–with a glimpse of the future - EIUgraphics.eiu.com/files/ad_pdfs/eiu_60years_online.pdf · The...

�with a glimpse of the future

60Celebrating years

Economist Intelligence Unit TheEconomist

3 Introduction

5 Look back in wonder

9 The world in 2026

13 2066 and all that

© The Economist Intelligence Unit Limited 2006 1

Table of contents

Celebrating 60 years…with a glimpse of the future

The year 1946 might fairly be seen as the dawnof a new era. The end of the second world warwas inspiring a wave of innovation. An Italian

invented the modern-day espresso machine.American scientists developed the first"electronic brain". And a French designerunveiled the "bikini" bathing suit.

In London, meanwhile, an Englishman'sthoughts turned to commerce. Even before thetide of the war had turned in the Allies' favour,Geoffrey Crowther, the venerable editor of TheEconomist, saw the need for an "IntelligenceBranch". Its purpose: to conduct research thatwould help business navigate the difficult post-war environment. In October 1946 he advertisedfor a "Director of Intelligence", the formalbeginnings of the Economist Intelligence Unit.

As our first director, Geoffrey Browne, wouldsay 25 years later:

"The work of the EIU reflected the aspirations andproblems of the time. It helped industrialists toexplore and assess new markets and advised on therebuilding of their supplies of raw materials. It gaveinformation and opinion on trading and monetaryconditions, studied the implications of stateownership for industries in several countries, andsought opportunities for investment overseas."

The branch—or Unit as it would shortly beknown—was soon up and running, publishingquarterly reports and special bulletins onindustries and far away countries about whichpeople still knew little. Many of the subjectsreflected the nature of the times: "The control ofnationalised industries" (1948), "Forecast oftraffic through the Suez canal" (1956) and "Theeffect of the Common Market on major British

industries" (1959). With a mere tweak of the title,other reports could have been written today: "Theeffect of China's export drive on UK andCommonwealth trade" (1959) and "The climatefor re-entry of a major British contractor in Iraq" (1961).

Not everyone was impressed. Many staff at TheEconomist looked down on the new venture, andthe sense of separation was cemented when theEIU moved into its own buildings. Mr Browne wasparticularly resentful about the lack ofinvestment by The Economist in its wholly ownedsubsidiary, noting in the early 1980s that "themain Board still cherish the myth that a quarterof a million pounds was poured into the EIU. Itwasn't. The EIU did not need it, and TheEconomist had not got it to give."

At The Economist, contempt was fuelled in the earlydays by those who ditched the Intelligence Unit forthe newspaper. They typically complained of havingto work on projects despite having little or noexpertise or guidance, such as: "The market for frogs' legs in France" (1962). OneEIU émigré described his former firm as full of "slowtypists, fast women and silly little men". Anotherdescribed the EIU's role as "looking up things for firms that they're too lazy to look upthemselves". In fact, senior EIU analysts in thosedays were more likely to be on the croquet lawn,interrupted only by the occasional client phone call.

What follows is a look back over 60 years ofchanges, and a view of the future: first over thenext 20 years, where projections can be based ona modicum of solid intelligence; and then 60 yearsahead where, not entirely tongue-in-cheek, we tryto envisage the world of our great-grandchildren.


Introduction


1

1 Economist Intelligence Unit, Key Issues in Applied Economics 1947-1997: Essays in celebration of TheEconomist Intelligence Unit's 25th anniversary, Longman, 1972.2 Ruth Dudley Edwards, The Pursuit of Reason: The Economist 1843-1993, Hamish Hamilton, 1993.

2



Politics, war, demography, economic growth,social welfare and technology havetransformed the world over the past six

decades, and these factors are sure to do thesame for the next six. The political map in 1946,when the EIU was born, is almost unrecognisabletoday: the UN had only 55 members; there was asingle nuclear power; the sun still shone on theBritish (and French) empires; and an "ironcurtain" was descending across Europe. But withdecolonisation and the collapse of the Sovietbloc, the number of UN members increased to192 and continues to rise. Today, we cover over200 markets, including Macau, Puerto Rico andthe British Virgin Islands.

