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Scenarios for 2025
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
    Scenarios for 2025
Scenarios for 2025
               The long run, 2040 in brief




                                         Environment
                                                                        Waking
                                          Nine billions
                                                                            Up
                                          Technology
     Innate                              Energy, food,
 complexity                             water, resources
   requiring                                                       Yesterday’s
management                                                              Future
                                                 Success
                                                 within a core
                               Slow revival
                                                                   Neglect and
               Current
                                                                      Fracture
               difficulties
                               Chronic difficulties

               2010     2015       2020       2025    2030       2030    2040
Scenarios for 2025
               The long run, 2040 in brief
               The grounds of current difficulties




                                                                        Waking
                                                                            Up
     Innate
 complexity
   requiring                                                       Yesterday’s
management                                                              Future
                                                 Success
                                                 within a core
                               Slow revival
                                                                   Neglect and
               Current
                                                                      Fracture
               difficulties
                               Chronic difficulties

               2010     2015       2020       2025    2030       2030    2040
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
     The 1980s saw the start of fundamental changes:
                         Faith in markets

                         De-regulation and privatisation
The 1980s saw the start of fundamental changes:
                  Faith in markets

                  De-regulation and privatisation

                  A communications revolution
The 1980s saw the start of fundamental changes:
                  Faith in markets

                  De-regulation and privatisation

                  A communications revolution

                  An enormous expansion of the
                  world work force
The 1980s saw the start of fundamental changes:
                  Faith in markets

                  De-regulation and privatisation

                  A communications revolution

                  An enormous expansion of the
                  world work force

                  The outsourcing revolution
                  that tied all of this together

                  Easy money
Dow Jones index 1900-2012

 14000                                          The 1980s saw the start of fundamental changes:
                                                          2007
                                                                          Faith in markets
 12000
                                       2000
                                                                          De-regulation and privatisation
 10000
                                                               2009
                                                                          A communications revolution
                                                        2008
  8000                                   2002
                                                                          An enormous expansion of the
                                                                          world work force
  6000
                                                                          The outsourcing revolution
  4000
                                                                          that tied all of this together
                               1994


                                                                          Easy money
  2000

                1980

                  4000          8000            12000             16000
                         US nominal GDP $ bn
30,000   Asset price inflation


Dow Jones index 1900-2012

 14000                                     The 1980s saw the start of fundamental changes:
                                                                    Faith in markets
 12000

                                                                    De-regulation and privatisation
 10000
                                                                    A communications revolution
  8000
                                                                    An enormous expansion of the
                                                                    world work force
  6000
                                                                    The outsourcing revolution
  4000
                                                                    that tied all of this together
                                                         3000
                                                                    Easy money
  2000




                  4000          8000           12000      16000
                         US nominal GDP $ bn
Easy money

                         Asset price inflation

Asset building, saving      Asset consumption
Easy money

Asset price inflation

State deficits
Welfare bills –
and tax cuts – had
pushed many states
into chronic fiscal deficit
Percent split of UK GDP 2011
           100




                  Non-state
                   spending



            50


                              Non-welfare

                                            Social welfare
                    State                                    Not everyone in the
                   spending                   Education
                                Welfare                      wealthy world did well
                                related      Health care
                                                             out of the boom years
                                              Pensions




Welfare bills –
and tax cuts – had
pushed many states
into chronic fiscal deficit
In summary:
 The rich world saw Communism fail, and felt a universal optimism
 It funded much of this boom on debt, leading to asset price inflation
 Political pressures to extend welfare grew




                                                       High skills have done
                                                       very well in a world of
                                                       globalisation and
                                                       technological advance



                                                       Not everyone in the
                                                       wealthy world did well
                                                       out of the boom years


                                                       Low skills are unable
                                                       to compete with
                                                       automation and high
                                                       skill, low wage areas
In summary:
 The rich world saw Communism fail, and felt a universal optimism
 It funded much of this boom on debt, leading to asset price inflation
 Political pressures to extend welfare grew



 The US governments
 ordered the housing
 corporations, Freddie
 Mac and Fannie Mae,
 to extend credit to
 low income families.

 These held about half
 of all US mortgages.
 Banks treated their
 assets as triple A and
 passed them into the
 system.

 When the “sub-prime” mortgages failed, they left a $1.2 trillion hole,
 scattered around the world’s banks. Banks feared to lend to each other:
 the credit crunch. States used enormous sums to support banks.
 States debt grew due to low tax receipts and stimulus spending. It also
 became clear that some European states had been grossly imprudent.
Stimulus and rescue packages greatly extended the level of state debt.




When the “sub-prime” mortgages failed, they left a $1.2 trillion hole,
scattered around the world’s banks. Banks feared to lend to each other:
the credit crunch. States used enormous sums to support banks.
States debt grew due to low tax receipts and stimulus spending. It also
became clear that some European states had been grossly imprudent.
Stimulus and rescue packages greatly extended the level of state debt.


                                                  Easy money

                                                  Asset price inflation

                                                  State deficits

                                                  Private debt


                                                  Whilst banks were
                                                  the conduit for the
                                                  crisis, and had
                                                  behaved with great
                                                  ineptitude, they
                                                  were not truly its
                                                  origin. This was and
                                                  is a debt crisis.

When the “sub-prime” mortgages failed, they left a $1.2 trillion hole,
scattered around the world’s banks. Banks feared to lend to each other:
the credit crunch. States used enormous sums to support banks.
States debt grew due to low tax receipts and stimulus spending. It also
became clear that some European states had been grossly imprudent.
This was and is a debt crisis                   Easy money

                                                Asset price inflation

                                                State deficits

                                                Private debt
US Commercial bank lending $bn 2011
10000



 8000


 6000



 4000


 2000
                              Private debt

                                                    Commercial

    1952      1962     1972          1982    1992      2002
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
    Scenarios for 2025
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
The environmental problem has been discussed exhaustively,
and should perhaps be taken as read. Nine billions is
unsupportable without radical change.
The environmental problem has been discussed exhaustively,
and should perhaps be taken as read. Nine billions is
unsupportable without radical change.
The environmental problem has been discussed exhaustively,
                        and should perhaps be taken as read. Nine billions is
                        unsupportable without radical change.


