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02/03/2005
2020...The Global Economy
Every five years the National Intelligence Council takes a look at
the future of the world, a global outlook covering everything
from terrorism to the economy. Headquartered at the CIA, but
independent of it, the council seeks to combine the views of all
15 of the nation’s intelligence agencies. I thought the following
comments, limited to the economy, would be of interest.
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Report of the National Intelligence Council’s 2020 Project
[On the emergence of China and India and other thoughts]
Most forecasts indicate that by 2020 China’s gross national
product will exceed that of individual Western economic powers
except for the United States. India’s GNP will have overtaken or
be on the threshold of overtaking European economies.
Because of the sheer size of China’s and India’s populations –
projected by the US Census Bureau to be 1.4 billion and almost
1.3 billion respectively by 2020 – their standard of living need
not approach Western levels for these countries to become
important economic powers.
Barring an abrupt reversal of the process of globalization or any
major upheavals in these countries, the rise of these new powers
is a virtual certainty. Yet how China and India exercise their
growing power and whether they relate cooperatively or
competitively to other powers in the international system are key
uncertainties. The economies of other developing countries,
such as Brazil, could surpass all but the largest European
countries by 2020; Indonesia’s economy could also approach the
economies of individual European countries by 2020.
By most measures – market size, single currency, highly skilled
work force, stable democratic governments, and unified trade
bloc – an enlarged Euro will be able to increase its weight on the
international scene. Europe’s strength could be in providing a
model of global and regional governance to the rising powers.
But aging populations and shrinking work forces in most
countries will have an important impact on the continent. Either
European countries adapt their work forces, reform their social
welfare, education, and tax systems, and accommodate growing
immigrant populations (chiefly from Muslim countries), or they
face a period of protracted economic stasis.
Japan faces a similar aging crisis that could crimp its longer run
economic recovery, but it also will be challenged to evaluate its
regional status and role. Tokyo may have to choose between
“balancing” against or “bandwagoning” with China. Meanwhile,
the crisis over North Korea is likely to come to a head sometime
over the next 15 years. [Ed. no kidding!] Asians’ lingering
resentments and concerns over Korean unification and cross-
Taiwan Strait tensions point to a complicated process for
achieving regional equilibrium.
Impact of Globalization
We see globalization – growing interconnectedness reflected in
the expanded flows of information, technology, capital, goods,
services, and people throughout the world – as an overarching
“mega-trend,” a force so ubiquitous that it will substantially
shape all the other major trends in the world of 2020. But the
future of globalization is not fixed .Some aspects of
globalization – such as the growing global interconnectedness
stemming from the information technology (IT) revolution –
almost certainly will be irreversible. Yet it is also possible,
although unlikely, that the process of globalization could be
slowed or even stopped, just as the era of globalization in the late
19th and early 20th centuries was reversed by catastrophic war
and global depression.
Barring such a turn of events, the world economy is likely to
continue growing impressively: by 2020, it is projected to be
about 80 percent larger than it was in 2000, and average per
capita income will be roughly 50 percent higher. Of course,
there will be cyclical ups and downs and periodic financial or
other crises, but this basic growth trajectory has powerful
momentum behind it. Most countries around the world, both
developed and developing, will benefit from gains in the world
economy. By having the fastest-growing consumer markets,
more firms becoming world class multinationals, and greater
S&T stature, Asia looks set to displace Western countries as the
focus for international economic dynamism – provided Asia’s
rapid economic growth continues.
Yet the benefits of globalization won’t be global. Rising powers
will see exploiting the opportunities afforded by the emerging
global marketplace and the best way to assert their great power
status on the world stage. In contrast, some now in the “First
World” may see the closing gap with China / India, and others as
evidence of a relative decline, even though the older powers are
likely to remain global leaders out to 2020. The United States,
too, will see its relative power position eroded, though it will
remain in 2020 the most important single country across all the
dimensions of power. Those left behind in the developing world
may resent China and India’s rise, especially if they feel
squeezed by their growing dominance in key sectors of the
global marketplace.
The greatest benefits of globalization will accrue to countries and
groups that can access and adopt new technologies. Indeed, a
national level of technological achievement generally will be
defined in terms of its investment in integrating and applying the
new, globally available technologies – whether the technologies
are acquired through a country’s own basic research or from
technology leaders. The growing two-way flow of high-tech
brain power between the developing world and the West, the
increasing size of the information computer-literate work force in
some developing countries, and efforts by global corporations to
diversify their high-tech operations will foster the spread of new
technologies. High-tech breakthroughs – such as in genetically
modified organisms and increased food production – could
provide a safety net eliminating the threat of starvation and
ameliorating basic quality of life issues for poor countries. But
the gap between the “haves” and “have-nots” will widen unless
the “have-not” countries pursue policies that support application
of new technologies – such as good governance, universal
education, and market reforms.
Those countries that pursue such policies could leapfrog stages
of development, skipping over phases that other high-tech
leaders such as the United States and Europe had to traverse in
order to advance. China and India are well positioned to become
technology leaders, and even the poorest countries will be able to
leverage prolific, cheap technologies to fuel – although at a
slower rate – their own development.
*The expected next revolution in high technology involving the
convergence of nano-, bio-, information and materials
technology could further bolster China and India’s prospects.
Both countries are investing in basic research in these fields and
are well placed to be leaders in a number of key fields. Europe
risks slipping behind Asia in some of these technologies. The
United States is still in a position to retain its overall lead,
although it must increasingly compete with Asia to retain its
edge and may lose significant ground in some sectors.
More firms will become global, and those operating in the global
arena will be more diverse, both in size and origin, more Asian
and less Western in orientation. Such corporations,
encompassing the current large multinationals, will be
increasingly outside the control of any other state and will be key
agents of change in dispersing technology widely, further
integrating the world economy, and promoting economic
progress in the developing world. Their ranks will include a
growing number based in such countries as China, India, or
Brazil. While North America, Japan, and Europe might
collectively continue to dominate international political and
financial institutions, globalization will take on an increasingly
non-Western character. By 2020, globalization could be equated
in the popular mind with a rising Asia, replacing its current
association with Americanization.
An expanding global economy will increase demand for many
raw materials such as oil. Total energy consumed probably will
rise by about 50 percent in the next two decades compared to a
34 percent expansion from 1980-2000, with a greater share
provided by petroleum. Most experts assess that with substantial
investment in new capacity, overall energy supplies will be
sufficient to meet global demands. But on the supply side, many
of the areas – the Caspian Sea, Venezuela, and West Africa –
that are being counted on to provide increased output involve
substantial political or economic risk. Traditional suppliers in
the Middle East are also increasingly unstable. Thus sharper
demand-driven competition for resources, perhaps accompanied
by a major disruption of oil supplies, is among the key
uncertainties.
China, India, and other developing countries’ growing energy
needs suggest a growing preoccupation with energy, shaping
their foreign policies.
For Europe, an increasing preference for natural gas may
reinforce regional relationships – such as with Russia or North
Africa – given the interdependence of pipeline delivery.
[Source: cia.gov]
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Hott Spotts will return Feb. 10.
Brian Trumbore
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