It may not always seem like it, but the world hasbecome more peaceful over the past 60 years.Wars kill fewer people today than at almost anytime since the 1920s. The 1950s, 1960s and1970s were the deadliest decades since thesecond world war; the 1980s were calmer, butstill bloodier than the post-cold war 1990s—which in 60 years' time may be seen as a goldendecade of optimism, openness, innovation andescalating equities.

On the eve of September 11th 2001, manywondered what could possibly go wrong. Sincethen, Islamist suicide bombers have struck NewYork, Washington, Bali, Madrid, London andthroughout Israel. Several other plots havebeen confounded. More attacks are inevitable.The overarching fear is that terrorists willobtain weapons of mass destruction, a worrythat in part prompted the US-led invasion ofIraq. With the nuclear club enlarging to includefive permanent members of the UN SecurityCouncil, India, Pakistan and Israel, mostrecently North Korea and possibly soon Iran,

those fears are not unfounded and will persistfor the foreseeable future.

The body/mass indexDespite the threat of nuclear conflagration, theworld's population continues to multiply, risingfrom nearly 2.5bn mid-century to some 6.5bntoday. Most of this increase has occurred in thedeveloping world, where 20 of the 25 largesturban areas are located. In 2006, for the firsttime ever, more people are living in cities than inthe countryside.

There have been marked changes in health andsocial indicators too. The human race has neverbeen healthier or smarter. The prevalence ofchildhood immunisation and antibiotics in theindustrialised world is often credited for theimprovements. Life expectancy has stretched anextra 20 years since mid-century; the average IQhas risen steadily too. We even look different. Weare taller and heavier than our grandparents andgreat-grandparents. As one American researcherat the University of Chicago told the New YorkTimes, the transformation is "unique among the7,000 or so generations of humans who have everinhabited the earth".

Unfortunately, we are also fatter. Obesity hasbecome a growing issue. One in three Americanadults is chronically overweight, and healthcarecosts are ballooning accordingly. As Americanwaistlines expand, so others' follow. Obesityrates have surpassed 20% in OECD members suchas Mexico, Australia and the UK. Britain'sNational Audit Off ice estimates the cost ofobesity at some £7.4bn a year. Fat is a feminineissue too, especially in developing countries.One-third of women in Latin America and overtwo-fifths of women in emerging Europe, the

Look back in wonder

3

3 Gina Kolata, "So Big and Healthy Grandpa Wouldn't Even Know You", New York Times, July 30th 2006.

Middle East and North Africa are overweight,according to the UN's Food and AgricultureOrganisation.

The wealth of nationsThe world economy has grown even moredramatically, increasing tenfold since 1946. Evenwith rapid population increases, economic outputper head has risen nearly fourfold. While wealthynations have benefited most—total output in realterms in the G7 states has increased fivefold—theshare of the world's population living on theequivalent of US$1 a day almost halved between1981 and 2001 to 21%, according to a World Bankstudy. This means that some 400m people havebeen pulled out of poverty, largely as a result of thegreater economic freedoms in China. Not all arebetter off though, especially those living in Sub-Saharan Africa, where around one-half of thepopulation at the start of the new century wasliving in extreme poverty.

Globalisation—or at least the falling barriers totrade and capital movements—deserves much ofthe credit for the improving fortunes of so many.Foreign investment has flooded into the developingworld for much of the previous two decades, andinternational trade and investment havemultiplied. When the EIU started advising clientcompanies, most were manufacturing at home andonly cautiously probing foreign markets. Over the

years this has changed, triggered in large part bythe invention of standard-sized containers that canbe lifted from lorry to ship, cutting out thelaborious reloading process. As a result, shippingtimes and costs were slashed. According toCalifornia-based Matson, a pioneer incontainerisation, cargo handled per man hourincreased nearly sevenfold between 1959 and 1976,and a ship's average stay in port shortened fromthree weeks to 18 hours. This also meant thatmanufacturing abroad became a viable proposition.

Nowadays, the truly multinational firm no longerviews location and distance from HQ as a big deal.The development of another great 20th centuryinnovation, the Internet, has only served toenforce this offshoring trend. When once onlyproduction line workers resisted suchdevelopments, now white-collar employees inEurope and North America also fear for their jobs.

