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Think Globally, Act Globally.

Think Globally, Act Globally. Direction and nature of global economic change. KEY TRENDS On-going growth and global economic resilience. Reality or long-term wishful thinking? Trade as percentage of global GDP soars.

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Think Globally, Act Globally.

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  1. Think Globally, Act Globally. South Africa Scenarios 2025

  2. Direction and nature of global economic change KEY TRENDS • On-going growth and global economic resilience. Reality or long-term wishful thinking? • Trade as percentage of global GDP soars. • ‘Re-balancing’ of global economic power; the ‘five titans’ (China, USA, India, Brazil and EU) -- and Africa? • The $100 barrel: global energy prices soar. • Intra and Inter-nation inequality increases. ‘Black swan’: new global health pandemic. How would we deal with a ‘new AIDS?” South Africa Scenarios 2025

  3. Direction and nature of global economic change • From 1950 to 1973, the world economy grew at an average 4.9 percent. • Then growth slowed for almost 25 years. • From a world that averaged 2% annual growth for many years into the early 1980s, to a world that averages 5% plus annual growth in 2005, 2006, and 2007. • Is this a long-term trend for high rates of global economic growth? SUSTAINED HIGH GROWTH AND LOWER VOLATILITY? South Africa Scenarios 2025

  4. Direction and nature of global economic change Global economy SUSTAINED HIGH GROWTH AND LOWER VOLATILITY? • Counter trend: aging populations in developed world, soaring household debt, property price bubbles. • Long-term Inflation loop -- China’s deflationary effect on prices slows, while Chinese demand for energy pushes up energy prices (and thereby general inflation rates) all over the world. • Interest rates go up. Economies slow. How much slower? • Resilience or a lurking longish recession? (Especially if world is hit by a unexpected ‘trigger’ event: health pandemic, terrorism, hurricane in the Gulf etc). South Africa Scenarios 2025

  5. Direction and nature of global economic change Since 2000, growth in trade has outpaced growth in output by a factor of 2. Exports as a percentage of global GDP share is predicted to climb from 25% to 35% by 2025. By some measures (when including services for example), trade as a share of global GDP will from about 40% now to 50% of global GDP. The five fastest growing economies in the world from 1990 to 2004 measured by GDP per capita (Albania, Vietnam, Ireland, China, and Bosnia and Herzegovina) all experienced double-digit annual growth in trade as a portion of GDPs. WORLD ECONOMY Trade as a percentage of Global GDP is growing rapidly; the ability to export appears to be becoming more important. Trade in goods (which makes up 81 percent of trade) has been in been increasing 7 percent a year on average between 1990 and 2004. South Africa Scenarios 2025

  6. Direction and nature of global economic change Seismic shifts in global economic power: the five titans of 2025? 2006 2050 GDP size in US$ bn 2050 GDP size in US$ bn 2006 2006: The USA’s GDP is more than double China’s and India’s combined GDP 2050: China’s GDP alone is double that of the USA. USA and Indian GDP almost the same (Goldman Sachs) South Africa Scenarios 2025

  7. Direction and nature of global economic change News Flash: global oil production has peaked!! “According to a newly published global oil supply report to be presented by the Energy Watch Group at the Foreign Press Association in London, world oil production peaked in 2006. Production will start to decline at a rate of several percent per year. Published on 23 Oct 2007 by Energy Bulletin. 
"My experience of debating the peak oil issue with the oil industry, and trying to alert Whitehall to it, is that there is a culture of institutionalised denial in government and the energy industry. As the evidence of an early peak in production unfolds, this becomes increasingly impossible to understand…” Jeremy Leggett, the Solarcentury CEO and former member of the British Government's Renewables Advisory Board. South Africa Scenarios 2025

  8. Direction and nature of global economic change Growing inequality between countries and inside countries. "The top 10 percent of the US population has an aggregate income equal to income of the poorest 43 percent of people in the world. Put differently, the total income of the richest 25 million Americans is equal to total income of almost 2 billion people." Milanovic 2002 Global middle class (baseline: family of four earning at least US$ 16,000 (R112,000) per annum (PPP) grows to 1.2 billion by 2030. But world population grows by about 1.5 billion to about 8 billion! South Africa Scenarios 2025