                                       Carbon dioxide


            Change in land use                   worse   Extinction rate




          Freshwater use                                       Nitrogen cycle

                  Sustainable limit



                 Ocean acidification                     Phosphorus cycle


                                        Stratospheric
                                       ozone depletion

Some pollutants are relatively easy to abate
US Sulphur contamination




Others, such as CO2, are much less tractable

Some pollutants are relatively easy to abate
World
                                                                                 Colossal sums need to
                                                                                 be spent, and energy
Non-OECD                                                                         must be used with
                                                     coal
                                                     oil                         much greater
                                                     gas
    OECD                                             electricity                 efficiency: the 15W
                                                     other                       refrigerator.
                      5        10        15     20       25      30
                 Cumulative additional investment required 2010-2030 $trillion

                                                                                 All of this comes with a
                   CO2 emissions, IEA projections
                   gigatonnes per annum                                          short-run cost, and
            40                                          Bunkering                probably with a long
                                                        Non OECD gas
                                                                                 run cost
            30
                                                        Non OECD oil


            20
                                                        Non OECD coal

            10                                          OECD gas

                                                        OECD oil

                                                       OECD coal
                 1980   1990   2000   2010   2020   2030

Others, such as CO2, are much less tractable

Some pollutants are relatively easy to abate
World
                                                                            Colossal sums need to
                                                                            be spent, and energy
Non-OECD                                                                    must be used with
                                                coal
                                                oil                         much greater
                                                gas
    OECD                                        electricity                 efficiency: the 15W
                                                other                       refrigerator.
                 5        10        15     20       25      30
            Cumulative additional investment required 2010-2030 $trillion

                                                                            All of this comes with a
                                                                            short-run cost, and
                                                                            probably with a long
                                                                            run cost



                                                                            Current estimates of
                                                                            the UK electricity plan
                                                                            economics
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
Even with low global growth, resource costs have
increased by 10% since 2002. This clips about half
a percent of US growth rates, for example.
Even with low global growth, resource costs have
increased by 10% since 2002. This clips about half
a percent of US growth rates, for example.




The low cost sources of supply of food, energy and
minerals have largely been exploited. Demand is often
closely coupled to economic growth.
Primary energy demand 1970-2010 MTOE
                                                      Trend without efficiency
14000
12000                                                 World
10000
 8000
 6000                    Non OECD
 4000                           OECD

 2000


         10    20     30       40     50     60      70
              GDP ($ trillion const. PPP adjusted)




        The low cost sources of supply of food, energy and
        minerals have largely been exploited. Demand is often
        closely coupled to economic growth.
The world ahead is predicated on efficiency in both
      production and consumption. The required investment
      will be driven by a mix of high prices and regulation



Energy use per unit of value added
(grams oil equivalent per $2010 of GDP)
600
                                    USA

400
                                                  China
                                  World
200

                                                 India


      1810 1840     1870     1900    1930   1960 1990     2030




      The low cost sources of supply of food, energy and
      minerals have largely been exploited. Demand is often
      closely coupled to economic growth.
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
Many of the public welfare provisions in the
wealthy world were put in place to serve a
demographically young population.
Many of the public welfare provisions in the
wealthy world were put in place to serve a
demographically young population.
Many of the public welfare provisions in the
                   wealthy world were put in place to serve a
                   demographically young population.

Sales of diapers for adults exceeded those for babies in Japan in 2011




The cost of unfunded pensions in Europe and the US at current levels of
commitment are comparable to the cost of WWII
Unsafe            Safe




The shortfall in unfunded countries will, of course, grow as
numerous elderly voters seek additional support. Pension costs will
be exceeded by more than twice by health and adult support costs
There is no coherent
pattern of support
planned across the
industrial nations,
with a near random
scatter, as shown.
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
The implication is that US historical rates (3.5%) could be cut to
between 1.5% and no growth at all. Similar reductions apply to
other nations with demographic and financial difficulties.
Efficiency and health advances can abate some of this.




Reduction over OECD historical long run growth rates, %


½-1%

¼-½%

1-2%+


½-1%
The implication is that US historical rates (3.5%) could be cut to
between 1.5% and no growth at all. Similar reductions apply to
other nations with demographic and financial difficulties.
Efficiency and health advances can abate some of this.

Due to the slow down, competition from low wage areas will
arrive a decade earlier than expected in advanced industries.
Nations will need to invest in human capacity, science and
technology; plus relevant intangible infrastructure.

           Welfare budgets will be increasingly dedicated to care
           of the elderly. Adult welfare will be minimised, and
           many free services will be charged. Taxes will rise.

                         Political systems will be subject to
                         intense, increasingly populist pressures
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
    Scenarios for 2025
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
       China
       Emerging & poor economies
       Politics in the wealthy world
Demographics in China are similar to those in the West
Massive savings against old age fuelled the second revolution
China has ten years to undertake six key tasks:
  Switch from export orientation to domestic consumption.
  Manage the politics of a state with a huge middle class
  Bring 7-800 million rural poor into the economic revolution
  Manage its environmental situation, and other quality of life issues
  Give citizens access to law, information; deliver state integrity
  Find a place for itself as a power in Asia and the World
China moves successfully to domestic consumption
                    Rising labour            Social crisis,
                    costs                   sharply rising
                                             labour costs
                                            Critical issues
                                Mixed,        are political
                              evolving        change and
                             economy       social cohesion
  External world                                              China forced to focus
is kind to China                                              on its internal affairs
                            2012


                                         Forbidden zone
                   2007

                               1995


                             The economy
                            remains largely
                            export oriented
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
       China
       Emerging & poor economies
       Politics in the wealthy world




        The last decade saw major changes.
        Economies grew fast, but many countries
        became less politically stable.
The last decade saw major changes.
Economies grew fast, but many countries
became less politically stable.

A growing global middle class does not share
Western values.
The last decade saw major changes.
Economies grew fast, but many countries
became less politically stable.

A growing global middle class does not share
Western values.
The world’s educated population increasing
resides outside the industrial world
The world’s educated population increasing
resides outside the industrial world
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications

     China
     Emerging & poor economies
     Politics in the wealthy world

       The New Deal heritage is close to its end
       This and growing income inequality will be divisive
       Self-defeating responses attempt to cling to the past
       Positive responses must include socioeconomic renewal



                   What is “renewal”?
Price            Market size


               Profit                                               Market size
Unit cost
                                                   Price


            Firm A    Firm B   C   D             Firm A    Firm B     C

                 Sales volume


                                   Commoditisation


                                       Renewal


                                          What is “renewal”?
Price              Market size


                   Profit                                                                 Market size
Unit cost
                                                                  Price


              Firm A       Firm B     C    D                    Firm A       Firm B         C

                     Sales volume


     Cost of a standard desktop computer, $2005
     12000                                                         70%

     10000
                                                                   50%
      8000
                                                                          Margin as %
                                                                          selling price
      6000
                                                                   30%
      4000