But without embracing change, companies faceever quicker oblivion. Richard Foster and SarahKaplan (Creative Destruction, 2001) noted that ofthe companies in the S&P 500 at its inception in1957, only 74 were still on the list in 1997. Whereasone company in 65 would drop from the S&P 90rankings each year during the 1920s and 1930s,since 1998 the rate of attrition annually has beenone in ten. At this rate, by 2020 a company canexpect to stay in the S&P 500 on average for justone decade. And as mutual funds try to emulate4

6 © The Economist Intelligence Unit Limited 2006


4 Richard Foster and Sarah Kaplan, Creative Destruction: Why Companies That Are Built to LastUnderperform the Market--And How to Successfully Transform Them, Random House, 2001.

Top ten stocks in the S&P 500, 1980 Top ten stocks in the S&P 500, 20051. IBM2. AT&T3. Exxon Corp4. Standard Oil, Indiana5. Schlumberger6. Shell7. Mobil8. Standard Oil of Cal9. Atlantic Richfield10. General Electric

1. General Electric2. Exxon Mobil3. Microsoft4. Citigroup5. Procter & Gamble6. Wal-Mart7. Bank of America8. Johnson & Johnson9. AIG10. Pfizer



the riskier and richer hedge funds, turnover of theaverage portfolio already occurs once a year, fivetimes faster than in 1960.

Finance has also seen the pros and cons ofglobalisation. In 1946 currency risk was low andexchange controls were common. It wasunthinkable that Europe's big economies mightone day dump their currencies for a European-wide "euro", or that Moscow would have abooming stockmarket.

Today, trillions of dollars race around the planetat the click of a mouse. Over the last few decades,personal, corporate and national debt levels havesoared, alongside the new skyscraper banks thatissue the credit. Financial instruments are morecomplicated and sophisticated, the playthings ofmath PhDs that staff new hedge funds. The worldeconomy is surely better off for the innovationand the globalisation of finance that followed thedemise of the Bretton Woods system of fixedexchange rates. But numerous financialtroubles—the Tequila crisis (1994), the collapse ofBarings bank (1995), and financial emergenciesand crashes in Asia (1997-98), Russia (1998) andArgentina (2002) to name just a few—are starkreminders of the downsides.

From Burqa to boardroom: gender on the agendaFinally, the EIU has monitored many radicallychanging social indicators over the decades. Atthe forefront have been gender issues, which willbe as transformative in coming decades as theyhave been in the past. In 1950 one-third ofAmerican women of working age had a paid job;now two-thirds do. There are 40% more womenthan men in higher education. Since 1970, womenworldwide have filled two out of three new jobs.But women are still under-represented in theparliaments of most Western democracies. Thesituation is improving: the 1945 British House ofCommons included 24 women; in 2005 thatnumber increased to 128, or one in five. Thestruggle for female equality has become evenmore compelling in many emerging markets, and

will continue to be over coming decades.Like freedom and democracy, education,

especially for girls, has also spread across theglobe. One simple statistic demonstrates whatcan be achieved. In the 1960s only one-third ofSouth Koreans had completed secondary school;today, 97% of 25-34-year-olds have a high-school education—the highest level in theindustrialised world.

Foreign travel is no longer a novelty either,with the proliferation of the passenger jet.Passenger numbers have expanded 200-foldsince 1945, largely as a result of the packageholiday. Brits especially have forsaken their ownstony beaches for the Costa del Sol and othersunnier climes. In 1971 only 6.7m UK residentsever went abroad. By 2005 the annual holidayexodus had reached 44m.

For those who stay put there are plenty of newopportunities to connect with the world. Some1.2bn people surf the web, and twice thatnumber use mobile phones, far more than havetraditional fixed lines. This factor alone hashugely improved the livelihoods of poorercountries, especially in Africa.

The EIU too has embraced change. Gone are thetyping pools, slide rules and long-divisioncalculations. Over the last decade, we havemoved from quarterly reports, to monthly andeven daily analysis, as we have shifted toelectronic publishing and delivery. Gone too isthe (one-sided) rivalry with The Economist. Anera of co-operation dawned years ago, except onthe cricket pitch—EIU 146-6; Economist 88 allout, if you must know.


