Global megatrends: How Prepared are we? (part 2)
Today we conclude what we began with last week on the theme of global megatrends and how prepared or otherwise we are.
Another observable megatrend is deepening interconnectedness. It has become a virtual cliché to say that our world has become a “global village” – global neighbourhood. The rise of Donald Trump has witnessed an American retreat from global neo-liberalism and globalisation. It is a great irony because the United States has been the driver of the new wave of globalisation that we have experienced since the 1944 Bretton Woods conference and the ensuing post-war international economic order. The revocation of the Atlantic Trade Agreement with Asia and Europe and the Brexit misadventure mark a retreat from globalisation and regionalism. But we believe that the forces of globalisation will survive. This is because global capital will always need access to bigger markets and global finance will always be attracted to areas outside its borders that bring the highest returns on investments.
The reality of our interconnected world has its good as well as negative fallouts. Global interconnectedness brings different human communities closer together while opening up opportunities for new ideas as well as new networks and opportunities. It will hasten the further reduction of trade barriers while encouraging increasingly sophisticated cross-border investment instruments. But it also portends risks. Nations that fail to realign their national systems to hook on to networks of economic opportunity will regress while the life-chances of their people will diminish. In addition, financial and banking contagion effects will become more difficult to contain in future.
Radical terrorists, for example, can recruit followers using social media and other forms of electronic communications. Policing borders, patrolling cyber criminals and keeping out radical extremist ideas will become a nightmare for national regulators and governments alike.
Poverty is forecast to decrease, although inequalities are likely to become even more pronounced as individual talent is increasingly rewarded. There will be fierce competition for workers with high skills and competencies. Fortunately, gender inequality is also expected to reduce, as more and more women assert their rights and enlightened governments put in place progressive legislation in terms of gender equity.
Individual choice will also be enhanced. As individuals assert more rights, traditional communities and mainstream centres of power will come increasingly under pressure. What these changes will also promise is more choice for “prosumers” in terms of lifestyles, entertainment and consumption. The primacy of the individual in our mass consumer society will become even more pronounced in the years ahead.
Another megatrend that cannot easily be ignored is the rising global public debt. The average net ratio of public debt to GDP of the advanced industrial economies currently stands at 78 percent. By 2030 it is forecast to be 95 percent. Some conjectures project a rise to 213 percent for the USA and a whopping 386 percent for Japan by 2035. This trend is complicated by demographics. Meeting the health and social security needs of aging pensioners will require an average spending of 4.4 percent of the total incomes of developed countries. Africa will be on a comparatively better footing because its youthful population and the fact that its overall public debt figures are lower than the global average. But countries such as Nigeria will have to be more circumspect. Indeed, the IMF has already warned that our debt profile of N22.7 trillion is already heading towards the danger zone.
The inter-mixture of debt and public pensions will mean that the fiscal space to manoeuvre for developed economies will reduce. The future of the dollar as a world reserve currency may increasingly be imperilled. China alone holds over US$2 trillion of American treasury bills. For now, it seems to be in their mutual interest not to rock the boat. But if Donald Trump throws up enough tantrums to trigger a trade war between China and the United States it could force China to make a call on her investments, thereby triggering forces that could undermine the global economic and financial equilibrium.
At current trends, Nigeria’s total debt outlay could mushroom in excess of US100 billion. That would totally be unsustainable. In 2005, our external debt had reached some US$36 billion. Financial profligacy had thrown us into a situation that amounted to debt peonage. The government was paying an average of US$5 billion on servicing the interest payable alone. The Olusegun Obasanjo administration entered into negotiation with the Paris Club which resulted in a settlement that enabled the country to get a new lease of life from its decades-long debt peonage. Unfortunately, it seems history is repeating itself. I believe that if we must borrow at all, it must be for infrastructure projects that guarantee a full return on investments. We also need greater discipline in our public finance and expenditure systems.
Going forward, developed countries will need to drastically rationalise their social security systems to ensure a healthier balance sheet for their public finances. There is need for a new generation of leaders in both advanced and developing countries who have a better understanding of public finance and will help design fiscal and budgeting systems that ensure more prudent spending, cutting down on profligacy and pay sensitivity to intergenerational imperatives in fiscal policy.
One of the megatrends that will define our future is economic power shift. Our twentieth century, as Walter Lippmann described it, was “the American Century”. American generosity through the Marshall Plan enabled Europe and some part of Asia to rise, Phoenix-like, from the ashes of war. American leadership was central to the construction of the post-war Bretton Woods international economic order. At its best, America has stood as a beacon of hope for a rules-based international system and in the fight against poverty and disease. But unfortunately, also, the country has sometimes represented the forces of reaction and regression.
