Trends Identified
Material Expectations
Material expectations, fuelled by access to increasingly globalised communications and media, will be heightened by continued global economic growth, and by visibility of high standards of living in affluent states. Visible marginalisation, economic inequality and a sense of grievance, where they occur, are likely to increase in significance and become major political issues, possibly based around transnational agendas that advocate violent activism.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Global Trade
When the global economy grows, and the majority of major economies participate in that growth, a significant backlash against trade liberalisation is unlikely and international trade will grow.211 However, trade growth may be temporarily reversed in response to periodic economic, resource or financial crises. Moreover, environmental crises and rising transportation costs, linked to climate change and high energy prices, may lower, or even reverse trade growth, especially in manufactured goods.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Distribution of Economic Power
Economic power has long been wielded by wealthy, high-income states such as the US and, to a certain extent, by the EU and its individual members, to achieve desired outcomes. This can be done through the negotiation of trade arrangements or through coercive sanctions. However, rapid economic growth in developing economies, increasing economic interdependence, and competition for strategic resources will erode the utility and effectiveness of economic power. The trend towards a multi-polar economic landscape is likely to continue. As resource scarcity starts to impact, China, India, and resource-rich states such as Russia, Iran, Saudi Arabia, and possibly Brazil are likely to use economic levers to achieve geopolitical ends more frequently. By 2040, China’s and India’s output is likely to be of a similar magnitude to US and EU output, although their per capita income will remain significantly lower. Hence, 2 of the 4 largest global economies are unlikely to be high income states. The manner in which this disparity is perceived, and the extent to which China and India focus on internal development rather than wider global challenges, is likely to be fundamental to the global economic and strategic outlook.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
System of Global Economic Governance
The contemporary global economy bears little resemblance to the fragmented post-World War II period when the current global economic governance regime was constructed. Although institutions created 60 years ago have adapted, the IMF and the World Bank are struggling to become representative and to remain relevant. Efforts to develop global institutions that are structured, funded, and empowered to act as a stabilising force for international financial markets will continue.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Poverty
Between 1990 and 2002, global average incomes increased by approximately 21% and the number of people living in absolute poverty declined by an estimated 130 million; global child mortality rates fell from 103 deaths per 1,000 live births a year to 88; life expectancy rose from 63 years to nearly 65 years; an additional 8% of people in the developing world gained access to clean water; and an additional 15% acquired access to improved sanitation services.221 Economic growth is likely to lead to a continued reduction, albeit unevenly distributed, in absolute poverty.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Patterns of Labour Mobility
Remittances from migrants in developed states, worth $240 billion per annum, or more than twice the level of international aid, are the largest source of external capital in many developing countries and directly benefit 10% of the global population.224 Over half of the 16 million highly skilled expatriate workers in the 4 main destinations (US, Europe, Canada and Australia) have originated from outside the OECD area.225 Out to 2040, highly capable and skilled individuals, particularly those in niche or scarce areas, will continue to attract substantial rewards for their services and are likely to be mobile within the global economy. This flow of skilled migrants will become more complex and will be affected by the growth of research and entrepreneurial opportunities in developing economies, fluctuating migration policies, and changes to traditional career models in business and academia. This may result in a ‘brain circulation’ rather than a ‘brain drain’, as developing economies continue to rise, and opportunities and safeguards become more predictable; a reverse flow of people to countries of origin may accelerate.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Capital Flows
The volume of cross-border capital flows, both net and gross, is likely to increase, maintaining a high-level of financial interdependence between states. Gross capital flows have increased markedly over the last 30 years. For example, turnover on the foreign exchange markets generates flows of several hundred trillions of dollars per year. However, the majority of these trades represent short term speculative flows rather than longer-term investments, and net international flows, as a proportion of global output, are smaller than at the turn of the 20th century.226 The tension between the interdependency created by capital flows, and the instability that can be generated by capital flight, will continue. Financial instability may be one trigger by which protectionist- minded populations force de-globalising policies onto reluctant governments.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
The Role of Multinational Corporations
Over the last 30 years, industrial production has been de-centralised and geographically distributed in an unprecedented manner. Countries, regions, and firms have specialised in particular stages of a product’s manufacture in response to competition, internationalising the markets for goods, services and labour. Such specialisation requires large-scale transportation of components, and this has been facilitated by technological advances in transport and communications, and trade liberalisation.227 MNCs and out-sourcing have emerged as integrating factors in the globalised economy, producing networks of interdependence between states that are unprecedented in scale and pervasiveness. This integrating effort is likely to persist out to 2040. The rise of state-owned enterprises (5 of the 10 largest MNCs are currently state- owned by the Chinese, Brazilian and Russian governments) is likely to continue, as is the proportion of MNCs based in emerging rather than developed economies.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
Global Interconnectivity
The interdependence of the global system, under-pinned by physical links, international governance and norms, and a belief in the positive benefits of international markets and trade, is likely to act as a double-edged sword. It will act as a stabilising influence between major powers by raising the costs of confrontation and conflict, but is also likely to destabilise states and regions that are unable to cope with the increased competition and social change that interconnectivity brings. Interconnectivity and interdependence is epitomised by the symbiotic relationship between China and the US. On one hand both states are likely to see each other as a security challenge, but they will continue to exploit the economic opportunities that exist between them. However, the interconnectivity of the global system also represents a significant systemic risk to highly-integrated economies given that failure of one part is likely to have broad impact.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence
The Constituents of Power
Power is the ability to influence others. The constituents of power will continue to comprise a mix of ‘hard’ and ‘soft’ elements.229 Hard power is military, economic and some elements of diplomatic activity that can be used to coerce or pay others to change their behaviour. Soft power is the power of attraction based on culture (when it is pleasing to others), values (when they are attractive and consistently practiced), and policies (when they are seen as inclusive and legitimate).230 Soft power is at its most effective when under-pinned by hard power. The degree to which a state or group can combine hard and soft power into an amalgam of effective statecraft will determine their ability to achieve strategic objectives. Some states, especially in Europe, are already reluctant to use the military element of hard power. This trend towards a post- military society is likely to remain strong, but not irreversible. The ability of the Western liberal democracies to utilise power is likely to be challenged by the rise of alternative power bases in Asia, in particular in China and India. Moreover, all elements of power are likely to be wielded by a broader spectrum of actors and agencies, even by organised criminal, terrorist and insurgent groups.
2010
Global strategic trends - out to 2040
UK, Ministry of Defence