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Signposts Supplement to - Shell Global...forecasts of the future but rather are credible alternative...
Transcript of Signposts Supplement to - Shell Global...forecasts of the future but rather are credible alternative...
DEMOGRA
PHY
GLOBA
LIS
ATION
CLIM TE CHANGE
AFRICA
SECURITY
TRUST
Signp
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Supplement to Global Scenarios to 2025
Critical uncertaintiesand the “TrilemmaTriangle”
The Shell Global Scenarios to 2025 explores how forces of market incentives, communities, and regulation or coercion by the state advance societies’ objectives of efficiency and growth, security and social cohesion. Societies typically aspire to all three objectives and those that are more successful find ways of achieving them in mutually reinforcing ways. However, these forces can sometimes display elements of mutual exclusiveness – one cannot always be simultaneously freer, more secure and more socially cohesive – leading to difficult choices and trade-offs, particularly in the wake of sudden shocks such as 9/11 or Enron. Global Scenarios to 2025 explores the three dilemmas – a Trilemma – involved in the pursuit of these objectives.
The Trilemma Triangle provides a map of relations and interactions among market participants, civil society and states. In particular, it examines the interplay of three complementary, but occasionally competing, objectives of efficiency, social cohesion and justice and security. Using this analytical framework Global Scenarios to 2025 developed three alternative scenarios – Low Trust Globalisation, Flags and Open Doors – that capture the potential trade-offs facing society among these diverse, complex objectives in which two objectives dominate at the expense of the third.
The difficulty of achieving a satisfactory balance among these goals is a source of challenge for decision makers – in business, government and society. The three scenarios analyse potential ways in which these trade-offs will be accomplished. They also recognise that this balance may be more difficult to strike in the immediate wake of crises that create new political imperatives and that these crisis responses can have persistent effects.
In simplified terms, the balances of forces – or imbalances – in the three scenarios are as follows:• Efficiency and security tend to dominate in Low Trust
Globalisation• In Flags, security and social cohesion trump efficiency• Open Doors sees efficiency and social cohesion at the fore
This of course does not mean that the third objective is altogether absent in each of the scenarios. Rather, it is partially compromised in the face of achieving one or both of the other objectives.
Foreword 3Introduction to the Shell Global Scenarios to 2025 5Critical uncertainties and the “Trilemma Triangle” coverThe Scenarios in Brief 6Signposts 2006–Fundamentalobjectivesandforce 7Signposts:Securityandtrustthroughcoercionandregulation 8 Efficiencyandgrowththroughmarketsandprivateinitiative 12 Socialcohesionthroughforceofcommunity 16From Signposts to Scenarios–Whereareweheading? 20
Contents
Shaping our future
Global headlines are dominated by events that are clearly important in the immediate present. But their significance for the future is more difficult to interpret. As I write, an uneasy ceasefire is holding in Lebanon, world powers are deciding how to react to North Korean nuclear tests, global economic growth remains robust despite both high oil prices and a softening US economy and violence continues unabated in Iraq and Afghanistan. How should we assess the long-term implications of these developments? What do they tell us about how the future may unfold?
TheShellGlobalScenariosto2025,publishedin2005,providesananalyticalframeworktohelpunderstandhowtoday’sgeo-political,economic,andsocialaspirationsandforcesareshapingourfuture.Thisbookletcomplementstheoriginalreportbyreviewingselectedrecentglobaldevelopments-signposts-since2005.Itillustrateshowthescenariosframeworkcanbeappliedtohelpmakesenseofcomplextrainsofeventsandhighlightskeycontemporarytrendsinworldaffairs.
Since9/11andtheEnronscandalwehaveexperiencedaglobalbusinessenvironmentwithastrongfocusonenhancedphysicalsecurityandtightermarketregulation,whichhasgivenrisetonewtensionsandtrade-offsbetweenassertivestatepoliciesandcontinuedmarketliberalisation.Morerecently,therapidexport-ledgrowthofmanydevelopingcountriesandtheirimpactonglobalenergypriceshashelpedtofuelanewwave
of‘resourcenationalism’,aswellasariseinprotectionistpressuresinWesternEuropeandNorthAmerica.Thiscomplexinterweavingofpolitical,economicandsocialtrendscanleadtheworldinseveralpossibledirections,whichtheShellGlobalScenariosseektomapoutthroughthreestylizedscenarios.WecallthemLowTrustGlobalisation,FlagsandOpenDoors.
Ofcourse,thecomplexitiesoftoday’sglobalbusinessenvironmentcannotbedistilledintoasinglescenarioandweidentifyelementsofallthreescenariosinrecentdevelopments.TheLowTrustGlobalisationscenarioseestheprioritisationofeconomicefficiencyandsecurityatthepartialexpenseofsocialcohesionandexamplesofthiscanbeseenindevelopmentsintheUnitedStatesandChina,whereincomeinequalitieshavewidenedsignificantlyinthefaceofstronggrowth.IntheFlagsscenario,concernfornationalidentityandsocialcohesiontrumps
Forew
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“This framework helps to
understand how today’s
geo-political, economic,
and social aspirations and
forces are shaping our future “
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considerationsofeconomicefficiency,givingriseforexampletoeconomicprotectionismoralossofpoliticalappetiteforfurtherliberalisationasseeninthecollapseoftheDoharoundoftradenegotiations.ThereareperhapsfewerexamplesoftheOpenDoorscenariobeingplayedout,buttherecentelectioninSwedenillustrateshowsocialcohesionandeconomicefficiencycandrivethepolicyagenda.