Celebrating 60 years…with a glimpse of the futureCelebrating 60 years…with a glimpse of the future

We feel mildly confident about makingpredictions up to one-third of the waytowards 2066. That's because in 2026

the world may not look too different fromtoday. America's dominance of the 20thcentury will continue into the first few decadesof the 21st. The US spends nearly 4% of its GDP(about US$500bn in 2006) on defence, morethan the next nine countries combined. Thatgap will widen, even with the rising power ofChina. Economically too, the US will remain topdog. It will continue to enjoy strongproductivity gains as a result of years oftechnological superiority. Perhaps moreimportantly for the long-term prospects is thedemographic outlook. The workforce oftomorrow has already been determined by thebirth rates and education levels of today. TheUS population is benefiting from high fertilityrates—relative to other developed countries—and continued immigration.

Grey heirsGrowing life expectancy, however, means thatthe US will start to grey more quickly. The first ofnearly 83m baby-boomers are gearing down forretirement, and this will put increasing pressureon the working-age population. The old-agedependency ratio—the number of over-65s as ashare of those aged 15-64—will reach 25% by2026, up from 18% currently. By 2026 SocialSecurity (public pensions) will be paying out asmuch in benefits as it receives in contributionsand interest income earned on trust fundinvestments combined, and the situation willworsen. But pensions reform will have to wait, asthe more pressing concern of public healthcaretakes precedence. The Medicare programmealready pays out more than it receives, and as

costs soar the shortfall will widen. By 2018, allassets will be exhausted.

But in 2026 the US will merely be where the EUfinds itself now, at least in terms of old-agedependency, although people will probably beworking into their 70s. In Europe, old-agedependency will surpass one-third by 2026. Theoverall population in a 27-member EU will stabiliseat current levels, but the workforce will shrink evenafter allowing for increased immigration. Thereproductive failings of the Europeans, coupled withcontinuing inflexibility in Europe's labour markets,will gradually corrode long-term economicprospects. The EU economies will be secure for thenext 20 years though, both in nominal and PPPterms (see box on page 10). Ireland will continue tolead the way, with one of Europe's youngestpopulations, overtaking even the US in income perhead terms, with Scandinavian economies not farbehind. Eastern Europe will still be playing catch-up. Their economies will power on, but they face a demographic blight from emigration, disease and low birth rates, especially in the former Soviet states.

The EU will look positively vibrant compared withJapan. Its ageing workforce has already begun toshrink, and will contract by a further 15% over thenext 20 years, irrespective of any government policyto stop it. There will be only two people of workingage supporting every over-65, putting immensestrains on the welfare system and public services.Japan's economy, even at flattering marketexchange rates, will slip behind China's from 2014.

Globalisation's winners and losersChina and India together will account for 45% ofgrowth in the world economy until the firstquarter of the century, when the world economywill have doubled in size in real terms. On the

The world in 2026

basis of output, valued in dollars, India and SouthKorea will replace Italy and Spain in the world'sTop Ten by 2026, while continued rapid growthelsewhere in Asia will narrow the gap withdeveloped nations (although for the billion or soAsians still surviving on US$2 a day, actuallyclosing that gap will remain a distant dream).

The prospects are mixed for the rest of theworld. Latin American economies, which haveimproved notably in recent years, will continue tobe held back by ongoing weaknesses in theirpolitical systems and shortcomings in the healthand skills of the workforces. Asia's unbridledgrowth will be good for oil exporters, whileEurope and the US will still depend on crude. And

if oil production has already peaked,developments in the Middle East will continue tosend shudders through the global economy. Iraqwill be a source of instability long after the USforces quit, and a nuclear Iran no more reliable.

Much of Africa has long been denied the fruits ofglobalisation. Nearly three-quarters of HIV/AIDSsufferers are in Africa, and their deaths willdevastate the population. The UN's goal ofhalving the share of the world's population livingon less than a US$1 a day by 2015 may well beachieved, but not in Africa.

Companies in 2026: emerging Asia, ageing EuropeShifting demographic and economic factors willkeep more nimble business minds focused on twotypes of market opportunities: the fast-growingdemand for mass-produced goods in Asia; and astill-wealthy but ageing population in thedeveloped world. What in practice will this meanfor investors?

Successful companies will be those with evermore specialised skills, offering increasinglypersonalised products. A flatter world willdemand an even flatter corporate structure. Andthe successful manager will be the one whofigures out how to make his company'sknowledge workers more productive. Customerswill be more demanding, more numerous andmore dispersed. The resulting personalisation ofproducts and services will require increasedcollaboration, whether suppliers interactingwith vendors, salespeople with customers,employees with one another, or companies withtheir proliferating partners.