Following the fall of the Berlin War in 1989 and the subsequent disintegration of the Soviet Empire, the United States emerged as the only superpower in what has essentially become a unipolar world. Ironically, the Cold War and the so-called “balance of terror” between East and West was a guarantor of the international equilibrium. Unilateralism, by contrast, has led to the emergence of a less stable international order.
Napoleon Bonaparte long ago wisely counselled that we should let China sleep, because, when she wakes up, “the earth will tremble”. The rise of China is one of the defining features of our new twenty-first century. For millennia, the Chinese saw themselves as the Middle Kingdom – essentially the centre of the universe. That worldview weakened their ability to learn from others and to engage in that collective learning that goes into the making of what the British historian Arnold Toynbee termed “creative civilisations”.
In terms of nominal GDP, the United States outstrips China by a considerable order of magnitude, with US$20.252 trillion as against China’s US$13.093. However, if we base the comparisons strictly on purchasing power parity (PPP) terms, we could say the two are already at par. The Chinese themselves are uncomfortable with such comparisons; strictly preferring to pursue their quest for growth through their policy of “peaceful development”.
However one looks at it, the rise of China and the countries known as the BRICS (Brazil, Russia, India, China and South Africa), will transform the structure of world politics and economics beyond anything we have known. Today, at nominal GDP, the combined wealth of the BRICS currently stands at US$21.28 billion, which is way ahead of that of the United States. India has one of the world’s most rapid growth rates, averaging 7.5 percent while that of China is slightly lower, at 6.9 percent. These growth trends are considerably ahead of the current United States average of 2.3% and the EU average of 2.4 percent. At current growth trends, the world center of economic gravity would have all but shifted to Asia and the emerging economies by 2030, by which time the emerging economies will account for 57 percent of world GDP. China and India will both account for 35 percent of world population and 25 percent of world GDP.
We face not only a geopolitical shift in economic and political power, but also a shift in power from national governments increasingly to smaller players such as multinational corporations, international non-governmental organizations and rogue players such as armed guerrillas and organized terror groups. The rise of extreme ideological Salafi Islam and the hate-filled frenzy of those who dream of a world Islamic Caliphate will inevitably lead to a violent “clash of civilizations” as prophesied by Harvard political scientist Joseph Nye. Radical extremist zealots will force democracies to resort to “undemocratic measures” to control terrorist groups. The moral-constitutional foundations of the international liberal order will come increasingly under tension. Unfortunately, it is unlikely that the new emerging powers will be particularly committed to structuring a more stable international equilibrium and may not commit to building robust institutions for global governance.
Climate change will, of course, remain one of the great megatrends of our time. For the first time since Homo sapiens began to work on both feet on this planet, we have entered the Anthropocene Age — the age in which humanity by its own independent action is able to alter the basic character of the biosphere and eco-system of the earth as a planetary body. Worsening climate impact will result in further loss in biodiversity, water shortages, water pollution, deforestation and desertification.
In Nigeria we face the challenge of desertification which has been encroaching ferociously into our country while in the south we face the challenge of erosion and massive oil pollution in the creeks of the Niger Delta. Climate change is partly responsible for the Boko Haram insurgency as well for the violence and conflict associated with the militia herdsmen in the Middle Belt region.
These challenges call for greater coordinated global action. This may prove particularly difficult in light of the Trump administration’s retreat from multilateralism. At regional levels, governments should also work together on projects for mitigation as well as adaptation, while agreeing common norms for responsible action with regard to climate change and utilisation of natural resources.
Finally, there is the reality of black swans. The concept of the black swan was first popularised by the philosopher and statistician Nassim Nicholas Taleb. Taleb analyses the phenomenon of unexpected random, highly improbable events and their impact on politics, economics and society in general. Concern for such outliers, according to Taleb, is aimed at compelling leaders to re-focus on preparing for the unexpected and to correct “our blindness with respect to randomness, particularly large deviations”.
September 11, for example, was a “black swan event”. No one really saw it coming and the relevant agencies never prepared for it. Other improbable high-impact events of that kind could occur in the future: a nuclear accident; a massive attack on Iran by Israel leading to a conflagration in the Middle East; a new strain of manufactured Ebola wiping out millions in central Africa; technology breakdown wreaking havoc on banking systems across the world; and so on.
In our integrated global marketplace, the possibility that black swan events will spread through contagion effect is more likely than ever. National governments and their leaderships must therefore always be on a high state of alert.
Ahead of us, to echo Max Weber, is not the bliss of summer but an icy winter. There is hope for Nigeria and Africa. But we must also be prepared. Global structural changes will generate opportunities as well as negative fall-outs. Our nations, being particularly vulnerable, will suffer more than others when push comes to shove. It calls for a new generation of leadership on our continent – leaders of high intellect, commitment and vision — that will steer purpose-driven societies through new horizons of freedom and prosperity. Now as ever, eternal vigilance is the price of liberty.