The National Intelligence Council is composed of the 17 U.S. government intelligence agencies. The Council’s Global Trends Report has, since 1997, worked with a variety of experts both in and out of government service to examine factors such as globalization, demography and the environment to produce a forward-looking document to aid policymakers in their long-term planning on key issues of worldwide importance.
“We are at a critical juncture in human history, which could lead to widely contrasting futures,” wrote Christopher Kojm, the Council’s Chair, in his introduction to the current Report, published just this week.
The Report is intended to stimulate thinking about the rapid and vast geopolitical changes characterizing the world today and possible global trajectories over the next 15 years. Significantly, it does not seek to predict the future – we have a dreadful track record in the regard – but instead it seeks to provide a framework for thinking about possible futures and their implications.
The Report argues that the breadth of global change we are facing today is comparable to that during and surrounding the French Revolution and the rise of the Industrial Age in the late 18th century, but it is being realized at a much faster rate. While it took Britain more than 150 years to double its per capita income, India and China are set to undergo the same level of growth in a tenth of the time, with 100 times more people.
I encourage all investors to read it carefully. Despite the vital importance of the “long cycle,” it isn’t likely to change your current portfolio outlook, but it will provide a helpful backdrop to your overall thinking and to your longer-term outlook and analysis.
Among the Report’s conclusions is that there are certain “megatrends” that are relative certainties and that we should prepare to deal with them. These include the following (and note that all have investment implications, some of them potentially enormous).
- For the first time in history, a majority of the world’s population will no longer live in poverty by 2030, leading to a healthier global population and a major expansion of the middle classes in most countries.
- Life expectancies will continue to expand rapidly. “Aging” countries (such as those in the West – particularly Europe – and Japan) face the possibility of a significant decline in economic growth.
- Asia is set to surpass North America and Europe in global economic power, but there will not be any hegemonic power.
- Demand for resources will increase owing to global population growth from 7.1 billion people today to about 8 billion by 2030.
- Demand for food is likely to rise by 35 percent and energy by 50 percent over the next 15-20 years.
- Nearly half of the world’s population will live in areas with severe water stress by 2030. Fragile states are most at risk, but China and India are vulnerable to volatility of key resources.
These megatrends will inevitably lead to a variety of vexing and potentially “game-changing” questions. Each has profound political, economic, market and human implications.
- Will divergences and increased economic volatility result in more global breakdown or will the development of multiple growth centers lead to increased resiliency? For much of the West, the challenges involve sustaining growth in the face of rapidly aging populations. For China and India, the main challenge will be to avoid “middle income traps.” In general, the global economy will be increasingly crisis-prone and won’t return to pre-2008 growth levels for “at least” the next decade.
- Will current governments and international institutions be able to adapt fast enough to harness and channel change instead of being overwhelmed by it? While this sounds generally like the investment challenge we face daily, there are a variety of major global issues in this regard. Potentially (more) serious government deficits driven by rapid political and social changes are likely to exist. Countries moving from autocracy to democracy are often unstable and about 50 emerging market countries fall into this major risk group. All of them could – at least potentially – grow out of their governance incongruities by 2030 if economic advances continue.
- Will rapid changes and shifts in power lead to conflicts? The general answer is surely duh, with uncertainty only as to the number, extent and nature of the conflicts. Limited natural resources—such as water and arable land—in many of the same countries that will have disproportionate levels of young men—particularly in Sub-Saharan Africa, South Asia, and parts of the Middle East—increase the risk of intrastate conflict. It is particularly troubling to note that any future wars in (at least) Asia and the Middle East may well include a nuclear element. Many of these conflicts, once begun, would not be easily containable and would (obviously) have global impacts.
- Will regional instability, especially in the Middle East and South Asia, spill over and create global insecurity? See the commentary re #3 above. Wash; rinse; repeat.
- Will technological breakthroughs occur in time to solve the problems caused by rapid urbanization, strains on natural resources, and climate change? The report identifies 16 key “disruptive” technologies with potential global significance out to 2030. They are generally grouped around potential energy breakthroughs, food- and water-related innovations, big data and the forecasting of human behavior, and the enhancement of human mental and physical capabilities, including anti-aging.
- Will the United States, as the leading actor on the world stage today, be able to reinvent the international system, carving out potential new roles in an expanded world order? The Report anticipates that the U.S. will likely remain primus inter pares (first among equals) among the other great powers in 2030 because of the multifaceted nature of its power and legacies of its leadership. But it also expects that the “unipolar moment” is over. Overall, power will likely shift to networks and coalitions in a multipolar world. The United States’ (and the West’s) relative decline is seen as inevitable but its future role in the international system is much harder to project. China is deemed unlikely to replace the U.S. as international leader by 2030. Non-state actors and even individuals, empowered by new media and technology, will be an increasing threat. A reinvigorated U.S. economy – spurred perhaps by U.S. energy independence – could increase the prospects that the growing global and regional challenges would be addressed. However, if the U.S. fails to rebound, a dangerous global power vacuum would be created.
From these building blocks and issues, the Report posits potential futures including a best-case scenario of increased cooperation between the U.S., China and Europe as economic and security interests increasingly align, a worst case scenario of conflict and fragmentation in a stalled global economy where political, social and economic inequalities work against integration and stability, and a scenario involving a “nonstate world,” where the nation-state does not disappear, but countries increasingly organize and orchestrate “hybrid” coalitions of state and nonstate actors which shift depending on the issue.
There is no earth-shaking news here. But it is helpful to take a step back and look at the bigger picture once in a while. Because change is so often incremental, it is easy to underestimate how quickly it can happen and how much impact it can have in the aggregate. In the markets as in life, caveat emptor.