Japan may provide a glimpse of the future.Unicharm, the country's leading manufacturer offeminine-hygiene products and nappies, isdiversifying into healthcare (nappies for adults)and even pet care (nappies for dogs). Lawson,Japan's second-largest chain of conveniencestores, is turning one-fifth of its outlets intoelderly oriented stores. The changes includewider aisles for wheelchairs, automatic doors and



What is PPP?

Why do economists frequently talk aboutPurchasing Power Parity, or "PPP"? Comparingprices just by using the market exchange ratetends to make rich countries look richer andthe poor look poorer. That's because whileincomes in poor countries may be relativelylow, so too are the prices of locally producedgoods and everyday services. For example, acheap haircut in Manhattan might cost US$20;one in Shanghai might cost five renminbi, or63 US cents at current exchange rates. The NewYork haircut is unlikely to be 32 times better,and the US-based client certainly won't fly toChina to get his hair cut more cheaply. Sowhich of the two is really better off? The PPPcalculation re-weights a country's output ofgoods and services into a comparable measureusing a common set of prices, in order to give afairer reading of living standards.

On this more favourable measure, China'seconomy will surpass that of the US in totalsize by 2017. Of course in per head terms, mostof Asia will be around one-fifth of US levels.But Asian tigers, Singapore, Hong Kong andTaiwan will surpass or come close to the US inper head terms at PPP by 2026.



larger price tags. Hot-selling product linesinclude ready-made meals that can be eatenwithout chewing, smaller portions and batteriesfor hearing aids.

Ageing, coupled with the desire for higherquality of life and the growth of a service-oriented economy, will generate a boom inhealthcare services. Health spending is set togrow in line with demand for geriatric care, aspeople continue to live into their 90s. In the US,healthcare is set to become the fastest-growingsector, in terms of employment. Life sciences,biotechnology research f irms and bigpharmaceutical companies will co-operateclosely on new products. China and India canalso play a role in research and development.State-run health systems in Europe will bestretched, creating an increasing role for theprivate sector.

The automotive industry provides anotherexample of multiple challenges. By 2026 Asianconsumers will account for almost one-half ofworldwide sales. This will prompt demand forsmall, easy-to-drive and low-cost cars.Carmakers in developed markets, however, willface declining customer loyalty. In Europe andNorth America, there will be a sizeable niche forup-market, higher-quality vehicles. As inretailing, it will be mid-market producers thatface the toughest challenges.

Auto and other manufacturers in the developedworld will still hold advantages in high-value-added and capital-intensive activities. Proximityto customers will also be critical, which is whyJapanese carmakers will continue to build newplants in North America and Europe. Risingdemand for the personalised products will lead tocustomisation locally. But the low-cost emergingworld will still attract the generic and easilyautomated manufacturing processes.

With more than 100m cars being sold each yearby 2026, mostly in Asia, this will generate hugedemand for energy, keeping prices high andvolatile. That will mean exploring harder-to-get-at oil and gas fields, and an increased drive for

environmentally friendly technologies andalternative energy sources. Environmentalconcerns will become a key factor in thechanging markets, in terms of the products thatare bought, lifestyle aspirations andgovernment regulations.

0 50 100 150 200

Japan

Russia

Italy

Germany

China

UK

Brazil

US

India

2026 2066

Population growth

(2006=100)

* Rank in 2066 by total population.

Sources: US Census Bureau; Economist

Intelligence Unit.

1*

3*

7*

18*

2*

16*

23*

12*

13*

Picturing the next 20 years is relatively easy;imagining life 60 years hence—holidays onthe moon, daily meals replaced by little green

pills, Woody Allen's orgasmatron—borders on thescience fiction. Or does it? We don't have to resortto flights of fancy to make sensible extrapolations.In fact, we can safely say that we are totallyconfident that scenarios painted below will indeedcome to pass in 2066. For a start, demographictrends, which are difficult to reverse, will bereasonably well known at least to mid-century. Wecan fairly predict that in 2066 the world will becomemiddle-aged, with the median age rising from 28today to around 40. One in five people will be atleast 60 years old, compared with one in ten today.