      2000                                                         10%
                                                                                 Selling price
                                                                                 Manufacturing cost
            1975   1980    1985     1990   1995   2000   2005   2010
Cost of a standard desktop computer, $2005
12000                                                   70%

10000
                                                        50%
8000
                                                              Margin as %
                                                              selling price
6000
                                                        30%
4000

2000                                                    10%
                                                                     Selling price
                                                                     Manufacturing cost
    1975   1980   1985   1990   1995   2000   2005   2010
Renewal




               Renewal
New ideas &
capabilities


                          Renewal
New ideas &
capabilities
Clusters form wherever there is a sustained burst of industrialisation
They draw in human and financial capital, technology and support industry
Clusters form wherever there is a sustained burst of industrialisation
They draw in human and financial capital, technology and support industry
They are centres for innovation and renewal
The result is extremely focused
areas of expertise and wealth




                                  As wealth generating
                                  hubs, clusters offer
                                  higher wages.
                                  Property prices rise
                                  and the population
                                  tends to select for
                                  high earning, capable
                                  people. This reinforces
                                  the cycle.
The result is extremely focused
areas of expertise and wealth
The governance and strategic
needs of extremely small
areas are completely
different. Under unifying
standards and national
values, these will need to find
their own way of dealing with
complexity & competition.




                           Neither nations nor regions have equal
                           abilities to renew themselves
Intangible infrastructure – security, honesty,
trust in institutions and rule of law, educated
work force, attitudes that assist wealth
generation – is required for prosperity.




Neither nations nor regions have equal
abilities to renew themselves
Intangible infrastructure – security, honesty,
              trust in institutions and rule of law, educated
              work force, attitudes that assist wealth
              generation – is required for prosperity.




  National
government-
  related

              Success in renewal is local and issue-focused.
              National government is increasingly incapable
              of delivering this, particularly if the nation is
              very large or very varied.
              Neither nations nor regions have equal
              abilities to renew themselves
Intangible infrastructure – security, honesty,
trust in institutions and rule of law, educated
work force, attitudes that assist wealth
generation – is required for prosperity.




Success in renewal is local and issue-focused.
National government is increasingly incapable
of delivering this, particularly if the nation is
very large or very varied.
Neither nations nor regions have equal
abilities to renew themselves
Intangible infrastructure – security, honesty,
trust in institutions and rule of law, educated
work force, attitudes that assist wealth
generation – is required for prosperity.


                  Whilst people are more
                  informed by events than ever
                  before, their sense that the
                  political establishment is up
                  to the task is at a low ebb
                  across the industrial world, in
                  China and other emerging
                  economies.




Success in renewal is local and issue-focused.
National government is increasingly incapable
of delivering this, particularly if the nation is
very large or very varied.
Neither nations nor regions have equal
abilities to renew themselves
Intangible infrastructure – security, honesty,
trust in institutions and rule of law, educated
work force, attitudes that assist wealth
generation – is required for prosperity.


                  Whilst people are more
                  informed by events than ever
                  before, their sense that the
                  political establishment is up
                  to the task is at a low ebb
                  across the industrial world, in
                  China and other emerging
                  economies.

                  The roots of this are complex:
                  people do not bundle into
                  party brands any more; as a
                  group, politicians are suspect.


Success in renewal is local and issue-focused.
National government is increasingly incapable
of delivering this, particularly if the nation is
very large or very varied.
Neither nations nor regions have equal
abilities to renew themselves
“Trust” can mean: trust that they will deliver; and trust in their intentions.
The systematic difference between countries reflects trust in intentions.




                                                   Whilst people are more
                                                   informed by events than ever
                                                   before, their sense that the
                                                   political establishment is up
                                                   to the task is at a low ebb
                                                   across the industrial world, in
                                                   China and other emerging
                                                   economies.

                                                   The roots of this are complex:
                                                   people do not bundle into
                                                   party brands any more; as a
                                                   group, politicians are suspect.
“Trust” can mean: trust that they will deliver; and trust in their intentions.
The systematic difference between countries reflects trust in intentions.




Politics is seen as a career and not a vocation. Personal advantage is
thought usually to trump public good. In all studies of international trust,
state corruption is the strongest correlate with distrust.

The media have a vested interest in generating distrust and reporting scandal
The reason that this matters is that a broken political
machine is colliding with a broken social model: the
New Deal, welfare, the state as universal provider.

Agitation around this has the
potential to derail the crucial
processes of renewal




      The media have a vested interest in generating distrust and reporting scandal
The reason that this matters is that a broken political
machine is colliding with a broken social model: the
New Deal, welfare, the state as universal provider.

Agitation around this has the
potential to derail the crucial
processes of renewal
The reason that this matters is that a broken political
machine is colliding with a broken social model: the
New Deal, welfare, the state as universal provider.
The reason that this matters is that a broken political
machine is colliding with a broken social model: the
New Deal, welfare, the state as universal provider.
The reason that this matters is that a broken political
machine is colliding with a broken social model: the
New Deal, welfare, the state as universal provider.


                                                          Navigators
                                                          Go-getters




     Belongers
     Tribalists
Scenarios for 2025
    The long run, 2040 in brief
    The grounds of current difficulties
    The short-run outlook
    Regional implications
    Scenarios for 2025
Improving global economic
                             conditions

   Resolution of the
      Euro impasse
  Clear political will
 to address welfare
and pensions issues
                                            Resolution of debt issues and
  Commerce begins                           of the Euro deferred
   to spend its cash                        indefinitely
         mountains
                                            No grip acquired of the
                                            welfare-pensions issues, with
                                            a rhetoric of entitlement
                                            unchallenged
                                            China runs into sociopolitical
                                            difficulties; regional tensions



               Global conditions antagonistic to
            renewal, trade, new ideas and policies
Improving global economic
                           conditions


                           2000

                         2007
                                           1989
Movement to a                                           Drift to political
more complex,                                           primitivism:
  collaborative                   1914    Cold          populism,
 political style                          War           nationalism
                          2012


                                                 WWII
                                         1930




                 Global conditions antagonistic to
              renewal, trade, new ideas and policies
Improving global economic
                               conditions
               New
           Narrative




                           Muddling
Movement to a              Through                   Drift to political
more complex,                                        primitivism:
  collaborative                                      populism,
 political style                                     nationalism



                                           Old Narrative 2.0


                 Global conditions antagonistic to
              renewal, trade, new ideas and policies


        New Narrative       Managed political transition to renewal

    Muddling Through        Events permit extension of the status quo

     Old Narrative 2.0      Increasing bitter cycle of decline
Muddling Through       Events permit extension of the status quo

China fails to make its transition. Political dissent & unionisation
raise manufacturing costs. Outsourced jobs are repatriated.
Supply-side inflation remains low. Hydraulic fracturing has a major
impact on gas supply and so on energy prices.