Overall,thesignpostsfoundinrecentdevelopmentsrevealsignificantfault-linesandopposingpressures,suggestingthatanoverall,dominantdirectionfortheworldremainshighlyuncertain.However,itdoesappearthatsecurityandsocialcohesiondominatetheday-to-dayagendasofthekeyglobalplayers,whilemarketforcescontinueto
“I have found it valuable to view
developments through the lens of
the Shell Global Scenarios, and
I hope you will also “
DEMOGRA
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assertthemselvesinexorablyandtheglobaleconomyremainsrobust.WearethereforecurrentlylivinginaworldthatpredominantlyreflectstheLowTrustGlobalisationscenario,withastrongcomponentofFlags.Atleast,thatisoneoftheconclusionsIdrawfromthereview,butperhapsyouwilldrawothers.Inanyevent,IhavefounditvaluabletoviewdevelopmentsthroughthelensoftheShellGlobalScenarios,andIhopeyouwillalsofindthistobethecase.
ThispublicationwaspreparedbytheShellScenarioTeamandbyShellCorporateAffairs.Inparticular,IwouldliketothankChoKhong,ChiefPoliticalAnalyst,StevenFries,ChiefEconomist,andJamesSchofield,Editor,fortheireffortsinbringingthispublicationforward.
Jeremy B. Bentham – Vice President, Global Business Environment
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Overthelastthreedecades,ShellhasdevelopedtheGlobalScenariostohelpdeepenourunderstandingofthebusinessenvironmentinwhichtheGroupoperates,toidentifyemergingchallengesandtofosteradaptabilitytochange.ThescenariosareusedtohelpreviewandassessGroupstrategy.Thescenariosthemselvesarenotforecastsofthefuturebutratherarecrediblealternativeviewsofthefutureglobalbusinessenvironmentthatcanchallengeassumptionsorestablishedviews.
TheGlobalScenariosto2025arestructuredaroundbothpre-determinedtrendsandcriticaluncertainties.Thepredeterminedtrendsarecommonacrosseachofthethreeofthescenarios.Thecriticaluncertainties,whichoverlaytherelativelycertaintrends,areusedtobuildcrediblealternativevisionsofwhatthefuturemayhold.Thecontrastingwaysin
whichtheseuncertaintiesareresolvedcriticallyshapethealternativescenariosfortheglobalbusinessenvironment.
Thetrendsto2025thatcanbepredictedwithsomedegreeofconfidencearethoseinvolvingdemographics,globalisationandkeygeo-politicalactors.Overthescenariohorizon,theworld’spopulationissettoincreasefromaround6billionto8billion,withalmostallofthegrowthoccurringindevelopingcountries.Thiswillfurtherreinforcethegrowingcontributionthatdevelopingcountriesaremakingtotheworldeconomy.Atthesametime,theincreasedglobalisationofrecentdecades–madepossiblebymarketliberalisationandtechnologicaladvances–willbevirtuallyimpossibletoreverse.Thistrendhasenabledasignificantriseinlivingstandardsandhashelpedmany–butnotall–
developingcountriestobeginclosingthegapinlivingstandardswithindustrialisedcountries.Goingforward,thekeygeo-politicalactorswillbetheUnitedStatesandChina.ReflectingtheeconomicriseofAsia,theglobalbusinessenvironmentwillmorelikelybeshapedbyrelationshipsacrossthePacificthanovertheAtlantic.
Whiletheabovearereasonablycertain,therearecriticaluncertaintiesfacedbysocietiestodaythatmayberesolvedinseveralpossibleways.Inparticular,twocriseshaveunfoldedsince2001-namely9/11andtheEnronscandal-thathaveaffectednationalsecurityandtrustin
themarketplace.Bothhavehighlightedvulnerabilitiesinourglobalisedworldandmanysocietiesnowexpectthestatetoleadtherestorationofphysicalsecurityandmarketintegrity.Societies’demandforchangeinresponsetothetwocrisesisacceleratingthetransformationoftheState’sagendaandmethods.Thisroleinvolvesbothdirectintervention–fightingterrorismandpolicingthemarket–aswellasstrongeremphasisontransparency,disclosureandgoodgovernance.Theprecisewaysinwhichthesecriticaluncertaintiesareresolvedshapethethreescenarios.
Intro
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2025
“The scenarios are not
forecasts but rather credible
alternatives of the future “
Shell Global Scenarios to 2025
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Low Trust Globalisation
•Thisisa“proveittome”world,ascepticalworld.Thekeywordsarecompliance,compliance,compliance.It’saboutplayingbytherules,andaboutbeingveryawareofthediversityofjurisdictionsthatwillcometoyouwiththeirverydifferentandoftenoverlappingdemands.
•Aworldoflawyersandaccountantswithacultureofblame.Whenthingsgowrong,regulationandlitigationareseenasanswers.Actionisreactiveratherthanproactive.Peopledonotoperatewithasensethatcommonproblemscanbedealtwithinadvance.
•Heavycompliancerequirementsbringhightransactionscostsinmarketsandfostergreaterbusinessscale:marketsaredominatedbylarge,verticallyintegratedcompaniesthatcancontrolthepotentialliabilitiesinthewholesupplychain.Valueprotectionisasimportantasvaluecreation.Complianceanditscostandscaleimplicationsalsocreatelargebarrierstomarketentrybysmallandmedium-sizedcompanies.
•IntheworldofLowTrustGlobalisation,listedcompaniesarelargemultinationals.Bondfinancingispopular.Smallandmedium-sizedcompaniesaretakenoutofthepubliceyebytheprivateequityindustry.
•Theabsenceofmarketsolutionstothecrisisofsecurityandtrust,rapidregulatorychange,overlappingjurisdictionsandconflictinglawsleadtointrusivechecksandcontrols,encouragingshort-termportfolioflowsandarbitrageaswellasverticalintegrationofbusinesses.
Flags
•Flagsisa“followme”world,wherepeoplearedogmaticabouttheircodesandcauses.
•Althoughstillinterconnectedwiththerestoftheworld,peopleandcommunitiesfeelastrongerneedtoexpresstheirownidentityintermsofthegroup/club/nation/religiontowhichtheybelong.
•Flagsisfragmentedandpolarised–bothinternationallyanddomestically.Peopledistrustelites,theydistrustotherswithwhomtheycannotcloselyidentify.Theywanttoshowtheirdifferencesfromothersbystatingitclearlyandsaying‘no’toanythingcountertotheirnorms,viewsorbeliefs.