Ageing will have a major impact on politics,economics and business, especially in thedeveloped world. The modern welfare state willhave come to an end, with the public sector indeveloped countries doing less than in the past.Most major economies, with the exception of Indiaand the US, will struggle with shrinking workforces.

We can also take a fair guess that scientificinnovation will accelerate the pace of change. Thespread of the Internet alone will have arevolutionary impact. An estimated 10% of theworld's written information is currently availableonline; and only one in five people has access. In60 years' time, computers will have become morepowerful, fully integrated into other electronicand communications devices, and will have spreadto the vast majority of the world's population.This may mean an almost instantaneous, globalsupply chain, a more unified media, and freecommunications anywhere, anytime, by and toanyone in the world.

Perhaps more diff icult to predict will beprogress in biotechnology. The mapping of thehuman genome is proceeding more quickly than

expected, and is already yielding significantdiscoveries. By 2066 this project will becomplete, and will transform our knowledge ofpersonal health, and make it easier to identifyhereditary illnesses. We will live longer, and betaller, stronger and healthier, assuming that theworld manages to avoid a global pandemic of oneform or another. Practical applications forgenomics and genetics will make biotechnologyone of the century's booming fields.


Celebrating 60 years…with a glimpse of the futureCelebrating 60 years…with a glimpse of the future

2066 and all that

0 500 1,000 1,500 2,000

Egypt

Mexico

Philippines

Brazil

Pakistan

Indonesia

Nigeria

US

China

India

Top ten by population, 2066

(m)

Source: Economist Intelligence Unit.



Along with biotechnology, robotics, pioneered inJapan, will spread rapidly across the globe. Asworkforces are replaced by robots, the demand forever-new effort-saving devices will translate intonew demand for ever more sophisticated robots, andtherefore jobs for designers and maybemanufacturers too (although these could be done byother robots). Every household in Japan will own atleast one robot by 2015, according to governmentofficials. Robots as pets, or grandchildren even? Thefirst signs are already here.

Such technological developments will play havocwith patterns of economic growth, but will certainlyfavour those countries with strong educationalsystems, a young population and a culture ofinnovation. Asia will benefit, and by 2066 the Asiancentury will be in full swing. In real terms, six of theten largest economies in the world will be in Asia.This will still include Japan, clinging onto ninth spotdespite a population shortfall of 30m people. Itsinfluence in the region will have been surpassed byChina, India, Indonesia, South Korea and possiblyeven Pakistan. Economic output in China and India,on any measure, will be larger than that of the US.

However, the long-term effects of the Chinesegovernment's one-child policy will become clearerin 2030 when the workforce starts shrinking. In2066 China will be a nation of 1.4bn, strugglingwith issues of greying and possibly a dangerousurban-rural divide. India's population, bycontrast, will have increased to 1.7bn people andthe size of its workforce will be growing.

The fall and rise of empireRelative economic strength will underpingeopolitical influence. By 2066, the US will haverelinquished its hyper-power status. Although itwill continue to have the most bombs and rockets,and cutting-edge military technology, it won'tdare to act without the nod from a now verywealthy China and India. Indeed, as the USpopulation gets older and its dominance wanes, itmay become more inward-looking, and less willingto take on foreign military responsibilities in amulti-polar world. Instead, it will focus on

relations to the south, as a source of immigration,and the demand for its products in the Pacific Rim.ASEAN will become more important than NATO.

The Middle East will continue to have its troublespots, as Israel, the Palestinians and the Arab worldcontinue to talk about talks, while reverting tointermittent fighting. Western reliance on MiddleEastern oil and gas may diminish as a result ofenergy-saving reforms and new fuel technologies incars. Iran, however, will have asserted a pre-eminent position in the region, as its populationexpands, and it bristles with nuclear weapons. Itmay even have become a friend of the US.

The EU will be transformed. One in two or threeEU citizens will be over 60 years of age, with theshortfall in working-age people in western Europe

0 100 200 300 400 500

Pakistan

Japan

UK

South Korea

Russia

Brazil

Indonesia

US

India

China

Top ten by GDP, 2066*

(US$ trn)


* At purchasing power parity exchange rates.


