U.S. Intelligence Community Forecasts Digital-Driven Future
The digital technology revolution is transforming every single business and industry around the world. But, beyond that, it is having a transformational impact on economies and societies around the world, as we transition from the industrial society of the past couple of centuries to a new kind of information-based society.
What will our world look like over the next couple of decades? A new report by the National Intelligence Council, Global Trend 2030: Alternative Worlds provides a well constructed framework for reflecting on what the world might be like over the next 15 to 20 years. In particular, the report identifies the most important megatrends of our transforming world, all of them highly influenced one way or another by advances in digital technologies. It is critical for companies to understand the nature of these inevitable long term changes, avoid being left behind by faster moving competitors, and figure out how to leverage these changes to grow their business around the world.
The NIC is the center for mid- and long-term strategic thinking within the U.S. Intelligence Community. Every four years, it develops the Global Trends report to provide the White House and the intelligence community with a framework for long-range strategic policy assessment. Its latest report - Global Trend 2030: Alternative Worlds (GT2030) –was released this past December.
“This report is intended to stimulate thinking about the rapid and vast geopolitical changes characterizing the world today and possible global trajectories during the next 15 to 20 years,” it states in the Executive Summary. “As with the NIC’s previous Global trends reports, we do not seek to predict the future –which would be an impossible feat–but instead provide a framework for thinking about possible futures and their implications.”
GT2030 has identified four overarching megatrends that are expected to shape and transform the world over the next couple of decades: individual empowerment; the diffusion of power; demographic patterns; and the growing nexus among food, water, energy and climate change. These megatrends are pretty knowable. They are well underway today.
But, they could lead to radically different worlds depending on how they interact with what the report calls game-changers, each of which raises unanswerable questions about the very different directions the megatrends might follow. GT2030 explores in detail six such game-changers: a crisis-prone,volatile global economy; governments inability to adapt to a fast changing world; the potential for increased conflicts; wider regional instabilities; the impact of new technologies; and the future role of the United States.
For the final step, the GT2030 team worked with McKinsey to analyze the many alternative scenarios that can occur based on the complex interactions between the four megatrends and the six game-changers. They used McKinsey’s sophisticated Global Growth Model, to model these various scenarios, and picked the four most likely ones. They then developed a somewhat fictionalized vision and storyline for each of the four alternative worlds:
- stalled engines - globalization stalls and interstate conflicts increase;
- fusion - worldwide cooperation on a number of issues led by the US and China;
- gini-out-of-the-bottle: economic inequalities dominate, leading to increased social tensions and global conflicts; and
- nonstate world - nonstate actors collaborate to confront global challenges leading to a more stable and socially cohesive world.
I found the GT2030 report quite interesting. It does indeed provide a well constructed framework for reflecting on what the world might be like over the next 15 to 20 years. And in particular, it is a good framework for thinking about our continuing digital technology revolution and its transformational impact on economies and societies around the world. We are going through a period of major change, as we transition from the industrial society of the past couple of centuries to a new kind of information-based society. What will our world look like over the next couple of decades?
The impact of new technologies is one of the six game-changers, focused on the question: “Will technological breakthroughs be developed in time to boost economic productivity and solve the problems caused by a growing world population, rapid urbanization, and climate change?”. But, in fact, technological changes play a major role in each of the four megatrends. Let’s take a closer look.
Individual Empowerment: Individual empowerment will accelerate owing to poverty reduction, growth of the global middle class, greater educational attainment, widespread use of new communications and manufacturing technologies, and health-care advances.
Over the past couple of centuries, the Industrial Revolution has led to major improvements in the standard of living around the world. According to economist Richard Steckel, from 1820 to 1998 the overall GDP per capita of the world increased by a factor of 8.6, with different regions experiencing widely different increases. GDP per capita went up by a factor of 3.3 in Africa and India, and 5.5 in China. But in the more industrialized countries, whose economies strongly benefited from the technological and scientific advances of the Industrial Revolution, GDP per capita grew at a much faster rate. Western European countries realized more than a ten-fold increase, the U.S. a factor of 21.7, and Japan 30.5.
These advances have led to a growing middle class of over a billion or so people, mostly concentrated in the industrialized countries. At the same time, over a billion people in less developed economies still live in extreme poverty. But, thanks to individual empowerment, which GT2030 thinks might well be the most important megatrend, this situation is rapidly changing.
“Significant numbers of people have been moving from well below the poverty threshold to relatively closer to it due to widespread economic development. Absent a global recession, the number of those living in extreme poverty is poised to decline as incomes continue to rise in most parts of the world. The number could drop by about 50% between 2010 and 2030, according to some models. . . Under most scenarios–except the most dire–significant strides in reducing extreme poverty will be achieved by 2030. . .”
