The World In 2025 Analyzing NIC Predictions

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This article provides a general analysis of some topics mentioned in the last National Intelligence Council report on the World in 2025. A focus is made on China’s potential, US challenges and the way to maintain the US leadership.

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The World In 2025 Analyzing NIC Predictions

  1. 1. The World in 2025 according to the NIC: Addressing US challenges Nadir Belarbi, Sr Business & Innovation Manager http://www.linkedin.com/in/nadirbelarbi nbelarbi@chicagogsb.edu New York, USA Abstract-This article provides a general analysis of some topics But predicting the future remains a perilous exercise as mentioned in the last National Intelligence Council report on unexpected events may modify a defined context generating the World in 2025. A focus is made on China’s potential, US repercussions that may exceed predictions. For instance, few challenges and the way to maintain the US leadership. imagined the extent of the last financial crisis and its international ramifications to Iceland and Greece. The use of I. Predictions & Accidents complex financial instruments, didn’t allow a clear understanding of the risks associated with these products The National Intelligence Council (NIC) released its new and the domino reaction that followed. Global trends report for the world at the 2025 horizon [1]. The 120 pages try to predict the state of the world in 2025 Overall, any unexpected political, social, technological or based of current trends. The geopolitical balances are environmental event may affect the course of history and probably easier to predict than weather changes but still, lead to new balances. Another major Earthquake, an Iranian how can we accurately predict the state of the world fifteen nuclear test, a conflict between India and Pakistan or a large years from now? cyber-attack against vital on-line services, are examples of unexpected events that may have important consequences Some predictions seem obvious because of the current on the world economy. The world future is a non-linear trends: system where any small event may have important repercussions. Furthermore, as trade became global, so did • The emergence of a multipolar world with regional the risk. powers like China, India and Russia where China will be the main US rival and a logical shift of The intent of this article is not to analyze all the details of Wealth from West to East. the NIC report but rather discuss some key topics related to • The decrease of the US dominance and its influence the US leadership in the next decades. on the world. • The raise of unprecedented conflicts related to II. The emergence of a multipolar world climate change and resource scarcity. The emergence of a multipolar world is probably the most The remaining predictions encompass changes that may significant geopolitical change since the fall the Soviet strongly reshape the world depending on their magnitude: Union in 1991. After nearly 20 years of unchallenged power, the US is now confronted with new Eastern regional, • Energy transition from Oil and Gas to alternative seeking a new world status and a greater control of their energies by 2025. economies. These new contenders are growing • Extent and intensity of the climate changes. economically and feel the need to strengthen their positions • The continuation of the economic globalization to impose their conditions and maintain a social and while shifting to more protectionism in certain cases. political stability. The list of these contenders is a subset of • Domestic Political changes in Chine and Russia. the BRIC group and mainly concentrated in the Far East: • Nuclear proliferation in the Middle East essentially China, India and Russia, where China is without a doubt the because of the Iranian nuclear program. new US rival. • The possible resolution of Israel - Palestinian conflict and the stabilization of Iraq. Unquestionably, the underdevelopment of China and India, • The impact of demographic changes on Europe and has turned these countries into fertile lands for low cost Japan. manufacturing and business investments. Today’s world economy growth largely relies on the Indian and Chinese Nadir Belarbi - 1/5
  2. 2. markets; the western ones being saturated and exhibiting China remains nevertheless the most interesting protagonist. bleak annual growths. While India’s economy is heavily relying on agriculture and the service industry, China is massively investing in With currently 36% of the world population, China and advanced manufacturing, high tech and education to sustain India are catching up with the western world at a fast pace. its fundamental research. The recent Indian achievements in Some forecasts predict that they will reach the US GDP space launch technologies is more of a psychological step to respectively in 2036 and 2050 [2] [3]. The size of the Chinese confirm its new international status and send a signal to its and Indian population, the low costs of their workforce, will neighbors in regards to ballistic