•Opposedgroupsinsocietytrytocapturethestatefortheirownobjectives,byonerouteoranother:votes,violenceormoney.Orgovernmentswavethenationalflag,encouragingunityamongthediversegroupsandcommunitiesbyremindingthem‘weallbelongtothesamecountry.’Carefulcountry-riskmanagementisapriority.
•Securityispursuedthroughisolationandgatedcommunities.Globalmobilityofpeopleandmoneyisseriouslyhamperedandtradeiscurtailed.
•Businesseswithstrongnationalidentitiesfarewellandaregrantedstateprotectionthroughsubsidiesandthetaxsystem.
•Highmilitaryspendingpromotesinnovation–forexample,infuelefficiency.
Different scenarios - different worldsSummary
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fundamental objectives and forces
Open Doors
•OpenDoorsisa“knowme”world,aworldoftrust:inglobalsystems,andinglobalisation.Itispragmatic,proactiveandco-operativeworld.Peoplecooperatewithotherstodealwithfutureproblems,becauseitisthemostefficientwaytodealwiththem.
•Underpinningtrustistheprecautionaryprinciple,whichbroadlystatesthatcautionshouldprevailwherethepossibilityofharmfuleffectsonhealthandtheenvironmenthavebeenidentifiedandscientificevaluationoftherisksprovesinconclusive.
•Inthisworld,governmentactsinthebackground,maintainingtrustandsecuritythroughincentivesandsoftpowerratherthanintrusivechecksandcontrols.Statesareinclusive,takingresponsibilityforthewiderconstituenciesinsociety.
•Reputationcanbeasubstituteforintrusivecontrols.Aworldofconstantquestionnairesbyratingagenciesandmedia.Reputationcarriesapremium,butalsomakescompaniesvulnerable.Voluntarybest-practicecodes,andcloselinksbetweeninvestorsandcivilsocietyencouragecross-borderintegrationandvirtualvaluechains.Networkingskillsandsuperiorreputationmanagementareessential.
•Competitiveadvantagethroughinnovationisshort-lived,butnottoinnovateisnotanoption.Companiesaredriventoinnovatemoretocompete.MorecapitalisavailableinOpenDoorstoinvestininnovation,becausefinancialmarketshaveahigherappetiteforrisk.
•Innovationsaredisseminatedfaster,becauseoftheopennessoftheglobalbusinessenvironment.
•Globalequitymarketsbecomemoreintegratedandlargesumsofventurecapitalchasesuperiorreturns.
InthefollowingpageswesetthecontextforourreviewoftheGlobalScenarios–LowTrustGlobalisation,FlagsandOpenDoors–developedintheTrilemmaTriangleandexplorehowrelevanttheyaretotoday’sworld.Todosowefirstsurveykeynewsstoriesofimportantrecentevents–signposts–thatpointtothestrengthofthefundamentalunderlyingobjectivesofmarketefficiency,security,andsocialcohesionandtheforcesthroughwhichtheseobjectivesareattained.
Eacheventorsignposttendstoillustratethestrengthofoneoftheunderlyingforcesinaparticularcontext.Forexample,thecollapseoftheDoharoundoftradenegationsrepresentsthestrengthofsocialcohesionandtheunwillingnessofpoliticianstotakeonvestedinterestsinthestatusquo.Incontrast,itssuccessfulconclusionwouldhaveindicatedapoliticalandsocialpriorityplacedonmarketefficiencyandgrowth.Whileeacheventcaninvolvesomeinteractionsortrade-offswithotherobjectives,theyareoftennewsbecauseitisan“extreme”eventinthesensethatitshowsthedominanceofoneobjectiveorforceoveranother,atleastintheimmediatepresent.Attheendofeachsetofnewsitemscoveringsecurity,efficiencyandgrowth,andsocialcohesion,weofferabriefoverallassessmentofthedriversofchange.
TheconcludingsectionofthisupdatewillthenviewtheseandothersignpoststhroughtheprismoftheGlobalScenariosto2025.Wedothistoshowhowthescenarioscanbeusedtoputtoday’seventsinabroadercontextinordertobettermonitorandinterpretthem.Thisanalysiscanalsobeusedtopointtothepossiblefuturedirectionsoftheglobalbusinessenvironmentandwhetheroneormoreofthescenarios,orindeedcombinationsofscenarios,arebeginningtoemerge.Inthiswaythescenariosthemselvescanbereviewed,andifnecessary,challengedaswemovetowards2025.
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Security and trustthrough coercion andregulation
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Signposts: security a
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1: Terror threat grows TheNewYorkTimesnewspaperhaspublishedwhatitsaysarethefindingsofaclassifiedUSintelligencepaperontheeffectsoftheIraqwar.Thedocumentreportedlyblamesthethree-year-oldconflictforincreasingthethreatofterrorismandhelpingfuelIslamicradicalismworldwide.
Thislatestfinding,knownasaNationalIntelligenceEstimate,isthemostcomprehensivereportyet,basedontheconsideredanalysisofall16oftheUSintelligenceagencies.
AccordingtotheNewYorkTimes,whichhasspokentoofficialswhohaveeitherreadit,orbeeninvolvedindraftingit,thereportsaystheinvasionandoccupationofIraqhasspawnedanewgenerationofIslamicradicalismthathasspreadacrosstheglobe.
ItalsowarnsthatIslamicmilitantswhohavefoughtinIraqcouldfomentradicalismandviolencewhentheyreturntotheirhomecountries,muchasreturningJihadisdidafterthewaragainsttheSovietUnioninAfghanistaninthe1980s.
Itreportedlyconcludesthat,whileal-Qaedamayhavebeenweakenedsincethe11September2001attacks,theradicalIslamicmovementworldwidehasstrengthenedwiththeformationofnewgroupsandcellswhoareinspiredbyOsamaBinLaden,butnotunderhisdirectcontrol.
