Have you ever wondered what the world will look like when today’s children will have grown up to adulthood? What opportunities will be theirs to grab and what new challenges they will have to face? What will the global balance of power look like? Will the old North/South dichotomy still make any sense?
Sadly, the future -especially technological and scientific advances- remains largely unpredictable. In the 1960s, our grandparents would have discarded as pure science fiction the possibility that we would soon be making video calls around the word from anywhere and without a cable almost for free! Nonetheless, some fundamental shifts can be predicted, especially as many are already underway and unlikely to reverse. In fact, the UN’s high-level panel (“post MDG”) has just issued a report which takes a long perspective on future development challenges.
As a development practitioner – and father of three children - here are the big trends I am keeping my eyes on:
Big economic shifts
1. The world’s economic balance is shifting East and South. Since the mid-1990s, poor countries started to grow –increasingly- faster than rich countries. Within the next decade, China will overtake the USA in economic might and emerging economies will outperform OECD countries. Large gaps in living standards will remain, however, as emerging economies account for about 80 percent of the global population.
2. An economic “super-cycle” is under way. Over the last 200 years, the world economy experienced only one episode – from 1945-1973 – when average growth exceeded 3 percent. Between the oil shock of 1973 and the turn of the millennium average world growth hovered at a moderate rate of 2.8 percent. Since 2000, thanks to emerging markets, global growth averaged 2.5 percent, despite the global financial crisis. Some predict that with renewed economic stability the World will exceed 3 percent until 2030 and thus enter another economic “super-cycle".
3. Africa is starting to catch-up. Over the last decade, Sub-Sahara Africa outperformed the world in terms of growth (starting from a low base). Without the relatively advanced South Africa, the continent grew at 6 percent. Almost all stable countries in Africa are expected to become Middle Income by 2025. But the continent is also drifting apart: the stable parts of Africa are catching up with the rest of the world while fragile countries are not seeing many improvements in development indicators, and drifting further away from the rest of the pack.
4. It is too early to count Europe out. Europe is currently facing economic difficulties and challenging demographics. However, the old continent still produces almost a third of global output and accounts for half of total trade. Over the last two decades, Europe’s economies expanded at a rate of 2 percent per year and some countries which were once poor (e.g. Ireland, Poland) have become among the richest in the world. For example, Poland’s per capita income has increased from $2,000 in 1990 to more than $13,000 last year. Many European brands maintain world-wide appeal and its lifestyle and social stability remains attractive across the globe.
The underlying trends
5. Developing countries are reaping a demographic dividend. By 2025, owing to steady population growth, the world will be home to 8 billion people. While the adult population will increase to 5 billion by 2020, the number of children below 15 is expected to stay stable. This is creating a favorable “dependency ratio”. Today, the world’s workforce is double the size as children and retirees combined. And the demographic dividend is compounded by an education dividend, as well since highly educated people (having completed at least secondary) will increasingly outnumber those with little or no education.
6. Geographic agglomeration and urbanization. Emerging markets will continue to experience rapid urbanization and population growth will also increase density in rural areas. Globally, cities attract ever greater numbers of people and will be home to 70 percent of the world’s population by 2050. Africa is also catching up and now the most rapidly urbanizing continent. By 2030, half of Africans will live in cities.
7. Technology driving growth and productivity. The mobile revolution continues to reshape economies and social structures. Already today, there are more than six billion people using cell phones. Almost everyone who wants to be connected will be able to, sooner rather than later, because the costs for phones and subscriptions will continue to fall. Phones are also increasingly becoming multi-purpose tools. In many parts of the world, with developing countries leading the way, people already use their phone to transfer money, check test scores or get information on crop yields.
8. A policy consensus around stability objectives, especially in developing countries. The South has improved its macro-policies, while the North is facing challenges. The debt dynamics are telling: many OECD countries are pilling-up debt while emerging markets are keeping borrowing low (and some are even lending heavily to the advanced countries). If Southern Europe had been as disciplined as pretty much any emerging economy (most of which have debt levels below 50 percent of GDP), Europe would not be experiencing a debt crisis. Emerging economies have also improved many social policies. Countries like Brazil, Indonesia and China are now leading the global dialogue on social protection reform. But the track record in structural reforms and governance remains uneven. Here the gap between most developing countries and the OECD remains large.
Implications for development aid
9. Traditional development assistance will soon run out of ‘clients’. Typical poor countries of the past, both stable and poor, will catch up economically. In the future, there will be two distinctly different sets of developing countries: middle income economies, with large remaining pockets of poverty but vibrant economies and fragile states, mired in conflict and poor governance, which will become the last frontier of the poverty agenda.
10. Aid needs to leverage additional finance and ideas. With domestic budgets rising rapidly in developing countries, aid will lose its significance in most if it is limited to financial ‘gap-filling’. In fact, except in parts of Africa and a few particular cases (e.g. Haiti, East Timor, Myanmar), donors have already become financially irrelevant. Brazil’s national development bank makes more loans domestically than the World Bank globally. The future of aid is to become a catalyst of system-wide reform and transformation. Knowledge transfer will become at least as important as financial transfers.
These deep structural transformations are already underway. On balance they hold more promise than threats. Are we ready to leverage them so our children, wherever they are born today, can have a better life tomorrow?