World Out of Balance — Three Scenarios for 2015

To paraphrase Henry Kissinger, if you don’t know where you’re going, every road will get you nowhere. But what to do about it?

Companies and countries need to develop their own structured processes for reading the signs of change.

The objective is to sort false signals from meaningful developments and to enable leaders to act rather than merely react.

Based on my own modeling of five key drivers of change — globalization, demographics, consumption patterns, natural resources/environment and regulation/activism, I envision three possible and plausible scenarios for the ten-year global outlook.

In this darkly pessimistic (though not necessarily most-probable) scenario, the world in 2015 is plagued with instability. Terrorist groups have continued their campaign of well-coordinated attacks against the United States and its institutions abroad. They succeeded in eroding global confidence in what was once seen as the world’s preeminent political and economic superpower.

Although most of al Qaeda’s leaders have been caught and killed, many questions are still unresolved. They include Palestinian statehood, ongoing conflicts in Central Asia and the Caucasus region, as well as worsening standards of living in Middle Eastern countries.

As a result, among Western nations, national security trumps all other concerns. Civil liberties have taken a backseat to security concerns, as governments subject their citizens to constant surveillance.

With xenophobia on the rise, immigrants, foreign workers and even ethnic minorities are viewed with suspicion. Fewer and fewer people are willing to travel, work or live abroad, knowing that they will be subjected to intense scrutiny.

As a siege mentality sets in, rising nationalist and populist sentiment is the catalyst for heightened levels of economic protectionism.

Governments now consider it a high priority to protect jobs and prevent them from going overseas. And barriers to foreign investment and cross-border travel ensure that countries can safeguard their own unique ways of life.

Countries no longer believe in the efficacy of multilateral arrangements and prefer alliances with small groups of like-minded countries they feel they can trust.

Let’s now switch to another, less calamitous, view of the world of the future. The state of the world and the business environment is characterized by a muddle-through mentality. Few governments show much leadership or vision — or even have enough high-quality talent to try to do so.

The corporate sector responds in kind. Companies seek growth and profits by working their relationships and looking for advantage wherever they can find it in a fairly chaotic and turbulent world.

Large patches of the globe are mired in poverty and violence, although the good news for North America, Europe and Australasia is that much of the trouble is localized. It does not spill over excessively into the zones of affluence, though they would be getting even more affluent if global growth rates were higher.

The United States and the expanded European Union prove to be more resilient than others, given their vast internal demand and relative self-sufficiency.

However, trade barriers in export markets have a damaging impact on key industrial sectors in Japan, China and Southeast Asian nations, curtailing overall macroeconomic growth in these countries.

Government aid and emergency financing grow more scarce, leaving the developing world to fend for itself, while the world’s wealthiest consumers account for a greater share of global spending power than at any other time in modern history.

In advanced markets, these on-the-go consumers show a penchant for sophisticated, easy-to-use goods and services that simplify lifestyles and address personal needs.

Meanwhile, middle-income spending shifts to emerging markets such as China, India, Mexico and Brazil. Collectively, roughly two billion people — 29% of the world population — form the basis of this growing middle class.

However, purchases of cars and first homes are sluggish, owing to economic growth rates that are lower than expected. Despite the broad convergence in purchasing power, a truly global “middle class” consciousness fails to take hold.

National governments find it increasingly difficult to regulate corporations, in part due to the mass exodus of talented senior policymakers seeking more lucrative careers in the private sector.

Confronted with tight budgets and growing obligations to care for their aging populations, governments turn to corporations to handle a number of formerly public sector services. These include technical training programs, law enforcement and healthcare.

As corporations assume a more visible role in the public sphere, they become increasingly sensitive about how they are perceived by the general public.

As government oversight declines, a broad coalition of activist groups step into the breach to enforce certain standards of corporate behavior.

The United States and China are the dominant economic, political and demographic players on the world scene — with large, robust markets that are highly intertwined, with muscular roles in the world that sometimes collide.

This is a time of intense business activity and technological innovation, and the rising tide of affluence continues to lift living standards in countries open to the global economy, even as further trade liberalization remains gradual.

In the richest markets, companies tap into new consumption patterns emphasizing high-end, lifestyle-enhancing products and services.

Trade in services is booming, and secure digital connections allow far-flung, truly global production and distribution networks to emerge.

Rising expectations, coupled with a demand for constant innovation, makes consumers less tolerant of products and services that are cumbersome to use and do not deliver on their promises.

Which world are we likely to see? Probably none of the above scenarios will come to pass in exactly the manner outlined above.

But by mapping the possibilities, we will be better prepared for the future that does unfold. Everybody has a joint interest in rigorously researching and powerfully imagining the future. Such forecasting will enable companies, organizations and individuals to act with confidence in a world chronically “out of balance.”

Adapted from “World Out of Balance” by Paul A. Laudicina. Copyright © 2005 A.T. Kearney, Inc. Used with permission of McGraw Hill Education.