‘US report says Iraq fuels terror’ http://news.bbc.co.uk/2/hi/middle_east/5375064.stm
2: States struggle to find common response to nuclear proliferation
SixworldpowersyesterdayagreedtodiscusspossiblesanctionstopunishIranforfailingtohaltitsnuclearprogrammebutsaidtheywerestillopentonegotiationswithTehran.
Iransaysitsatomicprogrammeisonlyforpowergeneration.TheWestsuspectsIranwantstomakeanuclearbomb,andtheUNSecurityCouncilhadsetanAugust31stdeadlineforTehrantostopuraniumenrichment.
“Furtherpressureisneeded,”BritishforeignsecretaryMargaretBecketttoldreportersaftertalkswithministersfromtheUnitedStates,France,Germany,RussiaandChina.
InJuly,aUNresolutionauthorisedtheSecurityCouncilto“adoptappropriatemeasures”-underarticle41,Chapter7-whichreferredtocommercialordiplomaticsanctionsbutexcludedmilitaryforce.
TheUS,backedbyBritain,hassuggesteditistimetoconsideraSecurityCouncilresolutiontoimposesanctionsafterfourmonthsoftalksbetweentheEUandTehranfailedtoyieldanIranianpromisetohaltatomicwork.
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>>>ButRussiaandChina,underliningdivisionsamongthesixworldpowers,agreeditwas“absolutelyunacceptable”tothreatenforceandtalkofultimatumswascounter-productive,RussiandeputyforeignministerAlexanderAlexeyevsaidyesterday.
‘World powers consult on Iran sanctions’, Sophie Walker, 7 October 2006, Irish Times, © 2006, The Irish Times.
�: NATO expansion fuels security concerns
InanothersignofthecoolingofUkraine’spro-Westernzeal,thenewprimeministersaidhiscountryisputtingeffortstojointheNorthAtlanticTreatyOrganizationonholdbecauseofalackofpublicsupportforthemove.
“Wehavetotakeapause,”PrimeMinisterViktorYanukovychsaidyesterdayaftermeetingwithNATO’schiefinBrussels.HesaidUkrainewouldformallylaunchitsbidtojointhealliance,butonlyafterareferendumontheissue.
TheKremlinhaslobbiedhardagainstUkraine’sentry.TheKremlinsaidthatasaNATOmember,UkrainewouldbeathreattoRussiansecurityandwarnedKievthatanymovementstowardmembershipwouldworsenrelations.
BesidesmanytradetieswithRussia,UkrainemustworryaboutitsdependenceonRussiannatural-gasdeliveries.UkraineisinthemidstofnegotiationswithRussiafornextyear’sshipments.
UkrainianPresidentViktorYushchenko,whowasswepttopowerintheOrangeRevolution,hassaidUkrainewouldn’t“veeroneiota”fromplanstojoinNATO.
BeforeagreeingtonameMr.Yanukovychprimeminister,hepushedhimtosignaso-calledmemorandumonnationalunitythatpreservedtenetsofaWestern-orientedagenda–includingNATOmembership.ButthepactappearstobenonbindingandtoovaguetoforceMr.Yanukovychtoanyconcreteaction.
‘Ukraine puts efforts to join NATO on hold’, Alan Cullison, 15 September 2006, The Wall Street Journal, © 2006, Dow Jones & Company, Inc.
�: Market regulations place heavy burden on small business
ChristopherCox,chairmanoftheSecuritiesandExchangeCommission,yesterdayissuedarobustdefenceofSarbanes-Oxleylegislation,sayingitwas“importanttokeepinmind”thatmanyofitselementshadbeenadoptedbyotherregulatorsoverseas.
ThelawhasstirredcontroversyintheUS,withmanyinthebusinessandfinancialcommunityblamingitsmoreonerouscompliancerequirementsforaddingunwantedcoststobusiness.
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>>>IthasalsobeenblamedforforcingforeigncompanylistingsabroadtoLondonandHongKong,damagingthecompetitivenessoftheUScapitalmarkets.
MrCoxsaid:“AsweconsidertheeffectofSarbanes-OxleyonUScompetitiveness,itisimportanttokeepinmindhowbroadlymanyofitstenetshavebeentakenupoverseas.”
HecitedtheestablishmentofindependentauditorwatchdogssimilartothePublicCompanyAccountingOversightBoard(PCAOB),whichoverseesUSauditors.
HepointedoutthattheEuropeanUnionhadadoptedadirectiverequiringallmemberstatestocreateanauditoroversightbody.MarkOlson,PCAOBchairman,concededtheenactmentandimplementationofSection404ofSoxhadbeena“symbioticover-reaction”bythePCAOB,SECandauditorstopastbusinessscandals.
Section404isthemostcontentiouspartofSoxandrequiresCEOstohaveoutsideauditorschecktheirassessmentsofacompany’sinternalcontrols.
‘Cox defends “Sox” to the House’, Jeremy Grant, 20 September 2006, Financial Times, © 2006, The Financial Times Limited.
5: Assessment
ThedriveforenhancedsecuritythroughmilitaryinterventioninIraqanddiplomaticinitiativestoimposesanctionsonIran,inresponsetoitscontinuednuclearprogramme,havebeenamongthemostsignificantsecurity-relatedissuessince2005.
ThedisputebetweenRussiaandUkraineoverthepriceofnaturalgas–adisputethatresultedinthetemporarydisruptionofenergysuppliesnotonlytoUkrainebutalsototheEU–increasedthispreoccupationwithsecurityformanyEUgovernmentsandreinforcedconcernsoversecurityofsupply,alreadyhighonpoliticalagendas.Abackdroptothisdisputewasthefuturegeo-politicalorientationofUkraine.
Atthesametime,thecostsofrebuildingmarkettrustthroughmoreeffectiveregulationbecamemoreapparent.Thesecostshavebecomeparticularonerousonsmallandmedium-sizedfirmsandhaveresultedintheshiftofinternationalsecuritiesawayfromNewYorktoLondon.