missiles than a element of a continue to attract foreign investments, sustain outsourcing broader development strategy. and fuel their organic growth. "If you don't plan for the future, you will be distracted by The state capitalism followed by these players will continue what happens in the short term," said Lu Yongxiang, to control their resources and insure a domestic stability. president of CAS, the Chinese Academy of Sciences during Beside Russia, the social structures of China and India in a news briefing in 2008 where China announced its next particular are very complex. The fast economic growth scientific strategy for the next 50 years. The roadmap covers mainly concentrated in large cities will have a lower impact 18 domains including agriculture, ecology and environment, on rural areas leading to increased social tensions because of human health and ocean science [6]. Energy is probably the income disparities among the population [4]. China and most important sector that China wants to secure in order to India will live their post industrial revolutions eras, in a sustain its fast growth. The oil consumption grew by an compressed time frame. Half of a century is a very short impressive 11.9% in 2008 where the country produced an period of time to absorb these changes compared to the two average of 3,795,000 bbl/day while its consumption was centuries that Europe had. China, India and at certain extent nearly the double at 7.999 million bbl/day [7]. Theoretically, Russia, are raw economic and military powers that enjoy a China has a week of reserves in case of an interruption of oil steady growth thanks to their relative political stability and imports. This discrepancy is the Red Dragon Achilles’ heel their low cost labor force. With its large oil and gas shaping most of its foreign policy and explains the different resources, Russia has a relatively important advantage trade agreements and diplomatic initiatives conducted in compared to India and China, which need to fuel their Africa. In parallel, China is also massively working on a growing economies with large energy supplies imported new generation of nuclear plants using an advanced from abroad. These imports are already shaping the Asian pressurized water reactor (PWR) with a 55% localized part geopolitical balances, China and India fostering their production, planned to start in 2013. economic exchanges with their neighbors. In 2001, the strong willingness of global western While Russia has to face an aging population, the steady corporations to access large foreign markets, lead the World growth of the Indian and Chinese economies will face a Trade Organization to negotiate new agreements that structural problem. At the long term, outsourcing to China allowed China to become its 143rd member. As a result, the and India will reach its limits. The Revaluation of the world economy has totally changed with a brutal rebalance Chinese Yuan, increases in the labor force salaries as in of economic powers from West to East. With $2,399.2B in Bangalore and the probable increase of oil prices will reduce foreign currency reserves and $894.8B of US Treasury arbitrage benefits brought by Western off-shore strategies. Securities, China is unequivocally the biggest winner of the As a consequence, other underdeveloped countries as last decade. Indonesia, Philippines or Vietnam will become more attractive destinations for off-shore activities but they will By contrast with the post second world war period, it's the nevertheless not offer the same structured and stable free trade not the military balances that shaped this new environments as in China and India. world. But as the economic crisis lingers and the unemployment rates are expected to remain high in the next Conversely, the Chinese and Indian large internal markets 3 to 4 years for most of the western economies, free trade will continue to offer enough room for organic growths requirements will become unbearable. Social pressures will through their internal consumption. While most of the world weigh on political campaigns requesting more protectionism economies, including Russia, strongly contracted in 2009, and isolation from the world affairs but at the same time, India and China achieved respectively an impressive 7% leading the populations to support military actions to regain and 8.7% growth. This accelerated growth is already an economic sovereignty. creating significant social tensions in China that will challenge the central political authority of Beijing and set Interestingly, at the long term, the next world on the rise is the base for more opposition groups. In India, the social likely to be shaped again by military conflicts. Force will tensions have already morphed into political grievances likely be the only way to void unacceptable economic where states like Telangana seek more independence [5]. agreements and important financial debts. Military power Nadir Belarbi - 2/5