  9. Direction and nature of global economic change • Epidemics • HIV & AIDS • TB • Obesity related illness, including diabetes. ‘Black swan’: new global health pandemic. How would we deal with a ‘new AIDS?” South Africa Scenarios 2025

  10. Direction and nature of global economic change 6. Health pandemics are unlikely but very high impact if they do occur. 1. High growth and stability 2. Trade a % of GDP soars ? Anything new from students 3. Profound shifts in global economic power 4. Energy prices soar 5. Increasing inequality South Africa Scenarios 2025

  11. Changing patterns in Global politics KEY TRENDS • Significant realignment of ‘hard’ and ‘soft’ power. • Decline of unilateralism; resurgence of multilateralism. • More resource-driven conflict -- oil, water, diamonds… their role in civil and other wars. • The rise of a new religiosity • A growing ‘age-gap’ between countries (and issues of migration) South Africa Scenarios 2025

  12. Changing patterns in Global politics • USA military expenditure 2007: +/- $650 billion • China: around $100 billion • Russia: $80 billion • USA education budget: (second highest item of discretionary spending in the USA): $56billion • . US public health budget: $53billion. • Total Budget of United Nations (including all agencies) $20billion • US defense budget is only 3.7% of its GDP Source: www.globalissues.org Geopolitics/ArmsTrade/Spending.asp Global distribution of military Expenditure in 2005 South Africa Scenarios 2025

  13. Changing patterns in Global politics Significant realignment of ‘hard’ and ‘soft’ power. Is the USA unlikely to embark on large-scale military interventions for a generation? Realignment of ‘hard’ and ‘soft’ power. USA still dominates hard-power in 2025, but China is catching up fast. The EU, India, Brazil are able to exert and project power due their burgeoning economies. South Africa Scenarios 2025

  14. Changing patterns in Global politics Decline of unilateralism; resurgence of multilateralism. Growing role of institutions such as the Gs. The G-8Heads of state of France, Germany, Italy, Japan, UK, USA, Canada and Russia G-7same countries but meeting of finance ministers and excluding Russia G8+5:France, Germany, Italy, Japan, UK, USA, Canada and Russia plus the heads of government of the 5 leading (most systemically important) emerging economies: Brazil, China, India, Mexico and South Africa.Currently informal: to be formalised through the Heiligendamm Process by 2009. To be known, interesting enough, as the G8 + 5 and not the G13…. G-20: 19 of the world’s systemically important economies, plus the EU. Focussed on international fiscal system. Other proposals: “Concert of democracies” – Princeton Project Time of ‘competitive multilateralism’. South Africa Scenarios 2025

  15. Changing patterns in Global politics Decline of unilateralism; resurgence of multilateralism. The UN plays an important role in keeping the peace with 18 active long-term peace keeping missions. South Africa Scenarios 2025

  16. Changing patterns in Global politics More resource-driven conflict -- oil, water, diamonds… their role in civil and other wars. • As many as one-third of civil wars ultimately reignite. • Contrary to the conventional wisdom that civil conflict stems from ancient ethnic hatreds or political rivalries, compelling evidence now suggest that the most powerful predictors of civil conflicts are in fact weak economic growth and volatile low incomes. • According to the U.K. Department for International Development, a country with $250 per capita income has a 15 percent likelihood of internal conflict over five years – many times greater than the 1 percent risk to an economy with $5,000 per capita income. • In 2002, more than two thirds of the poorest countries of the world were in conflict. South Africa Scenarios 2025

  17. Changing patterns in Global politics • Rise in ‘religiosity’ • Why has religion returned to secular and democratic politics? Probably enlightened countries have become unsure of their values, even of the Enlightenment itself…Those who are committed to liberty must learn to appreciate and defend it now, lest they someday have to fight to get it back. (Ralf Dahrendrof) • Far from being anti-Muslim, the Pope views Islam as a key cultural ally against the enlightenment liberalism that for him corrodes the moral core of Western society (Phillip Blond and Adrian Pabst). South Africa Scenarios 2025