Thesearealldeepandcomplexissuesthatarelikelytoremainopenandunresolvedforsometime.Theyarethereforelikelytocontinuetodominatepoliticalagendas.
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1: Business environment improving
Africaismakingstridesincuttingredtapeandimprovingbusinessregulation,accordingtoareportpublishedtodaybytheInternationalFinanceCorporation,theprivatesectorarmoftheWorldBank.
Two-thirdsofAfricancountriesimplementedatleastonepro-businessreformoverthepastyear.WithTanzaniaandGhanaamongthetopreformingnations,thestudyfinds.
OtheractiveAfricanreformersincludeBenin,BurkinaFaso,Cameroon,Gambia,Madagascar,Malawi,Mali,Mozambique,Niger,NigeriaandZambia.Thesecountrieshavesimplifiedbusinessregulationandsomehaveimprovedpropertyrightsandmadeiteasiertostartcompanies.
TheDoingBusinessReport,publishedannuallybytheIFC,showsthatinspiteoftheseadvances,Africaranksastheworld’sworstregulatedregion.
MichaelKlein,chiefeconomistattheIFC,toldtheFinancialTimes“thereisanoverwhelmingsensethatgovernmentscontinuetomovealongthisagendatowardsimprovement”.
Hesaidthepushforbetterregulationwasincreasinglyamatterof“consensusbetweenleftandright”withleftwinggovernments,forinstance,keentogivepoorpeopleformalpropertyrights.
Hesaidwhatmatteredmostwastosignala“regimeshift”towardsamorepro-business,betterregulatedeconomy.
“ThissenseofunstoppableprogressreleasedalotofdynamisminChina,IndiaandVietnam,”hesaid.
‘World Bank praises pro-business reforms in many African countries’, Krishna Guha, 6 September 2006, Financial Times USA, © 2006, The Financial Times Limited.
2: China spurs growth
Theglobaleconomyislikelytogrowata5%ratethisyearandnext,whichwouldmakeforthestrongestfour-yearexpansionsincetheearly1970s,accordingtotheInternationalMonetaryFund’snewsemi-annualeconomicforecast.
“Theglobalexpansionwasbroad-basedinthefirsthalfof2006,withactivityinmostregionsmeetingorexceedingexpectations,andrecentindicatorssuggestthepaceofexpansionisbeingmaintainedinthethirdquarter,”theIMFsaidinitsWorldEconomicOutlook,releasedyesterday.
DespiteanexpectedslowdownintheUSA,theEuropeanUnionandJapan–andhistoricallyhighpricesforoilandmetals–theIMFhasraiseditsgrowthforecastsbyone-quarterpercentagepointfor2006and2007overthepastsixmonths,largelybecauseofsteadygrowthinChinaandotherdevelopingcountries.
TheoutlookforslowergrowthinwealthiercountriesreflectshigherinterestratescarriedoutbytheFederalReserveand
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>>>othercentralbanksastheyattempttokeepalidoninflation.TheIMFsaidinflationconcernsarethemainrisktoitsforecast;otherrisksincludefurtheroil-priceincreasesandamorerapidthanexpectedcoolingoftheUSAhousingmarket.
‘IMF sees strength in global growth despite soft spots’, Campion Walsh, 14 September 2006, The Wall Street Journal, © 2006, Dow Jones & Company, Inc.
�: Immigration and liberalisation of labour flows
MigrantworkersfromeasternandcentralEuropehavenottakenjobsfromunemployedBritons,accordingtoagovernmentstudy.
Some329,000easternandcentralEuropeans,morethanhalfofthemfromPoland,haveregisteredtoworkintheUKsincetheircountriesjoinedtheEuropeanUnioninMay2004.
Thestudy,commissionedbytheDepartmentforWorkandPensionsandpublishedyesterday,foundtherewas“nodiscerniblestatisticalevidence”thatmigrantworkersfromtheso-calledA8accessioncountrieshadcontributedtotheriseinclaimants.“Overall,theeconomicimpactofmigrationfromthenewEUmemberstateshasbeenmodest,butbroadlypositive.”
OnlyBritain,IrelandandSwedenoftheprevious15EUmembershaveallowedunrestrictedaccesstotheirlabourmarketstoworkersfromA8countries.AEuropeanCommission
studyearlierthismonthurgedothermemberstofollowsuit.ItsaidfearsofaninfluxofcheaplabourandwelfaretourismhadprovedgroundlessandBritain,IrelandandSwedenhadenjoyedhigheconomicgrowthandhighemploymentdespiteopeningtheirlabourmarkets.
TonyMcNulty,immigrationminister,saidworkersfromtheaccessioncountrieswere“fillingimportantvacancies,supportingtheprovisionofpublicservicesincommunitiesacrosstheUKandmakingawelcomecontributiontooureconomyandsociety”.‘Workers from new EU states have had ‘broadly positive’ impact‘, Andrew Taylor, 1 March 2006, Financial Times, © 2006 The Financial Times Limited.
�: Foreign listings and liberalisation of international capital
LondonhasseenasurgeoflistingsbyRussiancompaniesinthepastyearbuttheforthcomingpipelineofdealsisevenmorestaggering.
In2005Russiancompaniesraisedcloseto£3bnonLondon’smainexchangeandthejuniormarket,Aim.Sofarthisyear,Russiangroupshavealreadyraised£4.8bn,thebulkofwhichhascomefromtheflotationofRosneft,thestate-controlledoilgroup,whichraised£3.5bn.
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>>>AccordingtoarecentstudybyChrisWeafer,chiefstrategistatAlfaBank,about80RussianIPOsareatvariousstagesofpreparation,withapossiblefundingtargetofUS$18.5bninthenext18months.
Ofthis,aboutUS$5.5bnisearmarkedtoberaisedbyyear-end.Russiancompaniesarelikelytodomoredomesticlistingsbutgloballistingswillremainhigh,analystssay.ButwhileinvestorshavehooveredupshareofferingsofRussiancompaniesinthepast,thereisgrowinguncertaintyaboutappetiteforfuturedeals.
