article which comes close to taking this rather complicated view of foresighting, although I don't think the article develops the idea  far enough. Yanuar Nugroho and Ozcan Saritas (2009) 'Incorporating network perspectives in
foresight: a methodological proposal' Foresight VOL. 11 NO. 6 2009, pp. 21-41 

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