European financial problems reach a semi-permanent resolution.
US growth picks up, and with it, confidence. Other EMs benefit
from China’s crisis, particularly in Latin America.

    Muddling Through       Events permit extension of the status quo

China fails to make its transition. Political dissent & unionisation
raise manufacturing costs. Outsourced jobs are repatriated.
Labour-intensive industries continue to decline in the wealth world

    Muddling Through     Events permit extension of the status quo

     Old Narrative 2.0   Increasing bitter cycle of decline
This is not an environment that encourages collaboration. The
European project fails to resolve its financial contradictions.




Labour-intensive industries continue to decline in the wealth world
China succeeds in its transitions. Competition intensifies greatly.
Complex industries are affected much sooner than anticipated

     Old Narrative 2.0    Increasing bitter cycle of decline
Increasingly strong and often violent populist movements develop
This is not an environment that encourages collaboration. The
European project fails to resolve its financial contradictions.




Labour-intensive industries continue to decline in the wealth world
China succeeds in its transitions. Competition intensifies greatly.
Complex industries are affected much sooner than anticipated

     Old Narrative 2.0    Increasing bitter cycle of decline
Increasingly strong and often violent populist movements develop
Divisive, angry politics assign blame and emphasise class divisions.
Attitudes are statist, attempting to restore “how it used to be”
Increasingly strong and often violent populist movements develop
Divisive, angry politics assign blame and emphasise class divisions.
Attitudes are statist, attempting to restore “how it used to be”




Companies defer plans, awaiting clarity, worsening a bad situation
States are unable to borrow significantly. Some print money. All
turn to high taxation, redistribution, job and trade protectionism
Economic growth is further deterred, tightening the spiral.
To the rest of the world, Western influence appears discredited
Political reaction to this will take a transnational scale
These are not those of the Western liberal model
Around 3.5 bn middle class people develop their own values




To the rest of the world, Western influence appears discredited
Political reaction to this will take a transnational scale
These are not those of the Western liberal model
Around 3.5 bn middle class people develop their own values




Many of the values in play revel in the West’s decline, and put
forward aggressive alternatives. The global security system
weakens, attitudes polarise and negotiations on issues such as
the environment stall.


To the rest of the world, Western influence appears discredited
Political reaction to this will take a transnational scale
These are not those of the Western liberal model
Around 3.5 bn middle class people develop their own values




        New Narrative      Managed political transition to renewal

    Muddling Through       Events permit extension of the status quo

     Old Narrative 2.0     Increasing bitter cycle of decline
The New Narrative is far from a technology driven world. However,
its population intensely recognise the need for renewal and change

       New Narrative    Managed political transition to renewal

   Muddling Through     Events permit extension of the status quo

    Old Narrative 2.0   Increasing bitter cycle of decline
Not every society finds
                                          this easy to accept.



                                          The national narrative –
                                          “who we are and what we
                                          are about; how we behave
                                          to others and to our own
                                          people” – defines how
                                          effective a response will be.



The New Narrative is far from a technology driven world. However,
its population intensely recognise the need for renewal and change

       New Narrative    Managed political transition to renewal

   Muddling Through     Events permit extension of the status quo

    Old Narrative 2.0   Increasing bitter cycle of decline
Not every society finds
                                          this easy to accept.



                                          The national narrative –
                                          “who we are and what we
                                          are about; how we behave
                                          to others and to our own
                                          people” – defines how
                                          effective a response will be.



The New Narrative is far from a technology driven world. However,
its population intensely recognise the need for renewal and change

       New Narrative    Managed political transition to renewal

   Muddling Through     Events permit extension of the status quo

    Old Narrative 2.0   Increasing bitter cycle of decline
The New Narrative is
                                      international in scope,
                                      and embraces the notion
                                      of constructive change, of
                                      actively building a future


                                      The national narrative –
                                      “who we are and what we
                                      are about; how we behave
                                      to others and to our own
                                      people” – defines how
                                      effective a response will be.




   New Narrative    Managed political transition to renewal

Muddling Through    Events permit extension of the status quo

Old Narrative 2.0   Increasing bitter cycle of decline
The New Narrative is
                                                          international in scope,
                                                          and embraces the notion
                                                          of constructive change, of
                                                          actively building a future


                                                          The national narrative –
                                                          “who we are and what we
                                                          are about; how we behave
                                                          to others and to our own
                                                          people” – defines how
                                                          effective a response will be.




                        New Narrative    Managed political transition to renewal


The New Narrative benchmarks all aspects of policy and management against best
practice elsewhere. Increasing swathes of policy are removed from political control
Schooling: around a quarter of
                                                      the adult population of the US
                                                      and UK are functionally illiterate.
                                                      They make up four fifths of gaol
                                                      inmates and half of the long
                                                      terms unemployed. So why do
                                                      schools in Norway under-perform
                                                      and those in Finland and China
                                                      over-perform?

                                                      Health: why are there such
                                                      great differences in both the
                                                      proportion of GDP spent on
                                                      health and in the longevity which
                                                      this delivers?




The New Narrative benchmarks all aspects of policy and management against best
practice elsewhere. Increasing swathes of policy are removed from political control
Public and private expenditure on health as % GDP
     14


     13        USA
                                                               The USA spends proportionately
     12
                                                               twice as much as the UK, but
     11
                                                               achieves worse outcomes. Japan
                                                               has much better outcomes than
                       Germany                                 the UK on identical proportional
     10
                             France                            spending
                               Canada
      9
                       Italy         Australia
      8
                               NZ       Sweden
                     UK                               Japan    Health: why are there such
      7
                                                               great differences in both the
                                                               proportion of GDP spent on
              77      78        79      80       81       82   health and in the longevity which
               Life expectancy, years, both genders            this delivers?


Many other aspects of the New Narrative have already been covered: renewal,
innovation. Whilst these are very important, what truly changes is attitude.
Societies realise that successful models involve intense, near-wartime change.

The New Narrative benchmarks all aspects of policy and management against best
practice elsewhere. Increasing swathes of policy are removed from political control
Which countries are
                                                           most likely to adopt the
                                                                   New Narrative?




Many other aspects of the New Narrative have already been covered: renewal,
innovation. Whilst these are very important, what truly changes is attitude.
Societies realise that successful models involve intense, near-wartime change.

The New Narrative benchmarks all aspects of policy and management against best
practice elsewhere. Increasing swathes of policy are removed from political control
Which countries are
                          mostWhich to adopt the
                               likely countries are
                           most likely to adopt the
                                   New Narrative?
                                    New Narrative?