Partofthisreflectsbroadertrendsinthemarket,whichhasseenavolatilefewmonthsandariseininvestors’aversiontorisk.Thereisalsoaconcernthatinvestorswillbeunabletotakeupthehugeamountofexpectedsupply.
‘The coming crop of Russian listings in London is expected to be huge’, FT report – Investing in Russia, 10 October 2006, Financial Times, © 2006 The Financial Times Limited.
5: Assessment
Recentsignpostssuggestthatthestrengtheningofmarketefficiencyandprivateinitiativeismoreprominentindevelopingcountriesthanintheadvancedeconomies.TheWorldBank’sannualsurveyofthecostsofdoingbusinessaroundtheworldshowedimprovementinthebusinessenvironmentindevelopingcountries,includingmanyinAfrica,whiletheIMF’ssurveyofglobaleconomicperformancehighlightedthemajorcontributionthatdevelopingcountriesaremakingtooverallgrowth.
TheUK’sdecisiontoallowmigrationfromnewEUmemberstateshasshownhowlabourmobilitycanenhanceeconomicperformance.Atthesametime,Russiancompaniesareincreasinglyembracinginternationalstandardsfordisclosure,transparencyandgovernanceinabidtoaccessinternationalcapitalmarkets.
Theseareallimportantexamplesofthecontinuinginfluentialroleofmarketforcesininternationalaffairs,althoughitisimportanttonotethattherehavebeenfewsuchmarketenhancinginitiativesinWesternEurope,NorthAmericaorJapanoverthepastyear.Manyoftheadvancesareindevelopingcountrieswheretheimperativeofefficiencyandgrowthis,perhaps,stronger.
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EfficiencyMarket incentives
Social cohesion, justiceThe force of community
SecurityCoercion,
regulation
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Signposts: socia
l cohesion through
force of comm
unity
1: Blow to world trade
…TheDohatradetalkshavecollapsed.OnJuly24th,attheendofyetanotherfutilegatheringoftradeministersinGeneva,PascalLamy,theWorldTradeOrganisation’sdirectorgeneral,formallysuspendedthenegotiations.
LaunchedintheQataricapitalin2001…theDoharoundwastobean“ambitious”efforttomakeglobalisationmoreinclusiveandhelptheworld’spoor,particularlybyslashingbarriersandsubsidiesinfarming,therich-world’smostmolly-coddledindustry.
Yet,despitetheirgrandrhetoric,theworld’sbigeconomieshavelongappearedunwillingtomakethepoliticalcompromisesthataDohadealrequires.
ThefaultlinesintheDoharoundaredeep.Americawantstoslashtariffs,arguing(rightly)thatthebestwaytohelppoorcountriesisthroughmoreopenmarkets.SinceAmerica’stariffsarealreadylow,thatputstheonusontheEuropeanUniontocutfarmtariffsandonbigemergingeconomiestoreducebarriersonfarmgoodsandindustrialproducts.
Emergingeconomies,incontrast,wantfewerfarmsubsidiesandlowertariffsinrichcountries,butareloathtoreducetheirownbarriersmuch.CountriessuchasIndiaarguethatinapro-poorDoharoundtheyneeddolittle.TheEUchidesAmericabothfordemandingunrealisticallylargetariffcutsfromothersandforofferingtoolittlefarm-subsidyreformofitsown.
‘In the twilight of Doha’, 29 July 2006, The Economist, © The Economist Newspaper Limited, London 2006.
2: Resource nationalism on the rise
EmboldenedbyVenezuelanPresidentHugoChavez’smovesagainstprivateoilcompanies,Bolivianationaliseditsnatural-gasindustry,orderingforeigncompaniestogiveupcontroloffieldsandacceptmuchtougheroperatingtermswithinsixmonthsorleavethecountry.
InadramaticsignofhowhighenergypriceshavesparkedaresurgenceofnationalismfromCaracastoMoscow,BolivianPresidentEvoMoralesyesterdayannouncedthenationalizationatthecountry’sbiggestnatural-gasfield,SanAlberto,andthenorderedarmytroopstotakecontrolofitandthecountry’sotherfields…
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>>>“Thetimehascome,theawaitedday,ahistoricdayonwhichBoliviaretakesabsolutecontrolofournaturalresources,”saidMr.Morales.TheformercocagrowerwonalandslidevictoryinDecemberelectionspartlyonapromisetonationalizethegasindustry,seenbymanypoorhereasthecountry’stickettoprosperity.
Mr.Morales’smovemimicsrecentmeasuresagainstBigOilbyMr.Chavez,acloseallyoftheBolivianpoliticianwhohasseizedonhighenergypricesinrecentyearstorewritetherulesofVenezuela’soilindustry.Mr.ChavezhasforcedmajoroilcompaniestoacceptaminoritystakeinfieldstheypreviouslyownedandputmoremoneyinVenezuelancoffersthroughhighertaxesandroyalties.
‘Bolivia seizes natural-gas fields in a show of energy nationalism’, David Luhnow and Jose de Cordoba, 2 May 2006, The Wall Street Journal, © 2006, Dow Jones & Company, Inc.
�: Social integration, exclusion and identity politics in Europe
AyaanHirsiAli,aSomali-bornDutchpoliticianknownforhercriticismofIslam,saidMondaythatherlifeintheNetherlandshadbecomeuntenablebecauseofsecurityissuesandacontroversyoverreportsthatshehadliedonherapplicationforasylumin1992.
HirsiAli,36,saidshewouldresignherseatinParliamentonTuesdayandspeedupherintendeddeparturefortheUSA,wheresheplanstotakeajobattheAmericanEnterpriseInstitute,aconservativethinktank.
AMuslimwhohasreceivedfrequentdeaththreatsfromIslamicmilitants,HirsiAli…hasfacedrisingpoliticalpressureoverchargesthatsheliedtotheimmigrationauthoritieswhenshefledfromanarrangedmarriageinSomaliatohideintheNetherlandsin1992.
