Imagine you are back at the dawn of the century in January 2000, perhaps celebrating the non-event of the past year: the Y2K bug that fizzled.
Now consider some of the real game-changers from 1999: the first human chromosome successfully sequenced; a mobile device called the BlackBerry arriving on the scene; the dorm room innovation of the year, Napster, forever changing the music business.
Today, in the warm glow of hindsight, we have a very different view of how any of those events changed our world. Back in January 2000, the words "Al Qaeda," "iPhone," "Barack Obama," "Wikipedia," "Arab Spring," or "Twitter" would have drawn blank stares. All our tomorrows do, indeed, have a way of taking us by surprise. And as for the yesterdays? As Macbeth discovered, they have a nasty habit of having "lighted fools the way to dusty death."
Now we've crossed into 2013. That means we are now officially a dozen years into the century and it has proven to be a tumultuous period from the very first year on. As we head toward the global crossroads of 2025, it's time to imagine some scenarios for the next 12 years. The reasoning is simple -- if leaders do not have the courage to imagine the future, they won't play a part in shaping it. But if the future is so elusive, where do we start?
My first suggestion: Just as 1999 was not terribly helpful in our understanding of the 12 years to follow, start by ignoring some of the "big stories" spiking in 2012: the chill on the Arab Spring, the Facebook IPO debacle, the emergence of Turkey and sub-Saharan Africa as the new emerging market darlings, the iPhone5 launch amidst the tablet wars, the U.S. election that seemed to last forever contrasted with the Chinese non-election, the fiscal cliffhanger. Instead, ask: What do high-level trends tell us about where we might be headed?
Fortunately for us, 2012 closed out with a 200-page door-stopper of a report from the U.S. National Intelligence Council on the megatrends that will shape the planet all the way up to 2030. Of the trends outlined, the report singles out the growth of a global middle class as a "tectonic shift." It goes on to declare: "For the first time, a majority of the world's population will not be impoverished, and the middle classes will be the most important social and economic sector in the vast majority of countries around the world."
My old firm, McKinsey, through their independent analysis, also came to a similar core conclusion this past year. They found that by 2025, the majority of the world's population will have at least $10 a day at their disposal, placing them in the "consuming" class.
Let's go from there. How you interpret the impact of a "global middle/consuming class" can lead towards extremely different visions of the next dozen or so years. Of course, the reality will be somewhere in between, but neither extreme is beyond reason.
So let's consider six questions we should evaluate for the long and winding road to 2025:
1. Is 2012's Malaise a Harbinger of 2025? Despite the talk in the 2012 U.S. presidential election of the disappearing middle class, and the economic malaise all around the globe, by 2025 it's possible that most of the world's population is marching towards a more prosperous future: a majority will be in the "middle class," thanks to the emerging markets.
But the counter argument to this vision is that the fast moving economies must contend with a slow moving context; the emerging markets represent a bubble that could burst or deflate as India, China, Russia and Brazil have started to do already over the course of 2012. Politics, bureaucracy, non-inclusive growth, repression, corruption -- these, among others, can act has a brake on the spread of prosperity.
2. Revolution or Natural Deceleration? With a population of about 10 million at the outset of the Industrial Revolution, GDP per capita in Great Britain doubled over 150 years. China and India alone, with populations of about a billion apiece, will experience roughly 10 times the economic acceleration on 100 times the scale. Another kind of Industrial Revolution, far more revolutionary than any preceding it, could be underway.
But such a revolution, if it occurs, could be boxed-in by natural limits created by the revolutionary growth itself: We will run low on natural, mineral and fossil fuel resources, clean water and air, and arable land. And the worsening human condition itself could stop a revolution: consider that more than 50 percent of the world is already crammed into urban areas; a billion are in slums; chronic diseases are on the rise.
3. Is it Finally Africa's Turn or Not? Africa -- the perennial "final frontier" -- is a litmus test of how inclusive this global growth might be. According to the IMF's World Economic Outlook, 12 out of the 20 fastest growing economies in the world will be in Africa. Rates of ownership of consumer durables, housing quality, health and education, suggest that consumption in sub-Saharan Africa has been growing more than three times faster than what GDP measures suggest, according to the economist Alwyn Young of the London School of Economics. If it is Africa's turn, other countries will be turning to the continent's resources to keep their place in line.
A look at McKinsey's "lions on the move" segmentation reveals some troubling issues with this scenario. The typology separates out the oil exporters, the diversified economies, and the transition nations. Balanced between the possibilities of a "resource curse" for those in the first category, highly uncertain political futures in the second and rather small economies in the third, the continent's future looks much less rosy -- and not much of the inclusive nirvana as it might appear at first glance.
4. Big Innovation: Taking-Off or Nearly Over? Some see innovators as optimists who will continue to push the envelope. Social media, mobile applications, cloud computing and big data are among the most significant high-tech breakthroughs converging in the near term. If you are a devotee of Ray Kurzweil you will believe that by 2029, we will have passed the Turing test: a machine can replace a human for any job.
Yet this innovation convergence is not guaranteed. Well-respected writers like George Mason University's Tyler Cowen and Northwestern University's Robert J. Gordon, for example, have independently sounded the alarm about the demise of real breakthrough innovation and future productivity growth in the U.S. And if smart innovation is over for the U.S., who takes up the lead?
5. Can U.S. Competitiveness Last? Factors like a bonanza in domestically produced natural gas or a revival in manufacturing, dominance in higher education and its intrinsic can-do, free-spirited culture could shore up U.S. competitiveness. While China's ascendance is inevitable, Beijing will offer a good counter-balance, primarily as an economic power and keep the U.S. on its toes.
To make the opposite case, if the U.S. has no "cold war" innovation rival that galvanizes a sustained political commitment to resources being put into fundamental innovation, competitiveness could suffer. Over time, top entrepreneurs may wind up with no more government-funded foundational innovations (e.g. Internet, web, wireless, biotech, alternative energies, etc.) upon which to expand. And as for the other factors: education in the U.S. at all levels appears to be heading towards a crisis, and can-do cultures can emerge with greater urgency in parts of the world that are hungrier for growth and see prosperity within their reach.
6. Will Democratic Capitalism Spread or Hit the Wall? Thanks to the ubiquity of wireless and Web technologies, there will be more bottom-up co-creation, active citizenship and user-generated customization -- and inclusiveness in both business and political innovation. Even within undemocratic systems, dismantling of state controls by pragmatic politicians may prove inevitable.
But there may be a strong counter-argument. A push for democratic institutions will sustain only if these institutions are decisive and are perceived to be immune to manipulation by interest groups. The pressure in most emerging or troubled economies to prioritize fast growth may mean that there is a preference for a strong center that dispenses with individual freedoms in favor of just getting "things done." The continuing troubles of western economies since 2008 may be the strongest argument in favor of state capitalism in favor of "runaway" free-market capitalism.
Well, there you have it. There is as much here to disagree with as there may be ideas that resonate as we look to 2025. What do you think? What questions did we miss? Let the debates and imagination begin...I will be back to comment on your ideas.
Bhaskar Chakravorti is the Senior Associate Dean of International Business & Finance at The Fletcher School at Tufts University. He is founding Executive Director of Fletcher's Institute for Business in the Global Context. He has taught innovation and entrepreneurship as faculty member at Harvard Business School and Fletcher and was a leader of McKinsey's Innovation and Global Forces practices as a Partner based out of the Boston office. He is the author of the book, The Slow Pace of Fast Change. The Institute recently started its Fletcher Futures project: http://fletcher.tufts.edu/
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