We looked at 39 countries for which we had data
on attitudes towards change, technology and
entrepreneurship. Seven variables stood out as
being particularly significant:
 Actual levels of innovation in the economy
 Social perceptions of entrepreneurs
 Commercial perceptions of relevant skills
 Overall levels of education levels
 Acceptance of internationalism and trade
 Acceptance of social and economic reform
 Taxation and state spending as a percent of GDP
We looked at 39 countries for which we had data
on attitudes towards change, technology and
entrepreneurship. Seven variables stood out as
being particularly significant:
 Actual levels of innovation in the economy
 Social perceptions of entrepreneurs
 Commercial perceptions of relevant skills
 Overall levels of education levels
 Acceptance of internationalism and trade
 Acceptance of social and economic reform
 Taxation and state spending as a percent of GDP



The statistics explained 70% of inter=country variance.
!   Low adaptability branch




    Highest commercial and social adaptability


    Adaptable, but with major state rigidities

    Nations in wealthy stasis

    Innovative nations with inflexible societies
New Narrative    Managed political transition to renewal

Muddling Through    Events permit extension of the status quo

Old Narrative 2.0   Increasing bitter cycle of decline
New Narrative    Managed political transition to renewal

Muddling Through    Events permit extension of the status quo

Old Narrative 2.0   Increasing bitter cycle of decline
Using the scenarios:
a suggested workshop schedule
09.00-09.15          Introduction: participation and goals
09.15-11.00          Scenarios for 2025; general discussion
11.00-11.30          Coffee
11.30-12.30          Your views and concerns, expressed on Post-Its
12.30-12.50          Defining the core uncertainties and issues
12/50-13.00          Assignment to syndicate, one per issue
13.00-13.30          Working lunch
13.30-14.15          Working in syndicate
14.15-14.55          Feedback and discussion
14.55-15.00          Closing remarks

Note: scenarios are a tool, not an outcome. To get value from these scenarios, teams
need to work on them so as to bring their message into the context of your own
activity. This schedule is a minimal approach to this.
People are asked to express what they have learned from the presentation in a few
words on a PostIt. (There are typically three rounds of this, focusing on e.g
customers, human resources, competition or as seems fit.) PostIts are arranged in
loose collections on the wall. They are then clustered into four or five centres of
weight. Syndicates are assigned to work through the implications of this centre of
weigh to the business, or whatever is under consideration. Feedback should, ideally,
seek to define further work that is needed to clarify these issues, and assign
responsibility to deliver this information, to whom and when.
Scenarios 2012