  18. Changing patterns in Global politics A growing ‘age-gap’ between countries. South Africa Scenarios 2025

  19. Changing patterns in Global politics A growing ‘age-gap’ between countries: migration • Migrations slowed in the 1990s, but the pace has picked up again. • The organisation’s world migration report estimated that there were 190 million migrants in early 2005, implying annual growth of 1.7 percent in the first half of this decade. (up from 1.3% previously) • Today’s most contentious borders separate economies where the income gaps between people on the two sides are the greatest. • There are four such global hot spots: the borders between the US and Mexico, Spain and Morocco, Greece (and Italy) and the southern Balkans and Indonesia and Singapore (or Malaysia). • The income gaps range from more than seven to one in the latter case to 4.5 to one in the case of Spain and Morocco, 4.3 to one between the US and Mexico, and four to one between Greece and Albania. South Africa Scenarios 2025

  20. KDF 2 – Changing patterns in Global politics 1. Significant realignment of ‘hard’ and ‘soft’ power. 5. A growing ‘age-gap’ between countries (and issues of migration) 2. Decline of unilateralism; resurgence of multilateralism. 3. More resource-driven conflict -- oil, water, diamonds… their role in civil and other wars. 4. The rise of a new religiosity South Africa Scenarios 2025

  21. Changes in the Global physical environment KEY TRENDS • The world is getting warmer. It seems to be our fault. 2. We are approaching ‘resource ceilings’ in more and more areas: Can we endlessly innovate around them? South Africa Scenarios 2025

  22. Changes in the Global physical environment Global warming Temperature changes over the last 1 million years South Africa Scenarios 2025

  23. Changes in the Global physical environment JUST HOW WARM? • Average surface temperatures have risen by 0.6 deg C in the last 140 years • Since 2001, no climate scientists have expressed skepticism that warming has occurred. • All of the 10 warmest years in history have occurred since 1990 – the warmest being 2005 • Before the Industrial Revolution, atmospheric C02 levels were about 270-280 parts per million (ppm)/They now stand at almost 380 ppm… • More than 90% of the world’s glaciers have retreated since 1995. • Since 1992, the sea level has risen about 3 mm a year…. South Africa Scenarios 2025

  24. Changes in the Global physical environment WHO DONE IT? • It does now seem certain that it is caused by carbon emissions: • From evidence of 800 000 year-old ice cores, taken from 2.2 km beneath the Antarctic’s surface, there is now clear evidence that CO2 changes consistently accompanied by climate change. • This is the issue: the fastest previous increase was 30 ppm in 1 000 years… • Because of human emissions, the level has risen by 30 ppm in just the last 17 years! South Africa Scenarios 2025

  25. Changes in the Global physical environment • Environmental constraints to growth • It’s not just global warming….. • Eco-system degradation: the United Nations Millennium Eco-System Assessment compiled by 1360 scientists from 95 countries and released in 2005 has confirmed for the first time that 60% of the eco-systems that human systems depend on for survival are degraded (Millennium Ecosystem Assessment, 2005). • Food insecurity: according to the World Resources Institute Report for 2002-2004 , 65% of global agricultural soils show signs of soil degradation and that this has already started to undermine the $1,3 trillion global agricultural industry (World Resources Institute, 2002) that is supposed to feed a population that will grow from 6 billion in 2005 to 8 billion by 2030. South Africa Scenarios 2025

  26. South Africa Scenarios 2025

  27. Changes in Global Physical environment 1. Global warming is throwing up new challenges; we don’t know if there is a tipping point, or when it could happen… 2. We are approaching ‘resource ceilings’ in more and more areas… South Africa Scenarios 2025

  28. What are the challenges the UN will be facing in 2020? • Global economic resilience. Reality or wishful thinking? • Trade as percentage of global GDP soars. • ‘Re-balancing’ of global economic power? • The $100 barrel: global energy prices soar. • Intra and Inter-nation inequality increases. • ‘Black swan’: new global health pandemic. • Significant realignment of ‘hard’ and ‘soft’ power. • Decline of unilateralism; resurgence of multilateralism. • More resource-driven conflict -- their role wars. • The rise of a new ‘religiosity’ • ‘age-gap’ between countries and issues of migration • The world is getting warmer. It seems to be our fault. • ‘Resource ceilings’ South Africa Scenarios 2025

  29. Is it time to think globally, act globally? South Africa Scenarios 2025

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