“Middle classes most everywhere in the developing world are poised to expand substantially in terms of both absolute numbers and the percentage of the population that can claim middle-class status during the next 15 to 20 years. Even the more conservative models see a rise in the global total of those living in the middle class from the current 1 billion or so to over 2 billion people. Others see even more substantial rises with, for example, the global middle class reaching 3 billion people by 2030.”
Digital technologies have been playing a central role in this global individual empowerment. Since the mid-1990s, the Internet has been giving rise to a truly global digital economy, one connecting people and companies all over the world. In the last five years, our continuing technology advances are bringing the empowerment benefits of the digital revolution to just about everyone in the planet.
Three such advances particularly stand out. The explosive growth of increasingly powerful, inexpensive and smart mobile devices; the rise of cloud computing, which is enabling the economical distribution of sophisticated services and apps to all those devices; and ubiquitous, broadband wireless networks linking it all together. Together, these advances are giving rise to an Internet-based platform for digital, inclusive innovations which is lifting people out of extreme poverty as well as significantly expanding the world’s middle class.
Diffusion of Power: There will not be any hegemonic power. Power will shift to networks and coalitions in a multipolar world.
There are two major aspects to this megatrend. Economic and political power is shifting from North America and Western Europe to the faster-growing economies in the East and South. National power is getting distributed to countries with rising GDPs and populations, not just China, India and Brazil, but also regional players like Columbia, Indonesia, Nigeria, South Africa and Turkey.
“The shift in national power is only half the story and may be overshadowed by an even more fundamental shift in the nature of power,” observes the report. “By 2030, no country–whether the U.S., China, or any other large country–will be a hegemonic power. Enabled by communications technologies, power almost certainly will shift more toward multifaceted and amorphous networks composed of state and nonstate actors that will form to influence global policies on various issues. Leadership of such networks will be a function of position, enmeshment, diplomatic skill, and constructive demeanor. Networks will constrain policymakers because multiple players will be able to block policymakers’ actions at numerous points.”
The nonstate actors will include large cities and urban regions, multinational companies, nongovernmental organizations, academic institutions and empowered ad-hoc communities. Social media, big data and other advanced technologies, will enable these groups to collaborate with each other as well as with national governments to confront global challenges. Given the polarized populations and national governments in the U.S. and other large countries, such a distributed model of governance may well emerge as the most reasonable way to get things done.
Demographic Patterns: The demographic arc of instability will narrow. Economic growth might decline in aging countries. Sixty percent of the world’s population will live in urbanized areas; migration will increase.
Technology must play a major role to help find affordable solutions to the challenges posed by a growing, increasingly urban population, expected to rise from 7.1 to 8.3 billion people in 2030, 60% of whom will live in cities compared to 50% today.
In addition, the median age of almost all countries is rising rapidly, especially in the more advanced economies. A large percentage of their populations will be over 65 years, posing major challenges to health care and social benefit programs. Technological innovations are required to help provide high quality, affordable health services to an aging population, as well as the proper environment to enable them to work longer and postpone retirement.
Food, Water, Energy Nexus: Demand for these resources will grow substantially owing to an increase in the global population. Tackling problems pertaining to one commodity will be linked to supply and demand for the others.
With billions rising out of poverty and joining the middle class, we can expect an increased demand for natural resources as well as for products and services of all kinds. But, meeting these demands and hopefully unleashing an age of prosperity will only be possible in an economy based on sustainable production and consumption patterns.
“An expanding middle class and swelling urban populations will increase pressures on critical resources -particularly food and water–but new technologies–such as vertical farming in high-rise structures which also reduce transportation costs–could help expand needed resources. Food and water security is being aggravated by changing weather conditions outside of expected norms.”
“We are not necessarily headed into a world of scarcities, but policymakers and their private sector partners will need to be proactive to avoid scarcities in the future. . . The questions will be whether management of critical resources becomes more effective, the extent to which technologies mitigate resource challenges, and whether better governance mechanisms are employed to avoid the worst possible outcomes.”
In its opening page, the Global Trends 2030 report compares our current times to the dawn of the Industrial Age. “We are living through a similar transformative period in which the breadth and scope of possible developments–both good and bad –are equal to if not greater than the aftermath of the political and economic revolutions of the late 18th century.”
It then summarizes our current times with the famous opening lines used by Charles Dickens as he wrote about the late 18th century period of A Tale of Two Cities:
It was the best of times, it was the worst of times . . . it was the spring of hope, it was the winter of despair . . . we were all going direct to Heaven, we were all going direct the other way . . .
Irving Wladawsky-Berger is a former vice-president of technical strategy and innovation at IBM. He is a strategic advisor to Citigroup and is a regular contributor to CIO Journal.