  3. 3. will thus remain an important deterrence factor even for need to be simultaneously engaged and US forces need to be economic and financial negotiations. present in several hot spots around the world. Human and technical intelligence techniques associated to an increased use of unmanned aerial vehicles will allow targeted strikes III. The decrease of the US dominance and influence on supporting tactical operations. The ability of the US military the world forces to exhibit both traditional large-scale deployments and small mobile tactical interventions in a very short lapse The US has certainly the strongest brand image in the world, of time is essential to maintain the US superiority and associating power and success. The influence of the US influence. culture and its way of life on the world will continue in the next decades, largely thanks to a powerful entertainment Conversely, sustaining a worldwide influence exclusively industry, the country’s ambassador all over the world. This with military capabilities is unrealistic in this globalized intangible value, represents a goodwill that will continue to economy. Developed countries represent economic nodes attract talents to the US, foster startups and innovation and that attract talent, capital and innovation. They are able to help to position the country as technological leader among finance technologic breakthroughs and stay ahead of the the developing countries. curve. In terms of deterrence, technology plays a major role in designing the next weapons and systems that can provide The economic crisis and the slow recovery will nevertheless a superiority advantage to any nation. The Chinese and slow investments, keep employment rates high and hinder Indian economies are benefiting from temporary economic consumption which represented in 2009 nearly 71% of the arbitrage situations. Massive outsourcing programs to these of the Gross Domestic Product. As discussed in the previous countries by western companies has fueled their economies section, the distribution of powers in the current world is with a capital that enabled them to invest in different largely due to new economic balances created by the free research programs to acquire and produce new technologies. trade policies. If not tackled efficiently, the public debt and The aggressive knowledge collection by the Chinese the federal burdens carried by the country will definitely organizations through economic or cyber espionage has limit the renaissance of the economy and reduce the US accelerated this transmutation allowing Beijing to quickly influence in the world. A scenario where the triple A credit catch up with the western standards [9]. The large Chinese of the US would be demoted by Moody’s Investors Service Diaspora present worldwide and the different University is unlikely but it is sending the wrong signal to the world [8]. exchange and common scientific programs have also Since the last financial crisis, the US image abroad took a “legally” sustained this trend. In this perspective, a large and hit, showing for the first time that the colossus is vulnerable. thorough cyber policy is critical to protect US assets and The soft diplomacy policy of the current US administration intellectual capital. But besides only protecting the countries in regards to Iran and China, is unfortunately accentuating assets, it is essential for the US to continue to lead this perception. Diplomacy is perceived as a weakness and technological innovation. countries like Brazil do not hesitate now to publicly oppose US policies and recommendations like recently on Iran. During the last decade, the migration of mass production to the East and the transformation of China into the world The US will certainly remain the major military force for workshop, lead western economies to focus more on the next decades but its reach will be limited by the financial services. But the recent financial crisis showed the economic situation of the country. Large military operations limits of such specialization and the risks of heavily and deployments will face more public resistance and may relaying on non-tangible economic assets. If manufacturing experience budget limitations. The choice to withdraw goods with the current means of production costs less in 90,000 US troupes from Iraq by December 2011 and to China and India, only two options are available to maintain focus more on the war against Al Qaeda in Afghanistan is a the US superiority over these emerging powers; either sign that supporting two fronts is too complex. design enhanced manufacturing techniques to allow lower production costs and/or manufacture new products that Asia Moreover, nuclear weapons have changed the nature of can’t manufacture because of technical limitations. In both military balances. Today it's probably more important for cases, innovation is the key approach to maintain a most emerging powers to have nuclear deterrence competitive advantage. To enable that, national innovation capabilities than an organized and structured military force. programs combining government and private interests need Iran’s race to build a first nuclear weapon is probably a race to initiate profound changes in the way the country produces to secure its regime rather than develop a thorough nuclear cars, planes, electronic devices, etc. program. Large conflicts between nuclear powers have almost disappeared and conflicts have become short and The landscape of the workforce will need to be gradually localized involving state military forces and/or small and changed with more workers specialized in advanced disseminated guerrilla groups. In this aspect, the US old two technologies as IT, Nanotechnologies and Biotechnologies wars doctrine is not applicable anymore. Many enemies for example. If the country is able to produce better goods at Nadir Belarbi - 3/5
