Tagged: global

Governance Failures & Economic Disparity: WEF Global Risks Report 2011

The Global Risks Report 2011 from the World Economic Forum highlights two primary megatrends with the potential to inject significant disruption into global systems. From the report:

Two risks are especially significant given their high degrees of impact and interconnectedness. Economic disparity and global governance failures both influence the evolution of many other global risks and inhibit our capacity to respond effectively to them.

In this way, the global risk context in 2011 is defined by a 21st century paradox: as the world grows together, it is also growing apart.

It is worth noting how inter-related these two megatrends are as wealth consolidation into an elite class enables them to further deconstruct global governance mechanisms. This has been a feedback loop for at least the past 40 years, if not longer, as western growth fueled the rise of non-state economic bodies & super-empowered individuals who then lobbied against regulatory measures that would aim to keep their rise in check and mitigate the risk of disparity. Elites consolidate more money & power, further driving disparity and eroding governance. What results is an interstitial vacuum where corporate intervention fails to see any profit motive and where state intervention lacks the funds or will to govern effectively.

In effect, the combination of super-empowered non-state actors, failures of state governance, and widespread economic disparity undermines the Rule of Law by releasing elites from accountability and driving the underclass deeper into criminality.

Within these megatrends they cite three important risk factors:

The “macroeconomic imbalances” nexus: A cluster of economic risks including macroeconomic imbalances and currency volatility, fiscal crises and asset price collapse arise from the tension between the increasing wealth and influence of emerging economies and high levels of debt in advanced economies.

The “illegal economy” nexus: This nexus examines a cluster of risks including state fragility, illicit trade, organized crime and corruption. A networked world, governance failures and economic disparity create opportunities for such illegal activities to flourish. In 2009, the value of illicit trade around the globe was estimated at US $1.3 trillion and growing. These risks, while creating huge costs for legitimate economic activities, also weaken states, threatening development opportunities, undermining the rule of law and keeping countries trapped in cycles of poverty and instability.

The “water-food-energy” nexus: A rapidly rising global population and growing prosperity are putting unsustainable pressures on resources. Demand for water, food and energy is expected to rise by 30-50% in the next two decades, while economic disparities incentivize short-term responses in production and consumption that undermine long-term sustainability.

These risk factors are certainly of concern but it’s worth looking at how they represent symptoms of an underlying current. Macroeconomic imbalances & illegal economies are two sides of the same coin, both indicating that the fundamental truths of economics are no longer applicable to the current global system. The territory has shifted but the map has yet to be effectively updated. The legacy code of macroeconomics is far too simplistic to contain the realities of the modern globalized marketplace.

Furthermore, undue faith in free markets has blinded the regulatory eye to the simple fact that markets have been thoroughly gamed by a small class of particularly savvy players. Markets are in no way free and it’s a fine trick of the big players to turn blame towards state regulation rather than admitting their own aggressive influence. The light being shown on Rupert Murdoch’s empire during the News of the World scandal is a prime example of this posturing. Murdoch has used his media empire to champion the free market mythology and to challenge state governance while shrewdly re-drawing the regulatory and tax laws to suit the needs of his own business.

Thus, the rise of the illegal economy is both a necessary alternative to a broken formal economy thoroughly gamed by elites, and a perverse imitation of the seemingly above-the-law attitudes of those very same elites who are in many ways idolized by the downtrodden.

Similarly, but perhaps more fundamentally, the water-food-energy nexus arises as a consequence of the growth models so canonical to historic economics. These models arose before there was a nuanced understanding of finite natural systems. Growth was eternal and all economic success has been measured against metrics of expansion. Extract more oil, mine more resources, build more cities, sell more gizmos, hire more people, expand into new markets. But again, the map was too simple to really reflect the territory. Resources are finite. The planetary system is ultimately closed and you can’t send waste away and import new resources (at least not yet or any time soon).

The common picture that emerges is that our models for how civilization interacts with the physical world, and the governors that have emerged over millenia to keep the global system in relative stability, are out-dated and losing relevancy. The system is moving into a phase change and will shed many legacy governors and force the maps to be re-drawn. This is, arguably, where we stand today amidst the obvious turmoil of our world – a world that is being completely revolutionized by globalization, ubiquitous computing, and asymptotic population growth.

Across this landscape arise five risks to watch:

Cyber-security issues ranging from the growing prevalence of cyber theft to the little-understood possibility of all-out cyber warfare

Demographic challenges adding to fiscal pressures in advanced economies and creating severe risks to social stability in emerging economies

Resource security issues causing extreme volatility and sustained increases over the long run in energy and commodity prices, if supply is no longer able to keep up with demand

Retrenchment from globalization through populist responses to economic disparities, if emerging economies do not take up a leadership role

Weapons of mass destruction, especially the possibility of renewed nuclear proliferation between states

These are the more pragmatic and addressable drivers forming the new governing mechanisms. They will draw towards them the coordinated efforts of many interests. Grappling with these emergent threats will build the structures necessary to contain them effectively. However, the traditional reliance on state governance to overcome these challenges looks increasingly unreliable, and it remains unclear whether corporate solutions will offer trustworthy substitutes. More likely, responsibility will fall on local efforts, distributed collectives, community governance, and investment and championship by benevolent economic elites. This perspective offers another view of the WEF2011 paradox, “as the world grows together, it is also growing apart”.