Celebrating 60 years�with a glimpse of the future

being made up by Ukrainians, Russians, NorthAfricans and Turks, most of whom will be membersof an enlarged but looser Union. However, theissue of enlargement and more specificallyimmigrants will remain a sore point, as Europe'sageing population accepts that it cannot live withthem and cannot live without them.

Britain, as one of the few EU members with agrowing population, will have regained some of herformer lustre, as she becomes Europe's largesteconomy again. Despite some wobbles along theway, a deeply held commitment to liberal economicsand political tolerance means that internationaltalent and money will continue to flow throughLondon. The price of the average house will beworth several million pounds, but all homes will beenvironmentally friendly and self-sufficient.

Global warming, corporate dinosaursEnvironmentalism will have become a central partof political and economic life. Even modestincreases in average temperatures will createincreasingly extreme weather patterns. Modelssuggest that a rise in the average temperature of0.5ºC-1.0ºC is quite possible over the next 20years. Another degree or two seems quite likely by2066. Depending on how chronic the situationbecomes in the next six decades, political partiesmay be organised around the issue of globalwarming, and the economic sacrifices that society

must make to keep the world from overheating.The Stern report of 2006 will mark the start of asustained attempt by governments around theworld to address global warming. It will miss someof its targets, but the human race will survive.

The needs of the environment and ageingpopulations will loom large in every corporatestrategy too. Biotech and big pharmaceuticalcompanies will work ever more closely to applyscientific discoveries. Today's emerging-marketcorporations will become the multinationals oftomorrow, but will be so globally integrated thatthey become indistinguishable by nationality. Newcompanies will emerge and grow to colossalstrength within a single year as new ideas andtechnologies are rolled out almost instantaneously,and existing conglomerates merge to survive. Otherformer giants will disappear equally fast.

Tens of thousands of truly giant globalenterprises, larger than anything seen before, willroam the earth hunting for profits, merging andspawning offshoots at an ever faster rate. But thiswon't be the capitalist nightmare feared by anti-globalisation protestors. Instead, they will beworking for these companies, which, in turn, willhave turned their attention to solving globalproblems of disease and poverty as they realise thatit is their own employees who are dying of AIDS andtheir potential customers still too poor to buy theirproducts. Thus the UN's Millennium DevelopmentGoals will finally be achieved in all regions, albeit40 years later than planned, and by corporationsnot governments. Big branded multinationals (seetable) will be seen as a power for good, andeveryone will cheer in 2066 when the Dow Jones

New countries by 2066?

Abkhazia, Catalonia, Chechnya, Corsica,Euskadi, Flanders, Guangdong, Kosovo,Kurdistan, Padania, Palestine, Puntland,Quebec, Sardinia, Scotland, Siberia,Somaliland, South Ossetia, Tibet, Transdniestr,Wales, Wallonia, Western Sahara, Xinjiang�

Globalcorp 2066?

1. Exxon-Hydro

2. Tatasoft

3. Quaero

4. GGS (formerly Google Goldman Sachs)

5. Shanghai Automotive

6. RambaxiPfizerSmithKlineBeechamNovartis

7. OxbridgeHarvard

8. MyMcSpace

9. WholefoodsTesco

10. BollyDisney


Celebrating 60 years�with a glimpse of the future

index, after enjoying 60 years of 12% compoundgrowth, hits the ten million mark.

Threats to rosy scenariosHow, readers may ask, can we be so certain of allthis? For sure there are threats to the scenariosoutlined above; nuclear war, environmentalmiscalculation, a strike by an asteroid and theemergence of revolutionary technology, to namebut four. It is safe to say that nuclear weaponsare more likely to have proliferated than to havedisappeared by 2066 (although some form ofnuclear defence system may be developed).Mutually Assured Destruction may have saved abi-polar world in the previous century, but howmight nations cope with a nuclear "Mexican

stand-off", with several powers simultaneouslypointing their nukes at one another?