  4. 4. lower prices, the attraction for outsourcing will decrease and According the NIC report, only six countries: Saudi Arabia, the flow of capital to China and India will follow. The Iran, Kuwait, the UAE, Iraq (potentially), and Russia are regeneration of the US industry as a high tech focused projected to account for 39 percent of total world oil industry will stimulate the financial systems and boost stock production in 2025. Five of these countries are located in the markets as these new technologies will offer tangible Middle East, reinforcing the feeling that oil supplies will present values with understandable risks compared to increasingly originate from a region with high degree of complex finance products. political instability. A nuclear Iran neighboring an instable Iraq with continuous guerilla operations orchestrated by ex- The key factor to enable this transformation of the US into a members of the Baath party, Shia factions, Al Qaeda and knowledge society is education. U.S. data indicate that other players in the region may be a potential source of college-educated workers are three times as productive, and disruption for the oil world supply. Moreover, the a high school graduate is 1.8 times as productive, as a nationalization trend observed of oil and gas production worker with less than a ninth-grade education [13]. Since companies will spread, increasing the possibility of having 1998, China is following an aggressive education state these countries using these resources as an economic and sponsored program that lead in the four years to 165% political weapon. In this perspective, seeking new oil and increase in high education enrolments and 152% increase in gas reserves as well as alternative energies will be critical students studying abroad. This continuous trend may add up for the US to maintain an economic independence and an 6 percentage points to the country's annual economic growth internal stability. rate. On the climate changes impacts, interestingly the NIC report The last years, several report confirmed the decline of the only analysis long-term effects of the global warming with US in several international education rankings done by the potential water supply shortages and new lands and Organisation for Economic Cooperation and Development waterways resulting from an increase of temperatures. (OECD). In a survey done in 2006, the US ranked 21th, Nevertheless at the short term, regular abrupt climate behind countries like Croatia, the Czech Republic, and changes are already disturbing the world economy with Liechtenstein, and ahead of just five other OECD countries different extent. As an example, the bad weather in Europe [10]. A tremendous effort has to be made to enhance the during the 2005, 2006, 2007 and 2008 summers had public educational system, make private universities more important impacts on the price of the wheat with accessible and continue attracting foreign talents. consequences on the price of the milk and of dairy products. A report prepared by the FAO in 2008, showed that that the IV. The raise of unprecedented conflicts related to world cereal production fell by 3.6 percent in 2005 and 6.9 climate change and resource scarcity. percent in 2006 due to bad weather in major producing countries [13]. As consequence, stock levels in 2007/08 For the next decades, oil will remain the main source of reached their lowest level in three decades. More recently, energy on earth. The steady increase in worldwide record-breaking snows which fell across the U.S. East Coast consumption is likely to be offset by new oil fields in January and February 2010, may have shaved as much as discoveries as in the Gulf of Mexico or Uganda and the 2 percent off all sales which nevertheless grew by 4.1% in exploitation of untapped reserves in Iraq, Iran, Russia and at February. a lesser extent, Alaska and the Arctic Circle. Moreover, as the oil prices will continue to increase with economic In the next decades, unexpected and short-term climate recovery, the use of oil shale reserves will become a viable changes will definitely have an impact on local economies financial alternative. through decreases in production, consumption and increases in the amount of damages caused by floods and hurricanes. About two thirds of the oil consumed in the US is used by By 2030, the world food demand is predicted to increase by the transportation sector. This trend will be gradually and 50% challenging low agricultural prices policies and partially offset by the introduction of new hybrid electric