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Scenarios 2012

  • 2. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications Scenarios for 2025
  • 3. Scenarios for 2025 The long run, 2040 in brief Environment Waking Nine billions Up Technology Innate Energy, food, complexity water, resources requiring Yesterday’s management Future Success within a core Slow revival Neglect and Current Fracture difficulties Chronic difficulties 2010 2015 2020 2025 2030 2030 2040
  • 4. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties Waking Up Innate complexity requiring Yesterday’s management Future Success within a core Slow revival Neglect and Current Fracture difficulties Chronic difficulties 2010 2015 2020 2025 2030 2030 2040
  • 5. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The 1980s saw the start of fundamental changes: Faith in markets De-regulation and privatisation
  • 6. The 1980s saw the start of fundamental changes: Faith in markets De-regulation and privatisation A communications revolution
  • 7. The 1980s saw the start of fundamental changes: Faith in markets De-regulation and privatisation A communications revolution An enormous expansion of the world work force
  • 8. The 1980s saw the start of fundamental changes: Faith in markets De-regulation and privatisation A communications revolution An enormous expansion of the world work force The outsourcing revolution that tied all of this together Easy money
  • 9. Dow Jones index 1900-2012 14000 The 1980s saw the start of fundamental changes: 2007 Faith in markets 12000 2000 De-regulation and privatisation 10000 2009 A communications revolution 2008 8000 2002 An enormous expansion of the world work force 6000 The outsourcing revolution 4000 that tied all of this together 1994 Easy money 2000 1980 4000 8000 12000 16000 US nominal GDP $ bn
  • 10. 30,000 Asset price inflation Dow Jones index 1900-2012 14000 The 1980s saw the start of fundamental changes: Faith in markets 12000 De-regulation and privatisation 10000 A communications revolution 8000 An enormous expansion of the world work force 6000 The outsourcing revolution 4000 that tied all of this together 3000 Easy money 2000 4000 8000 12000 16000 US nominal GDP $ bn
  • 11. Easy money Asset price inflation Asset building, saving Asset consumption
  • 12. Easy money Asset price inflation State deficits
  • 13. Welfare bills – and tax cuts – had pushed many states into chronic fiscal deficit
  • 14. Percent split of UK GDP 2011 100 Non-state spending 50 Non-welfare Social welfare State Not everyone in the spending Education Welfare wealthy world did well related Health care out of the boom years Pensions Welfare bills – and tax cuts – had pushed many states into chronic fiscal deficit
  • 15. In summary: The rich world saw Communism fail, and felt a universal optimism It funded much of this boom on debt, leading to asset price inflation Political pressures to extend welfare grew High skills have done very well in a world of globalisation and technological advance Not everyone in the wealthy world did well out of the boom years Low skills are unable to compete with automation and high skill, low wage areas
  • 16. In summary: The rich world saw Communism fail, and felt a universal optimism It funded much of this boom on debt, leading to asset price inflation Political pressures to extend welfare grew The US governments ordered the housing corporations, Freddie Mac and Fannie Mae, to extend credit to low income families. These held about half of all US mortgages. Banks treated their assets as triple A and passed them into the system. When the “sub-prime” mortgages failed, they left a $1.2 trillion hole, scattered around the world’s banks. Banks feared to lend to each other: the credit crunch. States used enormous sums to support banks. States debt grew due to low tax receipts and stimulus spending. It also became clear that some European states had been grossly imprudent.
  • 17. Stimulus and rescue packages greatly extended the level of state debt. When the “sub-prime” mortgages failed, they left a $1.2 trillion hole, scattered around the world’s banks. Banks feared to lend to each other: the credit crunch. States used enormous sums to support banks. States debt grew due to low tax receipts and stimulus spending. It also became clear that some European states had been grossly imprudent.
  • 18. Stimulus and rescue packages greatly extended the level of state debt. Easy money Asset price inflation State deficits Private debt Whilst banks were the conduit for the crisis, and had behaved with great ineptitude, they were not truly its origin. This was and is a debt crisis. When the “sub-prime” mortgages failed, they left a $1.2 trillion hole, scattered around the world’s banks. Banks feared to lend to each other: the credit crunch. States used enormous sums to support banks. States debt grew due to low tax receipts and stimulus spending. It also became clear that some European states had been grossly imprudent.
  • 19. This was and is a debt crisis Easy money Asset price inflation State deficits Private debt US Commercial bank lending $bn 2011 10000 8000 6000 4000 2000 Private debt Commercial 1952 1962 1972 1982 1992 2002
  • 20. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications Scenarios for 2025
  • 21. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook
  • 22. The environmental problem has been discussed exhaustively, and should perhaps be taken as read. Nine billions is unsupportable without radical change.
  • 23. The environmental problem has been discussed exhaustively, and should perhaps be taken as read. Nine billions is unsupportable without radical change.
  • 24. The environmental problem has been discussed exhaustively, and should perhaps be taken as read. Nine billions is unsupportable without radical change. Carbon dioxide Change in land use worse Extinction rate Freshwater use Nitrogen cycle Sustainable limit Ocean acidification Phosphorus cycle Stratospheric ozone depletion Some pollutants are relatively easy to abate
  • 25. US Sulphur contamination Others, such as CO2, are much less tractable Some pollutants are relatively easy to abate
  • 26. World Colossal sums need to be spent, and energy Non-OECD must be used with coal oil much greater gas OECD electricity efficiency: the 15W other refrigerator. 5 10 15 20 25 30 Cumulative additional investment required 2010-2030 $trillion All of this comes with a CO2 emissions, IEA projections gigatonnes per annum short-run cost, and 40 Bunkering probably with a long Non OECD gas run cost 30 Non OECD oil 20 Non OECD coal 10 OECD gas OECD oil OECD coal 1980 1990 2000 2010 2020 2030 Others, such as CO2, are much less tractable Some pollutants are relatively easy to abate
  • 27. World Colossal sums need to be spent, and energy Non-OECD must be used with coal oil much greater gas OECD electricity efficiency: the 15W other refrigerator. 5 10 15 20 25 30 Cumulative additional investment required 2010-2030 $trillion All of this comes with a short-run cost, and probably with a long run cost Current estimates of the UK electricity plan economics
  • 28. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook
  • 29. Even with low global growth, resource costs have increased by 10% since 2002. This clips about half a percent of US growth rates, for example.
  • 30. Even with low global growth, resource costs have increased by 10% since 2002. This clips about half a percent of US growth rates, for example. The low cost sources of supply of food, energy and minerals have largely been exploited. Demand is often closely coupled to economic growth.
  • 31. Primary energy demand 1970-2010 MTOE Trend without efficiency 14000 12000 World 10000 8000 6000 Non OECD 4000 OECD 2000 10 20 30 40 50 60 70 GDP ($ trillion const. PPP adjusted) The low cost sources of supply of food, energy and minerals have largely been exploited. Demand is often closely coupled to economic growth.
  • 32. The world ahead is predicated on efficiency in both production and consumption. The required investment will be driven by a mix of high prices and regulation Energy use per unit of value added (grams oil equivalent per $2010 of GDP) 600 USA 400 China World 200 India 1810 1840 1870 1900 1930 1960 1990 2030 The low cost sources of supply of food, energy and minerals have largely been exploited. Demand is often closely coupled to economic growth.
  • 33. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook
  • 34. Many of the public welfare provisions in the wealthy world were put in place to serve a demographically young population.
  • 35. Many of the public welfare provisions in the wealthy world were put in place to serve a demographically young population.
  • 36. Many of the public welfare provisions in the wealthy world were put in place to serve a demographically young population. Sales of diapers for adults exceeded those for babies in Japan in 2011 The cost of unfunded pensions in Europe and the US at current levels of commitment are comparable to the cost of WWII
  • 37. Unsafe Safe The shortfall in unfunded countries will, of course, grow as numerous elderly voters seek additional support. Pension costs will be exceeded by more than twice by health and adult support costs
  • 38. There is no coherent pattern of support planned across the industrial nations, with a near random scatter, as shown.
  • 39. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook
  • 40. The implication is that US historical rates (3.5%) could be cut to between 1.5% and no growth at all. Similar reductions apply to other nations with demographic and financial difficulties. Efficiency and health advances can abate some of this. Reduction over OECD historical long run growth rates, % ½-1% ¼-½% 1-2%+ ½-1%