Tensions can come from many sources. Risingeconomic nationalism will create friction in Asia,especially in competition for natural resources.This has the potential to worsen as Japan's starfades and old rivalries with China and South Koreacome to the fore. North Korea and Taiwan may alsobe flash points, although their reintegration intoa dynamic and powerful Chinese sphere ofinfluence is more plausible. And there are thedelicate relations between nuclear-armed Indiaand Pakistan, which could explode at the drop of agrenade pin. The greatest political danger,however, will be in the Middle East, wherereligious differences, ancient hatreds, oil-

0 5 10 15

Czech Republic

Greece

Norway

Denmark

Switzerland

Austria

Hungary

Peru

Hong Kong

Ireland

South Africa

Colombia

Poland

Nigeria

Australia

Argentina

Taiwan

Turkey

Canada

Philippines

Thailand

France

Malaysia

Germany

Mexico

Russia

Brazil

US

India

China

GDP in 2066

(US=100 at PPP)

* Out of 53 countries.


149.5

135.8

100.0

1*

2*

3*

5*

6*

11*

12*

13*

15*

16*

18*

19*

20*

21*

24*

25*

26*

29*

30*

33*

34*

38*

39*

42*

43*

44*

47*

48*

49*

50*

0 50 100 150 200 250

Nigeria

Pakistan

Indonesia

Egypt

Mexico

Brazil

Turkey

India

Italy

Argentina

China

Russia

Japan

Germany

France

Malaysia

Canada

UK

Netherlands

Australia

Austria

Sweden

Denmark

US

S Korea

Taiwan

Ireland

Hong Kong

Singapore

GDP per head in 2066

(US=100 at PPP)

* Out of 53 countries.


1*

2*

3*

4*

5*

7*

9*

10*

11*

13*

15*19*

20*

21*

24*

26*

28*

29*

32*

33*

37*

38*

39*

42*

43*

44*

48*

51*

53*

dependent economies and stunted political lifecould easily last another six decades.

Perhaps the greatest threat of all is a morerapid overheating of the planet than expected.Recent studies in the UK have been especiallygloomy. The UK's Meteorological Office recentlyreleased a study showing that the incidence ofdrought is expected to increase significantly bythe end of the century. Using a climate modelthat looked at the impact of global warming,scientists at the Met Office's Hadley Centrewarned that regions affected by moderatedroughts could double to affect half the earth'ssurface within the next 100 years. More troublingis that whereas 1% of the earth currently suffersfrom extreme drought, nearly one-third could by2100. And if the drought does not get us, therising sea levels might. In either case, hope liesin technology, either to reduce greenhouse gasesor by allowing people to survive somehow in thesweltering, drought-ridden conditions of 2066.

But if we don't assume the worst, then we feel confident of one particular image of thefuture—of an eccentric figure, talking to hisrobot, while trying to stay cool in the record-breaking heat of another Mediterranean Londonsummer. He could well be an analyst from theEconomist Intelligence Unit. And he's probablydiscussing what the world will be like another 60years hence.



The world leader in globalbusiness intelligence

An Economist Group business

Our team of 650 analysts and economists constantly monitorsand forecasts business conditions in 201 countries—keepingyou on top of the issues that matter

Here are just some of the ways we can support your work:

• Country analysis and forecasting, including our 5-year macroeconomicand long-term forecasts

• Risk ratings and analysis, including risk modelling

• Industry analysis and forecasting, including extensive market-sizing data

• Management thinking and advice for global executives

• Custom publishing and research projects

• Top level strategic forums, including Government Roundtables, industryand management meetings

LondonTel: +44 (0) 20 7576 8181E-mail: [email protected]

New YorkTel: +1 212 698 9745E-mail: [email protected]

Hong KongTel: +852 2802 7288E-mail: [email protected]

Contact us today to arrange your FREE trial:

CIG Ad 210x270 v3 22/11/06 11:30 AM Page 1

LONDON

26 Red Lion Square

London

WC1R 4HQ

United Kingdom

Tel: +44 (0) 20 7576 8181

Fax: +44 (0) 20 7576 8476

E-mail: [email protected]

NEW YORK

111 West 57th Street

New York

NY 10019

United States

Tel: +1 212 698 9745

Fax: +1 212 586 0248


HONG KONG

60/F, Central Plaza

18 Harbour Road

Wanchai

Hong Kong

Tel: +852 2802 7288

Fax: +852 2802 7638


–with a glimpse of the future - EIUgraphics.eiu.com/files/ad_pdfs/eiu_60years_online.pdf · The...

Documents

Transcript of –with a glimpse of the future - EIUgraphics.eiu.com/files/ad_pdfs/eiu_60years_online.pdf · The...