HercriticsaccuseheroffurtherpolarizingthealreadydifficultimmigrationdebateandofalienatingratherthandefendingMuslimwomen.
InatelephoneinterviewfromTheHagueonMonday,shesaidshehadlearnedthatasaresultoftheasylumapplicationcontroversyshemightbestrippedofherDutchcitizenship.ShesaidthatwasthelaststrawinaseriesofsetbacksthatmadeherdecidetoleavefortheUSAayearearlierthanplanned.
‘Islam critic plans Dutch departure, Somali-born MP at centre of a storm’, Marlise Simons, 16 May 2006, The New York Times, printed in the International Herald Tribune,© 2006 International Herald Tribune.
Social cohesion through force of community
Low
Tru
st G
loba
lisation Open D
oo
rs
F lags
EfficiencyMarket incentives
Social cohesion, justiceThe force of community
SecurityCoercion,
regulation
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Signposts: socia
l cohesion through
force of comm
unity
�: Proud to be Japanese
Byadistance,ShinzoAbethisweekwontheelectionforthepresidencyofJapan’srulingLiberalDemocraticParty(LDP),thedaybeforeheturned52.OnSeptember26thparliamentwillappointMrAbetotheprimeministership,afterJunichiroKoizumi’sextraordinaryfive-and-a-halfyears.
MrAbesprangintothepubliceyefouryearsago,withanuncompromisingstandoverNorthKorea’sadmissionthatithadkidnappedJapanesecitizensduringthe1970sand1980s.Justthisweek,aschiefcabinetsecretary,heannouncedafreshroundoffinancialsanctionsagainstNorthKoreainresponsetoitsmissiletestsinJuly.MrAbe,certainly,isanardentnationalist,byJapan’sstandards.
HewantsJapantoplayamoreassertiveroleabroad,andtobeprouderandlessembarrassedaboutitspast.HeproposesthatJapan’spacifistconstitutionberewrittentoallowthearmedforcesmoreeasilytotakepartinoverseasmissions,andhewantslegislationtomakeschoolsteachahistorythatismoresuffusedwithpatriotism.
Fornow,hischiefdiscernibleforeignintentionlooksratherhopeful:MrAbeisrespondingtosignalsfromaChinesegovernmentdesperatetoimprovebilateralrelationsthatMrKoizumi’svisitstotheYasukunishrinehaveundermined.Heseemstowanttoresumetheleader-to-leadersummitsthatChinasuspendedwithMrKoizumi.‘Abe steps up – Japan’s new leader’, 23 September 2006, The Economist, © The Economist Newspaper Limited, London 2006.
5: Assessment
Theforcesofnationalismandpopulismcanbeseenacrossmuchoftheworld,butperhapsthesinglemoststrikingeventisthecollapseoftheDoharoundoftradenegotiations.Whilethereasonsforthefailureofthetalksarecomplex,highamongthemwastheunwillingnessofkeyindustrialisedanddevelopingcountriestoexposepoliticallyandsociallysensitivesectorslikeagriculturetogreaterglobalcompetition.
Butthestrengtheningofnationalistsentimentscanbeseeninotherareasaswell.InEurope,tensionsacrossChristianandMuslimcommunitiespersist,demonstratednotonlybythecaseofHirsiAliintheNetherlands,butalsobycontroversiesaroundreligiousdressintheUnitedKingdom.InJapan,thenewprimeministerhastakenstronglynationalisticstancesinpastroles,althoughhisapproachtosensitivehistoricalandgeo-politicalissuesasleaderremainsunclear.
Atthesametime,therehasbeenasignificantriseinresourcenationalismindevelopingcountries.ThisismostclearlyillustratedbytheBoliviannationalisationofitsnaturalgassector,butthistrendcanalsobeseenincountriessuchasVenezuelaandRussia.
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From the signposts above and others, we see clear indications that all three fundamental objectives and driving forces – security and state power, efficiency and market incentives, and social cohesion and force of community – are shaping events in today’s world. As emphasised in Global Scenarios to 2025, it will be the eventual balance among these forces that will determine the direction in which the world goes.
Intheshortrun,itappearsthatsecurityandsocialcohesionaregreaterpoliticalimperativesthanmarketefficiency,particularlyinwesternEurope,NorthAmericaandJapan.EventslikethewarinIraq,tensionsoverIran,identitypoliticsinEuropeandresurgentnationalisminJapancontinuetodominatetheheadlines.Moreover,concernsoverthepossibilityofanothermajorterroristattackinwesternEuropeorNorthAmerica,whichsecurityservicesdeemhighlylikely,continuetogrowandrestrictionsonairtravelhavetightenedasaconsequence.Thesetrendsreinforcetheextensionofstatepower.
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So where are we heading?
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From
signposts to
scenarios –
Where a
re we hea
ding?
Thepastyearhasalsoseenthesecurityagendaexpandbeyondterrorismtoincludeenergysecurity.TheyearbeganwiththeRussianattempttoblockgassuppliestoUkraine,whichignitedawaveofconcernbywestEuropeanstatesoverthesecurityoftheirenergysuppliesandpotentialover-dependenceonRussia.Energysecurityhasbeenaleitmotifofgovernmentconcernsthroughoutthepast12months.
InareasasdiverseaswesternEuropeandChina,concernsoverthesocialconsequencesofmarketliberalisationcontinuetofesterandfindpoliticalexpression.
InEurope,thesearemostclearlydemonstratedbygrowingprotectionistsentiment.ButthereisalsoincreasinguneaseoverimmigrationandcontinuedexpansionoftheEuropeanUnionwithpoliticiansandbureaucratsinBrusselsseenbymanyasoutoftouchwiththeanxietiesofthepopulationsofmanywestEuropeancountries.
InChina,evenanunelectedleadershiphasbeenforcedtorespondtotheconcernsofsociety,disavowingthe“growthatallcosts”policyofthepreviousJiangZeminleadership,andpromulgatingamoresustainablepolicythataddressesthesocial,
economicandenvironmentalimbalancesthathaveopenedupasaresult,andwhichthreatenthestabilityoftherulingregime.
