Resolutions and Predictions
So it’s January and a new year has broken. That means it’s time for those New Year resolutions (that, if you’re like me, will never be kept) and yes, all those predictions for what life will be like at the end of 2013. The newspapers are full of predictions such as where the S & P and FTSE indices might be on 31st December 2013.
I’m going to be controversial and say that these traditional predictions are potentially dangerous. They are dangerous for two main reasons:
(1) They don’t focus on the real issue. None of these predictions deal with the three big questions that should be on business leaders’ minds right now. These are:
• Who will be the architects of a new emerging world order?
• What will this new world order mean for my business?
• Which paths are we going to take to get from an old dying world order to a new order?
We need to ask these questions as there is an elephant in the room. We are on the edge of a major revolution in how the world is organised. I’m not talking about the much publicised potential shift of economic power from West to East. There is, potentially, something far deeper going on that we must focus on. And that is who the new rulers of the world will be. More of that later, but the important point to remember is that just looking at traditional measures means that we are thinking of the future in terms just of the past.
But traditional predictions and measures can be dangerous and downright dangerous for another reason.
(2) Certainty is assumed. Regrettably, there is no certainty. An unforeseen side effect of economic globalisation has been that we have created such a complex and interconnected world that it is impossible to make predictions. The data sets of the past are largely irrelevant. We are dealing with a huge global spider’s web. Pull at one thread and we don’t know for how long the spider web will vibrate or which threads will snap. We’re in the position where there are no national leaders who are fully in control of their economies. Not even Obama.
The Real Problem
The real problem, or the real issue is that both the architects of the current world order – powerful nation states (up until the Great Recession this was really only the US), and the financial markets, are suffering from a big crisis of legitimacy. One or even both of them could easily fall from grace and they could be replaced globally or regionally by totally new architects.
Just stop and think about the fact that unemployment levels in Spain and Greece could reach 30% within the next 12 months – that’s the level reached in Germany in the early 1930s. There are approaching 100,000 social disturbances (‘riots’) in China each year (China’s spending on internal security is increasing at around 13% per annum), India faces its own internal ‘social stresses’ and whilst all that’s going on in the US Republicans and Democrats are grappling with each other over the ‘fiscal cliff’. But this is not just a legitimacy crisis for the leaders of powerful nation states. Recall the LIBOR scandal, bankers bonuses (which was only to resurface again today) and the fiscal multipliers issue – the admission that the effects of austerity had been badly under-estimated by economists guiding national policy.
So, the ground is set for a big upset. Who could fill the gap? I explain in detail who the new global are and how they could work together in my book The Era of Global Transition: crises and opportunities in the new world – but you really need to consider the fact that an ‘Arab Spring’ isn’t limited to the Middle East. The unemployed youth in Europe grew by over 400,000 in 12 months – that’s well over the size of France’s and the UK’s armies combined.
We also need to remember that nation states are under incredible pressure at the moment. Their power of self-determination has been eroded (rightly or wrongly) by financial markets, technology is puncturing holes in national borders, the Great Recession has left many countries economically divided and that even new energy discoveries could open up border disputes. So expect to see some significant re-alignments – Putin’s moves to establish an Eurasian Union could just be the start.
Looking for Signals
What is clear is that just looking at traditional measures – GDP growth, inflation and stock market indices – won’t help you. Think instead about looking for signals or tremors that could warn of the start of a big shift. Some of the issues I’m looking out for include:
• Social cohesion in Europe
• Rising nationalism in Asia
• Conflict (1), not in military terms, but in terms of the emergence of economic imperialism
• Conflict (2), in military terms, as the hypothesis that the world is becoming a safer place needs to be tested. The South China Sea and Iran head up the list
• The impact of NATO’s scheduled withdrawal from Afghanistan
• Emerging indications of a rejection of consumerism
• Unfolding events in the Middle East particularly pathways to or away from democracy, the robustness of current geographic borders and the emergence of theocracy.
So 2013 is a year to look for tremors. It’s also a year to ask yourself and your organization critical ‘what if’ questions – and I’ll turn my attention to these in part 2 of this briefing.