Trends Identified

Going Viral

The previous chapter looked at the emotional and psychological impact of the multiple transformations the world is undergoing. This chapter considers another set of threats being shaped by global transformations: biological pathogens. Changes in how we live have increased the risk of a devastating outbreak occurring naturally, while emerging technologies make it increasingly easy for new biological threats to be manufactured and released—either deliberately or by accident.

2019

The Global Risks Report 2019 14th Edition

World Economic Forum (WEF)

Globalization patterns are changing, with rapid growth in data flows and a larger role for highgrowth emerging economies

Much of the recent focus on globalization has been on trade pullbacks, rising protectionist measures, and public hostility. As a phenomenon, however, globalization has not gone into reverse; rather, it has shifted gears to become more data-driven and more focused on South- South flows. The seeming flattening of globalization that followed the 2008 financial crisis disguises new patterns of connectedness. While cross-border flows of goods and finance have lost momentum, data flows are helping drive global GDP. Cross-border data bandwidth grew by 148 times between 2005 and 2017, to more than 700 terabytes per second—a larger quantity per second than the entire US Library of Congress—and is projected to grow by another nine times in the next five years as digital flows of commerce, information, searches, video, communication, and intracompany traffic continue to surge. In line with its rising economic role, the developing world is now driving global connectedness. For the first time in history, emerging economies are counterparts on more than half of global trade flows, and South-South trade is the fastest-growing type of connection. In the MGI Connectedness Index, Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has surged from number 25 to number seven. South-South and China-South trade jumped from 8 percent of the global total in 1995 to 20 percent in 2016. The shifting nature of the Chinese economy, toward a more R&D-intensive focus and away from low-cost manufacturing, plus China’s push through the Belt and Road initiative, may begin to create a new trade ecosystem with China at the core. By comparison, North-North trade and North-South trade have declined as a share of total trade, especially since the 2008 financial crisis. North-North trade is now 33 percent of the total, versus 43 percent in 2005 and 55 percent in 1995. Amid these shifts, our latest research suggests that China’s relationship with the world may be at a turning point. By 2017, China accounted for 15 percent of world GDP. It overtook the United States to become the world’s largest economy in purchasing power parity terms in 2014, according to International Monetary Fund data—for the first time since 1870. (In nominal terms, China’s GDP was 64 percent of US GDP in 2017, making it the secondlargest economy in the world). Behind these headline numbers lies a less-noticed shift: over the past decade, even as its economy has grown, China’s exposure to the world, as measured by the magnitude of flows of trade, technology, and capital with the rest of the world relative to its economy, has declined. At the same time, the world’s exposure to China (the magnitude of flows with China relative to the global economy) has increased since 2000. Metrics used to measure exposure include China’s importance as a market and supplier of goods and services; the importance of Chinese technology exports for global R&D spending; and China’s importance as a supplier of financing (Exhibit 2). Global value chains are also evolving. They are being reshaped in part by technology including automation, which could amplify the shift toward more localized production of goods near consumer markets. And they are changing along with global demand, as China and other developing countries consume more of what they produce and export a smaller share. As emerging economies build more comprehensive domestic supply chains, they are reducing their reliance on imported intermediate inputs. The result is that goods-producing value chains have become less trade-intensive, even as cross-border services are growing briskly—and generating more economic value than trade statistics capture, according to our analysis. Trade based on labor-cost arbitrage has been declining and now makes up only 20 percent of goods trade. Global value chains are becoming more knowledge-intensive and reliant on high-skill labor. Finally, goods-producing value chains (particularly automotive as well as computers and electronics) are becoming more regionally concentrated as companies increasingly establish production in proximity to demand.

2019

Navigating a world of disruption

McKinsey

Globalization of financial resources

An increasingly interconnected global financial system makes it more vulnerable to attacks by both state and non-state actors

2017

Strategic foresight analysis

NATO

Globalization & future markets

Globalization is a multifaceted process not limited to economic effects — political and social aspects are closely intertwined. But globalization has both proponents and critics. As the U.S. presidency of Donald Trump shows, the progress of free trade agreements and thus globalization strongly depends on the accordance and objectives of political leaders. In an interconnected world, migration constitutes one major facet of globalization with a strong impact on society and political debate.

2017

Megatrends: a bigger picture for a better strategy

Roland Berger Strategy Consultants

Globalization

The liberalization of global economic policy has opened borders, supply chains, and trade patterns, creating impacts in one country or region that affect or cascade to others, based on market activity.

2017

Beyond the Noise- The Megatrends of Tomorrow’s World

Deloitte

Globalisation reimagined

CEOs’ shift towards a targeted strategy signals the advance of globalisation – but it may diverge from how it’s looked in the past. Companies are not only affected by globalisation; the actions they take will shape it. And this time, the evidence shows, CEOs are going to do it a little differently.

2011

14th Annual global CEO Survey

PWC

Globalisation of Financial Resources

The financial networks and communication systems that manage the world’s critical resources are increasingly intertwined. The interconnected world creates greater opportunity for better management of global resources; it may also provide incentives for co-operation and multilateral approaches in addressing global issues. However, vulnerability to exploitation by non-state actors, ranging from international criminal networks to cyber criminals and terrorists, will increase. Attackers could target banking and financial institutions or communication systems. Additionally, as nations become increasingly interdependent, a negative economic event in one country could well be compounded globally as it spreads quickly to other markets.

2013

Strategic Foresight Analysis 2013 Report

NATO

Globalisation

During the next 30 years, the number of transactions, conducted irrespective of physical distance, is likely to increase. Such an expansion is likely to shape and, in general, improve everyday life for millions of people. A key feature of globalisation is likely to be the continuing internationalisation of markets for goods, capital, services and labour, which integrates geographically dispersed consumers and suppliers. This is likely to be an engine for accelerating economic growth, but also a source of risk, as local markets become increasingly exposed to destabilising fluctuations in the wider global economy.

2010

Global strategic trends - out to 2040

UK, Ministry of Defence

Globalisation

The world economy’s centre of gravity will continue to shift east and southwards, and new players will wield more power, some of them states, some of them non-state actors (such as multinational enterprises and NGOs) and others newly emerging megacities. Driving and facilitating many of these shifts in power and influence is globalisation, which operates through flows of goods, services, investment, people and ideas, and is enabled by widespread adoption of digital technologies. But globalisation will inevitably face counter-currents and crosswinds, such as geopolitical instability, possible armed conflict and new barriers to trade.

2016

OECD Science, Technology and Innovation Outlook 2016

OECD

Globalisation

The rapid convergence between the E7 (emerging seven economies of China, India, Brazil, Mexico, Indonesia, Russia and Turkey) and the G7 (global seven economies of Unites States, United Kingdom, France, Germany, Japan, Canada and Italy) has been accelerated by the global financial crisis. In 2007, total G7 gross domestic product (GDP, a country’s total economic output) at Purchasing Power Parity (PPP, the purchasing value in the local economy) was still around 60 percent larger than total E7 GDP8, yet by the end of 2010, PriceWaterhouseCoopers (PWC, a global consulting firm) estimates the gap had shrunk to around only 35 percent. The catch-up process is set to continue over the next decade: by 2020 total E7 GDP could already be higher than total G7 GDP.

2012

The future

Steria