Despitethesesocialconcerns,globalisationcontinuestorunitscourseandtodeliverstronggrowthinmanydevelopingcountries.Thismaywellprovetobethemoredecisivetrendoverthelongerterm.Indeed,recentsignsofprotectionismmaywellbeevidenceofresistancetothepersistentmarchofmarketliberalisation,ratherthanatippingpointmarkingthereversalofglobalisation.Overthelastyear,theworldeconomyhasprovedremarkablyresilientdespite
thefailureoftheDohatraderoundandanumberofadverseeconomictrends,includinghigherenergypricesandahousingslumpintheUSA.Wealsoseeincreasinglyimaginativeuseofmarketincentivesandmarket-basedsolutions,suchasCalifornia’sinitiativetoreducegreenhousegasemissionsthroughacarboncredittradingscheme.
WhatdoesthismeanforthescenariossetoutinGlobalScenariosto2025?Theysetoutatriangularspacewhoseapexesareformedbyourthreefundamentalobjectivesanddrivingforcesandthescenariosthemselvesplayoutacrossthisspace,with
“It appears that security and social
cohesion are greater political imperatives
than market efficiency “
21
manypossiblecombinations.Giventhiscomplexity,nooneapexwillshapeworlddevelopmentswithoutbeingcheckedorhavingtocombinewithortakeaccountofothers.Theconsequenceisaworldofcomplexinteractionsandtensions.
Statesarestrengthening,butstatesarealsocontinuingtoglobalise.Economicintegrationandcooperationisbalancedwithgrowingconcernsoversecurityandtheneedfortighterstatecontrolofmarketsandsociety.Societiesdonotrejectthestate’semphasisonmarket-basedefficiencyandpeopleareincreasinglylinkedglobally,buttheir
concernsremainverymuchfocusedaroundthemselvesandthecharacteristicsoftheirownspecificsocialcontexts.
Lookingaheadoverthenexttwentyyears,allthreeofourglobalscenarios–LowTrustGlobalisation,FlagsandOpenDoors–remainvalid.Theyexpress,inarchetypalform,theinteractionsandtensionsplayingoutamongourthreesetofobjectivesandforces.Whereweareintheworldmay,however,determineourperspectiveonthequestionofwhichscenarioisdominant.
LookingatRussiatodaywithitstenserelationswith
Georgia,securityconcernsoverNATOexpansionandstrategicinterestsshapingitsenergypolicies,weseeacalculatedrealpolitiknationalismcharacteristicofLowTrustGlobalisation,butalsoevidenceofaFlags-typeresponsebythestatetosocialpressuresthroughincreasespendingonsocialprogrammes.Incontrast,Sweden’sSeptemberelectionresultsshowacountrydeterminedtopreserveitsmuchvauntedhightaxandhighwelfaresocialmodel,whilerespondingtopopulardemandsforgreaterchoiceandhigherqualityinitspublicserviceprovision,thedilemmathatliesattheheartofOpenDoors.
Asalreadymentioned,noonescenarioisentirelydominant.However,itdoesappearthatsecurityandsocialcohesiondominatetheday-to-dayagendasofthekeyglobalplayers,whilemarketforcesstillcontinuetoassertthemselvesinexorablyandtheglobaleconomyremainsrobust.WearethereforelivinglargelyinaworldthatisperhapsacombinationofthescenariosofLowTrustGlobalisationandFlags.Asignificantevent,suchasanaturaldisaster,terroristattack,economicvolatilityorregionalconflictcoulddragtheworlddecisivelytowardsamoreentrenchedFlagsscenario.Ifeconomicgrowth
“A significant event, such as a natural disaster
or terrorist attack could drag the world decisively
towards a more entrenched Flags scenario “
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From
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Where a
re we hea
ding?
remainsstrong,conflictsdonotescalateandnonaturalorterroristcatastropheshit,theLowTrustGlobalisationscenariowillplayoutmorestrongly.
Ourdiscussionsuggeststhatwealsoneedtoconsidertheextenttowhichothercombinationsofourthreescenariosarepossible.Thefeaturesthatcharacteriseeachoneindividually–theglobalsolutionsofOpenDoors,theanarchyanddistrustofFlags,andtheadhocglobalcoalitionsandstructureofstatecontrolsofLowTrustGlobalisation–willnotoccurwithoutreferencetotheothers.Noneofourthreefundamentalobjectives
anddrivingforcesislikelytodissipate.
Moreover,theeventsof9/11–oneoftheshapingmomentsofour2005globalscenarios–demonstratednotonlyhowglobalisedourworldandourperspectiveshavebecome,butalsohowlocalisedaresomeoftheemergingpowerfulactorsthataremakingtheirpresencefeltwithinthisglobalisingworld.Statesincreasinglyfindthemselvescaughtinthemiddleofthisglobal-localaxis,havingtorespondtothecontrarydemandsofbothsides.Wecannolongerentertainthecertaintiesofthe1990saboutwheretheworldisgoing.Rather,
fromtoday’svantagepoint,thosecertaintiesappearassimplicities.Thetriangularspaceopenedupbythethreedrivingforcesofthe2005globalscenarioslooksincreasinglylikeaverycomplexterrainacrosswhichwehavetonavigateourfutureintoday’sageofuncertainty.
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Order information:Theoriginalpublicationof‘ShellGlobalScenariosto2025’isavailabletopurchasethroughthefollowingdistributors:
UKThe Eurospan GroupT:+44(0)2072400856F:+44(0)2073790609E:[email protected]
USInstitute for International EconomicsT:+18005229139F:+17036611501E:[email protected]
INTERNETBooksarealsoavailableonAmazon.co.ukandAmazon.com(tofindthebooksearchforShellGlobalScenarios)
Royal Dutch Shell plcGlobal Business EnvironmentCarelvanBylandtlaan302596HRTheHagueTheNetherlands
©February2007
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