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Breaking Futures 2012
Never in our lifetime has the future been in a more uncertain state.
In terms of the global economy, we have upped the probability on the "Forked Lightning" scenario of a double dip, where the second crash is even bigger than the one of 2008, to 20% (from 10). The reason is that one of the flags for this scenario has always been a sovereign default of note. Italy and Spain are candidates, the crucial thing to watch being the interest rate on their 10 year bonds. If it jumps above 7% for a prolonged time, the servicing of the bonds becomes problematic given the challenge of reducing the overall budget deficit.
The recent climate change conference in Durban has only revealed the deep divisions that still exist between nations on how to handle the issues. The upshot was to kick the can into another convocation in two years time. Accordingly we attach a 90% probability to our scenario "Dances with Wolves" in which the super-emitters like China and America carry on their dirty dancing act regardless. Alas, "Strictly Ballroom" – a tight agreement forcing nations to waltz together towards clearly set reductions in carbon emissions – is given a wild card probability of 10%
Last year we showcased "Ultraviolet", a scenario where advanced economies were caught in a U-shaped trap of lacklustre growth while emerging economies were enjoying a V-shaped recovery, as our favourite to win the race over the next five years.
Relations between Democrats and Republicans have fallen to an all-time low, just when co-operation between the two parties is essential to get America’s finances back in order. The focus has been on Europe; but it could easily switch to America if inflation picks up unexpectedly and interest rates rise.
2011 will be remembered as the year of the Arab Spring which toppled regimes in some countries and continues to be a revolutionary influence in others.
We have moved through the Age of Industrialisation and more recently through the Age of Knowledge, and currently stand at the dawn of the Age of Intelligence. With all the tools and machinery of the first era and all the information at our fingertips from the second era, we now face challenges of much higher complexity demanding a huge leap in the quality of education, skills, creativity, and all-round intelligence. Nations that understand this will do better than nations which remain blissfully ignorant.
Last year we talked about more smacks from Mother Nature. Sure enough, she duly delivered those smacks in Japan, New Zealand and several other countries. This year the risk is that a deadly strain of bird flu – a genetic mutation of H5N1 into a highly infectious influenza transmittable through coughing and sneezing – could escape from the laboratory that created it in Rotterdam. H5N1 kills 60% of the people it has infected.
Our mainframe scenarios for South Africa are "Premier League" to which we assign a 50% probability and "Second Division" which we give a 35% probability.
Breaking Futures 2011
At the end of every year, we produce a list of breaking futures for the following year. These are events, trends or issues that we think will make headlines in one way or another. Here is our list for 2011.
Increasingly, we are seeing a UV two-speed world developing where advanced economies are caught in a U-shaped trap of lacklustre growth, while emerging economies (China, India, Africa and South America) are enjoying a V-shaped recovery. The official forecasts of economic growth for 2011 have emerging economies growing at 6%, which is three times the estimate of 2% for advanced economies. Obviously, there are winners and losers in each group.
A double-dip Forked Lightning scenario cannot be ruled out where stock markets have a second crash as a result of bad news on the national debt front in Europe and possibly America. Two sure signs that the odds on this scenario are rising are an increase in interest rates on government bonds and a downgrading of their quality by the ratings agencies. In a sense, it is a repeat of 2008 in that the cause is easy money and the failure by governments to take the actions required to make the recovery sustainable. A shock event would be a national default of note.
An essay written by the famous British economist, Thomas Malthus, in 1798 stated that human population growth would eventually lead to starvation because food production could not keep up. With the industrial revolutions taking place in the two most populous nations on earth – China and India – the world is experiencing a growing scarcity of resources. The supercycle is real. It is not so much population growth per se but the increasing proportion of middle class people who aspire to the American lifestyle that is causing the problem. Whether it is food, water, minerals or energy, the market is getting tight and means of conserving resources by greater efficiencies or substitutes will grow in importance. After all, there is no Planet B.
2010 was not an easy year given volcanic ash disrupting airlines, the usual number of earthquakes around the globe and extreme winter conditions in Europe, the UK and North America. Because the world is more populous, more interdependent and has more energy in its atmosphere through global warming, be prepared for more disruptions and deaths as a result of extreme natural events.
The Great Recession has reintroduced a spirit of thrift and self-sufficiency among the general population, the like of which we have not seen since the 1950s in the aftermath of the Second World War. Equally, with higher costs of travel and freight charges due to a resurgent oil price, neighbourhood retail outlets and local industry are set for a revival. People are searching for the cheaper alternative and often it is close to home.
For smaller transactions, cellphones are set to feature more and more as the key device to make them happen – whether it is shopping in the supermarket, making transfers to relatives and friends or even being paid your monthly salary. Your cellphone will become your electronic wallet as you click and pay your way through life.
With the Americans pursuing Julian Assange for leaking all their diplomatic cables on the internet, things could get rough as the "hactivists" find ways of causing havoc to the websites of those in pursuit and their allies. Wikileaks has for the first time made the internet a battleground and the first shots have already been fired.
We had some close calls in 2010 such as the car bomb that did not explode in Times Square. We had many real terrorist incidents elsewhere that led to the loss of innocent lives. The threat level has not diminished at all; so it all comes down to the quality of intelligence versus the ingenuity of the terrorists as to what happens in 2011. Meanwhile, one cannot rule out a regional war between the two Koreas, which could get extremely ugly as the North has nukes.
Last year, we mentioned the possibility of a universal currency in light of the uncertainty surrounding the dollar as a reserve currency. This development is less likely now since nations, if anything, are more hostile towards one another now and more intent on looking after their own interests. We therefore repeat last year’s assertion that gold could breach $2 000.
Other than the FIFA World Cup, the most significant event of 2010 in South Africa was the launching of the New Growth Path by Ebrahim Patel. The way the document is implemented over the next few years could determine South Africa’s fortunes over the remainder of this century. Either we create a participative economy with a genuine chance of a better life for all; or we face the possibility of civil war caused by the gross imbalances in our society. Remember the rule of Marx: if the masses are alienated, expect a revolution.