Of note, the solution space is much greater than in the past. The upside of population growth and the rise of the developing world is that the resource pool for creative innovation in the face of these risks is now larger than ever. Likewise, the tools for knowledge gathering and collaboration are readily available to most of the world and offer incredible power, capacity, and scalabilty. The phase change will continue to be full of turbulence but the sandbox for innovation is huge and the timeframes for iteration are tiny.

From another WEF article published after the Japanes tsunami crisis, titled Lessons for Living in a New World of Risk:

Thus a global network that shares best practices, promotes lessons learned in one part of the world for application in another, and assists its members both to better prepare before an event and better respond after can be of enormous value. By establishing direct channels of communication to government leaders, risk experts from some of the world’s leading companies, academic institutions, NGOs and other parts of society can provide valuable assistance in times of crisis.

Patterns: Global Systems & Human Adaptation

Overview: The top-level context for the next 10-20 years will be characterized by growing environmental challenges across the planet, notably more irregular weather patterns with increasingly severe storms, a rise in temperatures and a reduction of rainfall leading to shifting distributions of agriculture and farming. Regions that are heated but retain humidity will face rising bacterial & viral outbreaks, especially if these regions see further economic declines due to declining food production. These changes will challenge many populations, adding pressure to invest in more climate-controlled (and energy-intensive) infrastructure and/or migrate towards more wet & fertile lands. The great dependence on rainfall and water delivery infrastructure coupled to its widely distributed nature will impact drought-stricken regions considerably, as well as neighboring water-rich regions (eg. Los Angeles and Northern California) that may see growing tensions across resource inequities.

Within this global system the primary drivers remain materials technologies, energy capture & generation, health care (freemium & premium), cleaning & streamlining industrial processes, managing supply chains (particularly with respect to resource/energy overhead, social & environmental impacts), remediating toxic environments, and coping with persistent disruptions to all of these. In communities, trends are moving towards group empowerment through emerging technologies for computation, communication, collaboration, design, and fabrication. This empowerment enables both resilience & resistance, aiding some to design better civic structures & local production capacity, for example, while others design and execute disruptive events and attacks on high-value targets.

Across the species, though in no way homogeneous, lifespans are extending, health care is more reliable, mobile computing is more powerful & ubiquitous, screens and media are proliferating, and more people, objects, plants, and animals are creating digital identities and communicating across the cloud. There is a rapid movement to digitize human information and expose it to massive computational structures, iterating exponentially across literally billions of logical nodes. This movement into the cloud has a huge energetic overhead only recently being considered – not to mention the social and economic impacts rapidly rewriting much of the first world.

Computational systems are evolving to model and predict larger living systems. We now model natural systems, business enterprise, financial variables, and human behavior deriving greater ability to predict future probabilities. All in order for the species to continue its adaptive success while willfully managing our resource requirements & impacts while effectively supporting a global virtualization of human endeavor, expression, and creativity.

In a nutshell, the patterns and processes we’ve relied upon are moving into a time of great flux with all systems facing regular perturbations. Change is the only constant. Survival, as it always ultimately has, depends on flexibility, resilience, collaboration, and adaptation.

Disruptive Civil Technologies
Six Technologies with Potential Impacts on US Interests out to 2025
(National Intelligence Council):

Key trends, “most likely to enhance or degrade US national power out to 2025″
– Biogerontechnology
– Energy Storage Materials
– Biofuels and Bio-Based Chemicals
– Clean Coal Technologies
– Service Robotics
– The Internet of Things.

[The NIC report offers some interesting signals but I personally disagree with their sense of trending towards biofuels. Turning human energy sources (food) into industrial energy sources (biofuel) is exceptionally short-sighted and dangerous and has already incurred a large backlash in common sense. I don’t know enough about so-called “clean coal” to comment… but I’m highly dubious.]

From the IFTF Winter 2009 Overview and Jane McGonigal’s initial Superstructing results.

Top Signals 2009
– Geolocation
– Biometrics & accelerometers
– Handheld augmented reality
– Simulation engines
– Lifecasting platforms
– Social networks for every living thing
– Avatars everywhere
– Virtual worlds based on real worlds

Critical Factors
– Evolvability
– Extreme scale
– Ambient collaboration
– Reverse scarcity
– Adaptive emotions
– Amplified optimism
– Playtests

DRAFT 2009 Climate Action Team Biennial Report to the Governor and Legislature (California Climate Change portal):

All simulations indicate that extremely hot daytime and nighttime temperatures (heat waves) increase in frequency, magnitude, and duration from the historical period. Within a given heat wave, there is an increasing tendency for multiple hot days in succession—i.e., heat waves last longer. Furthermore, the number of days with simultaneously hot daytime temperatures in multiple regions in the state increases markedly; this has important implications for emergency response and satisfying electricity demand in the state.

…In the northern part of California, the tendency for drying fades and even reverses but in Southern California the amount of drying becomes greater, with decreases in some simulations exceeding 15% drier. became significantly wetter by the end of the century.

…The results suggest that climate change will decrease annual crop yields in the long- term, particularly for cotton, unless future climate change is minimized and/or adaptation of management practices and improved cultivars becomes widespread.

…In summary, without changes in operating rules for the water system in California the reliability of water supply will be severely affected. On the other hand, it seems that California could afford the implementation of adaptation measures that could significantly reduce the system’s vulnerability.