  • 41. The implication is that US historical rates (3.5%) could be cut to between 1.5% and no growth at all. Similar reductions apply to other nations with demographic and financial difficulties. Efficiency and health advances can abate some of this. Due to the slow down, competition from low wage areas will arrive a decade earlier than expected in advanced industries. Nations will need to invest in human capacity, science and technology; plus relevant intangible infrastructure. Welfare budgets will be increasingly dedicated to care of the elderly. Adult welfare will be minimised, and many free services will be charged. Taxes will rise. Political systems will be subject to intense, increasingly populist pressures
  • 42. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications Scenarios for 2025
  • 43. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications China Emerging & poor economies Politics in the wealthy world
  • 44. Demographics in China are similar to those in the West Massive savings against old age fuelled the second revolution China has ten years to undertake six key tasks: Switch from export orientation to domestic consumption. Manage the politics of a state with a huge middle class Bring 7-800 million rural poor into the economic revolution Manage its environmental situation, and other quality of life issues Give citizens access to law, information; deliver state integrity Find a place for itself as a power in Asia and the World
  • 45. China moves successfully to domestic consumption Rising labour Social crisis, costs sharply rising labour costs Critical issues Mixed, are political evolving change and economy social cohesion External world China forced to focus is kind to China on its internal affairs 2012 Forbidden zone 2007 1995 The economy remains largely export oriented
  • 46. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications China Emerging & poor economies Politics in the wealthy world The last decade saw major changes. Economies grew fast, but many countries became less politically stable.
  • 47. The last decade saw major changes. Economies grew fast, but many countries became less politically stable. A growing global middle class does not share Western values.
  • 48. The last decade saw major changes. Economies grew fast, but many countries became less politically stable. A growing global middle class does not share Western values. The world’s educated population increasing resides outside the industrial world
  • 49. The world’s educated population increasing resides outside the industrial world
  • 50. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications China Emerging & poor economies Politics in the wealthy world The New Deal heritage is close to its end This and growing income inequality will be divisive Self-defeating responses attempt to cling to the past Positive responses must include socioeconomic renewal What is “renewal”?
  • 51. Price Market size Profit Market size Unit cost Price Firm A Firm B C D Firm A Firm B C Sales volume Commoditisation Renewal What is “renewal”?
  • 52. Price Market size Profit Market size Unit cost Price Firm A Firm B C D Firm A Firm B C Sales volume Cost of a standard desktop computer, $2005 12000 70% 10000 50% 8000 Margin as % selling price 6000 30% 4000 2000 10% Selling price Manufacturing cost 1975 1980 1985 1990 1995 2000 2005 2010
  • 53. Cost of a standard desktop computer, $2005 12000 70% 10000 50% 8000 Margin as % selling price 6000 30% 4000 2000 10% Selling price Manufacturing cost 1975 1980 1985 1990 1995 2000 2005 2010
  • 54. Renewal Renewal New ideas & capabilities Renewal
  • 56. Clusters form wherever there is a sustained burst of industrialisation They draw in human and financial capital, technology and support industry
  • 57. Clusters form wherever there is a sustained burst of industrialisation They draw in human and financial capital, technology and support industry They are centres for innovation and renewal
  • 58.
  • 59. The result is extremely focused areas of expertise and wealth As wealth generating hubs, clusters offer higher wages. Property prices rise and the population tends to select for high earning, capable people. This reinforces the cycle.
  • 60. The result is extremely focused areas of expertise and wealth
  • 61. The governance and strategic needs of extremely small areas are completely different. Under unifying standards and national values, these will need to find their own way of dealing with complexity & competition. Neither nations nor regions have equal abilities to renew themselves
  • 62. Intangible infrastructure – security, honesty, trust in institutions and rule of law, educated work force, attitudes that assist wealth generation – is required for prosperity. Neither nations nor regions have equal abilities to renew themselves
  • 63. Intangible infrastructure – security, honesty, trust in institutions and rule of law, educated work force, attitudes that assist wealth generation – is required for prosperity. National government- related Success in renewal is local and issue-focused. National government is increasingly incapable of delivering this, particularly if the nation is very large or very varied. Neither nations nor regions have equal abilities to renew themselves
  • 64. Intangible infrastructure – security, honesty, trust in institutions and rule of law, educated work force, attitudes that assist wealth generation – is required for prosperity. Success in renewal is local and issue-focused. National government is increasingly incapable of delivering this, particularly if the nation is very large or very varied. Neither nations nor regions have equal abilities to renew themselves
  • 65. Intangible infrastructure – security, honesty, trust in institutions and rule of law, educated work force, attitudes that assist wealth generation – is required for prosperity. Whilst people are more informed by events than ever before, their sense that the political establishment is up to the task is at a low ebb across the industrial world, in China and other emerging economies. Success in renewal is local and issue-focused. National government is increasingly incapable of delivering this, particularly if the nation is very large or very varied. Neither nations nor regions have equal abilities to renew themselves
  • 66. Intangible infrastructure – security, honesty, trust in institutions and rule of law, educated work force, attitudes that assist wealth generation – is required for prosperity. Whilst people are more informed by events than ever before, their sense that the political establishment is up to the task is at a low ebb across the industrial world, in China and other emerging economies. The roots of this are complex: people do not bundle into party brands any more; as a group, politicians are suspect. Success in renewal is local and issue-focused. National government is increasingly incapable of delivering this, particularly if the nation is very large or very varied. Neither nations nor regions have equal abilities to renew themselves
  • 67. “Trust” can mean: trust that they will deliver; and trust in their intentions. The systematic difference between countries reflects trust in intentions. Whilst people are more informed by events than ever before, their sense that the political establishment is up to the task is at a low ebb across the industrial world, in China and other emerging economies. The roots of this are complex: people do not bundle into party brands any more; as a group, politicians are suspect.
  • 68. “Trust” can mean: trust that they will deliver; and trust in their intentions. The systematic difference between countries reflects trust in intentions. Politics is seen as a career and not a vocation. Personal advantage is thought usually to trump public good. In all studies of international trust, state corruption is the strongest correlate with distrust. The media have a vested interest in generating distrust and reporting scandal
  • 69. The reason that this matters is that a broken political machine is colliding with a broken social model: the New Deal, welfare, the state as universal provider. Agitation around this has the potential to derail the crucial processes of renewal The media have a vested interest in generating distrust and reporting scandal
  • 70. The reason that this matters is that a broken political machine is colliding with a broken social model: the New Deal, welfare, the state as universal provider. Agitation around this has the potential to derail the crucial processes of renewal
  • 71. The reason that this matters is that a broken political machine is colliding with a broken social model: the New Deal, welfare, the state as universal provider.
  • 72. The reason that this matters is that a broken political machine is colliding with a broken social model: the New Deal, welfare, the state as universal provider.
  • 73. The reason that this matters is that a broken political machine is colliding with a broken social model: the New Deal, welfare, the state as universal provider. Navigators Go-getters Belongers Tribalists
  • 74. Scenarios for 2025 The long run, 2040 in brief The grounds of current difficulties The short-run outlook Regional implications Scenarios for 2025
  • 75. Improving global economic conditions Resolution of the Euro impasse Clear political will to address welfare and pensions issues Resolution of debt issues and Commerce begins of the Euro deferred to spend its cash indefinitely mountains No grip acquired of the welfare-pensions issues, with a rhetoric of entitlement unchallenged China runs into sociopolitical difficulties; regional tensions Global conditions antagonistic to renewal, trade, new ideas and policies
  • 76. Improving global economic conditions 2000 2007 1989 Movement to a Drift to political more complex, primitivism: collaborative 1914 Cold populism, political style War nationalism 2012 WWII 1930 Global conditions antagonistic to renewal, trade, new ideas and policies
