A Global Outlook

It is never too easy to predict the future. If we could, the world would have been saved from many tragedies, writes Binay Kumar.

It is never too easy to predict the future. If we could, the world would have been saved from many tragedies. Nothing in our knowledge has prepared us enough to accurately forecast future events. Who could have forecast the Asian Tsunami that gulped up more than 250,000 lives in a span of few hours? However, it is precisely the shock of such events that impels us to build futuristic scenarios so that we can steer clear of calamitous roadblocks.

It is in this context that the presentation and release of a report entitled 'The Shell Global Scenarios to 2025', at the Institute for International Economics in Washington DC on May 23, 2005, and at the Royal Institute for International Affairs, Chatham House in London on June 6, 2005 should be widely welcomed. The last Shell Scenarios document was published at the time of the 9/11 attacks. Now, as then, terror is the real uncertainty.
But Shell is careful to point out that the report is only an attempt to map out what the future might look like; it insists it is sketching possible outcomes, not making forecasts.

Last week our discussion on the report centered on one aspect: future security concerns and oil shortages fostering rise and growth of nationalism and protectionist policies; at the other end of the spectrum, also the opposite possibility of these concerns being addressed amicably by greater international cooperation and free trade.

As a matter of fact, the report's futuristic scenarios are critically rooted in two recent crises, the 9/11 tragedy and the collapse of the Enron Corporation. These events raised crucial issues of national security and trust in the marketplace. And both are also examples of growing vulnerability in a globalised world.

In sharp contrast to the highly fashionable 80's philosophy of Thatcherite roll back, all societies embracing the western market economy model now look paradoxically to the State to lead the restoration of physical security and market integrity. This brings into sharper focus the power of the State to regulate and to coerce, in a role involving both direct intervention to fight terrorism and police the market, and a more general emphasis on transparency disclosure and good governance.

The new Global Scenarios explore how the forces of market incentives, community, and coercion and regulation by the State interact and impact policy and business decision-making.

This week we probe a little deeper and peer into the future. The report says that the energy scene will be reshaped by the combination of three discontinuities: a relinking of energy consumption and economic growth as a result of the faster development of emerging countries, the emergence of carbon as a commodity in its own right, and the search for energy security.

Why would all this come about? Because the decades ahead would produce a world of startling contrasts. The most glaring development would be the burden of an enormous population growth which could rise by 1.5bn in 20 years to 7.9bn, with 6.8bn of them living in developing countries. Yet, the wages earned by one American worker would equal the earnings of wages would 40 Chinese. And, in spite of Bob Geldof, Blair and Brown, corruption would continue to ravage the African continent to the extent of nearly £80bn a year.

While the report is bleak on Africa, the prognosis on China and India is equally bullish.
India's potential is as a future powerhouse of growth is widely discussed. In fact, contrary to usual pessimism on India's constraints in attracting higher FDI than China, the report offers an interesting perspective; since Foreign investment in China has galloped to $70bn against India's measly $5bn, the report see greater potential in India than China.

Unlike China, India is a democracy and could offer a different example to other developing nations. But China's impact on the West is only starting -- what happens when it tackles the world car market? Even its home market may need 180 million cars, against 20 million now.

What about oil? After all, Shell should know this better than most of us. The spiraling prices are apparently here to stay for the foreseeable future. Discoveries of new oil fields is going to be as slow as it is now; in aggregate terms, replacing only 45pc of the oil being used. Even its most optimistic scenario has oil prices higher in real terms and continuously "testing what the market will bear."

Shell calls its best scenario "open doors" -- more free trade, more globalization and more trust. This enables the world economy to grow at 3.8pc a year, with even the European Union improving to 2.8pc. Oil prices are high but markets work and stimulate the huge investment -- up to £9,000bn -- needed to provide new supplies.

Three possible scenarios are identified and examined in the Shell Global Scenarios to 2025. All three scenarios see continuing globalisation in the simplistic sense of the word: continuing economic growth and an increasing movement of people and ideas across the globe. The focal question, which runs throughout all three scenarios, is how the 'triple dilemma', or 'Trilemma*' posed by trying to achieve efficiency, social justice and security, objectives that can sometimes require conflicting solutions, can be resolved in a globalised world?

No matter which side of the globalization debate you choose to take, the report makes a valuable contribution to the ongoing discussions. And, of course, you cannot fail to notice and appreciate the philosophical underpinnings of the report. By all accounts, Shell would like us to believe what is good for Shell is good for the world; growth and globalization are values that we all must uphold and aspire for. Why? Because only in a safer and prosperous world can multinationals like Shell thrive and flourish.