  • 77. Improving global economic conditions New Narrative Muddling Movement to a Through Drift to political more complex, primitivism: collaborative populism, political style nationalism Old Narrative 2.0 Global conditions antagonistic to renewal, trade, new ideas and policies New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 78. Muddling Through Events permit extension of the status quo China fails to make its transition. Political dissent & unionisation raise manufacturing costs. Outsourced jobs are repatriated.
  • 79. Supply-side inflation remains low. Hydraulic fracturing has a major impact on gas supply and so on energy prices. European financial problems reach a semi-permanent resolution. US growth picks up, and with it, confidence. Other EMs benefit from China’s crisis, particularly in Latin America. Muddling Through Events permit extension of the status quo China fails to make its transition. Political dissent & unionisation raise manufacturing costs. Outsourced jobs are repatriated.
  • 80. Labour-intensive industries continue to decline in the wealth world Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 81. This is not an environment that encourages collaboration. The European project fails to resolve its financial contradictions. Labour-intensive industries continue to decline in the wealth world China succeeds in its transitions. Competition intensifies greatly. Complex industries are affected much sooner than anticipated Old Narrative 2.0 Increasing bitter cycle of decline
  • 82. Increasingly strong and often violent populist movements develop This is not an environment that encourages collaboration. The European project fails to resolve its financial contradictions. Labour-intensive industries continue to decline in the wealth world China succeeds in its transitions. Competition intensifies greatly. Complex industries are affected much sooner than anticipated Old Narrative 2.0 Increasing bitter cycle of decline
  • 83. Increasingly strong and often violent populist movements develop Divisive, angry politics assign blame and emphasise class divisions. Attitudes are statist, attempting to restore “how it used to be”
  • 84. Increasingly strong and often violent populist movements develop Divisive, angry politics assign blame and emphasise class divisions. Attitudes are statist, attempting to restore “how it used to be” Companies defer plans, awaiting clarity, worsening a bad situation States are unable to borrow significantly. Some print money. All turn to high taxation, redistribution, job and trade protectionism Economic growth is further deterred, tightening the spiral. To the rest of the world, Western influence appears discredited
  • 85. Political reaction to this will take a transnational scale These are not those of the Western liberal model Around 3.5 bn middle class people develop their own values To the rest of the world, Western influence appears discredited
  • 86. Political reaction to this will take a transnational scale These are not those of the Western liberal model Around 3.5 bn middle class people develop their own values Many of the values in play revel in the West’s decline, and put forward aggressive alternatives. The global security system weakens, attitudes polarise and negotiations on issues such as the environment stall. To the rest of the world, Western influence appears discredited
  • 87. Political reaction to this will take a transnational scale These are not those of the Western liberal model Around 3.5 bn middle class people develop their own values New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 88. The New Narrative is far from a technology driven world. However, its population intensely recognise the need for renewal and change New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 89. Not every society finds this easy to accept. The national narrative – “who we are and what we are about; how we behave to others and to our own people” – defines how effective a response will be. The New Narrative is far from a technology driven world. However, its population intensely recognise the need for renewal and change New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 90. Not every society finds this easy to accept. The national narrative – “who we are and what we are about; how we behave to others and to our own people” – defines how effective a response will be. The New Narrative is far from a technology driven world. However, its population intensely recognise the need for renewal and change New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 91. The New Narrative is international in scope, and embraces the notion of constructive change, of actively building a future The national narrative – “who we are and what we are about; how we behave to others and to our own people” – defines how effective a response will be. New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 92. The New Narrative is international in scope, and embraces the notion of constructive change, of actively building a future The national narrative – “who we are and what we are about; how we behave to others and to our own people” – defines how effective a response will be. New Narrative Managed political transition to renewal The New Narrative benchmarks all aspects of policy and management against best practice elsewhere. Increasing swathes of policy are removed from political control
  • 93. Schooling: around a quarter of the adult population of the US and UK are functionally illiterate. They make up four fifths of gaol inmates and half of the long terms unemployed. So why do schools in Norway under-perform and those in Finland and China over-perform? Health: why are there such great differences in both the proportion of GDP spent on health and in the longevity which this delivers? The New Narrative benchmarks all aspects of policy and management against best practice elsewhere. Increasing swathes of policy are removed from political control
  • 94. Public and private expenditure on health as % GDP 14 13 USA The USA spends proportionately 12 twice as much as the UK, but 11 achieves worse outcomes. Japan has much better outcomes than Germany the UK on identical proportional 10 France spending Canada 9 Italy Australia 8 NZ Sweden UK Japan Health: why are there such 7 great differences in both the proportion of GDP spent on 77 78 79 80 81 82 health and in the longevity which Life expectancy, years, both genders this delivers? Many other aspects of the New Narrative have already been covered: renewal, innovation. Whilst these are very important, what truly changes is attitude. Societies realise that successful models involve intense, near-wartime change. The New Narrative benchmarks all aspects of policy and management against best practice elsewhere. Increasing swathes of policy are removed from political control
  • 95. Which countries are most likely to adopt the New Narrative? Many other aspects of the New Narrative have already been covered: renewal, innovation. Whilst these are very important, what truly changes is attitude. Societies realise that successful models involve intense, near-wartime change. The New Narrative benchmarks all aspects of policy and management against best practice elsewhere. Increasing swathes of policy are removed from political control
  • 96. Which countries are mostWhich to adopt the likely countries are most likely to adopt the New Narrative? New Narrative? We looked at 39 countries for which we had data on attitudes towards change, technology and entrepreneurship. Seven variables stood out as being particularly significant: Actual levels of innovation in the economy Social perceptions of entrepreneurs Commercial perceptions of relevant skills Overall levels of education levels Acceptance of internationalism and trade Acceptance of social and economic reform Taxation and state spending as a percent of GDP
  • 97. We looked at 39 countries for which we had data on attitudes towards change, technology and entrepreneurship. Seven variables stood out as being particularly significant: Actual levels of innovation in the economy Social perceptions of entrepreneurs Commercial perceptions of relevant skills Overall levels of education levels Acceptance of internationalism and trade Acceptance of social and economic reform Taxation and state spending as a percent of GDP The statistics explained 70% of inter=country variance.
  • 98. ! Low adaptability branch Highest commercial and social adaptability Adaptable, but with major state rigidities Nations in wealthy stasis Innovative nations with inflexible societies
  • 99. New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 100. New Narrative Managed political transition to renewal Muddling Through Events permit extension of the status quo Old Narrative 2.0 Increasing bitter cycle of decline
  • 101.
  • 102. Using the scenarios: a suggested workshop schedule 09.00-09.15 Introduction: participation and goals 09.15-11.00 Scenarios for 2025; general discussion 11.00-11.30 Coffee 11.30-12.30 Your views and concerns, expressed on Post-Its 12.30-12.50 Defining the core uncertainties and issues 12/50-13.00 Assignment to syndicate, one per issue 13.00-13.30 Working lunch 13.30-14.15 Working in syndicate 14.15-14.55 Feedback and discussion 14.55-15.00 Closing remarks Note: scenarios are a tool, not an outcome. To get value from these scenarios, teams need to work on them so as to bring their message into the context of your own activity. This schedule is a minimal approach to this. People are asked to express what they have learned from the presentation in a few words on a PostIt. (There are typically three rounds of this, focusing on e.g customers, human resources, competition or as seems fit.) PostIts are arranged in loose collections on the wall. They are then clustered into four or five centres of weight. Syndicates are assigned to work through the implications of this centre of weigh to the business, or whatever is under consideration. Feedback should, ideally, seek to define further work that is needed to clarify these issues, and assign responsibility to deliver this information, to whom and when.