pushing for an increased use of genetically modified crops. and hydrogen engines. Pre 2008 summer scenarios on the At this scale, any climate effect on a local food production impact of hybrid sales on the US oil consumption were at may have global consequences on the world supplies. best showing 2.5% decrease for 1 million hybrid cars predicted to be sold by 2025. In fact, this number was reached in February 2009 for the combined Toyota Prius V. Demography and pandemics. and Lexus hybrid cars sales in the US [11]. The inevitable increase of the world oil demand mainly driven by China, Some regions of the world are aging faster than others. fostered by financial markets speculations, will certainly Europe, Japan, Russia will face a major challenge in lead oil prices to cross again the $100 threshold and financing their pensions and avoiding immigrants to feed maintain this trend. their labor force. As a consequence, the European percentage contribution to global GDP is predicted to Nadir Belarbi - 4/5
  5. 5. plummet from 21% to 5%, in a generation [12]. Yet Europe [9] Capability of the People’s Republic of China to Conduct Cyber Warfare and Computer Network Exploitation, Prepared for The US-China prospects of a better life will remain a strong attraction for Economic and Security Review Commission, Bryan Krekel ,October 9, the large and young African unemployed population. In 2009. such less favorable economic context, the European countries like France, Spain and Italy will face serious [10] PISA 2006: Science Competencies for Tomorrow’s World, OECD briefing note for the United States, December 4th 2007. challenges in assimilating African populations and avoiding social troubles. Interestingly, Japan will face a serious [11] "Toyota and Lexus Hybrids Top One Million Sales in the U.S.". The dilemma between accepting more immigrants and Auto Channel. 2009-03-11. preserving its national identity. Tough economic and http://www.theautochannel.com/news/2009/03/11/453029.html. Retrieved cultural choice will have to be made to encourage parents to 2010-03-07. have more children. [12] $123,000,000,000,000: China’s estimated economy by the year 2040. Be warned, Robert Fogel, Foreign Policy, Jan/Feb 2010. Finally, the last bird flu and H1N1 pandemics had [13] High food prices: Impact and recommendations, Paper prepared by fortunately limited consequences on the world economy and FAO, IFAD and WFP for the meeting of the Chief Executives Board for the number of victims. But the possibility of a global and Coordination on 28-29 April 2008, Berne, Switzerland. virulent pandemic remains present. The absence of an adequate vaccine and the general lack of immunity may trigger a hundred of millions of contamination that may result in tens of millions of deaths [1]. More than ever, Nadir Belarbi received an Engineering degree from the University of science and medicine performance will be critical to find a Science and Technology of Oran, Algeria (1993), a Master Degree in cure in a short time frame while keeping populations alert. Networks and Telecommunications from Paris V University & Sup Telecom Paris, France (1994), studied 3 years of studies and research on Intelligent Networks during a PhD program (1997) and received an VI. Conclusion Executive MBA from the Chicago University, Booth Graduate School of Business, USA (2008). He has worked for IBM, Air France, Groupe As China increasingly appears as the main US contender, Danone. He currently leads Business & Innovation projects at Dannon. the different challenges raised by the latest NIC 2025 Global Nadir Belarbi’s research has spanned a large number of disciplines, Trends report, underline more then ever the need for the US emphasizing information technology and telecommunications with a focus to address some fundamental issues. First, fostering on emerging technologies. As a manager with multi-cultural skills education is an important requirement to take the US society speaking five languages, he worked in an international environment where to the knowledge era and foster Innovation. Second, he specialized in the coordination and lobbying of global organizations. massive investments in new technologies are mandatory to His political and social experience ranges from heading the corporate work maintain the US leadership, attract capital, accelerate council to participating in political and geopolitical organizations and think economic recovery and reduce the national deficit. Third, tanks. With a major interest in Intelligence, Technology & Energy roles in these factors will maintain the crucial US military Geopolitical, Military & Security issues, he is now managing a LinkedIn group on Business, Innovation & Geopolitics. superiority which strategy will have nevertheless to be adapted to the new type of guerilla and terrorist threads that will continue to dominate strategic regions. References [1] Global Trends 2025: A Transformed World, National Intelligence Council, 2008. [2] Goldman Sachs, Economics paper No 99, Dreaming With BRICs: The Path to 2050, 2003. [3] Goldman Sachs, Economics paper No 152, India’s Rising Growth Potential, 2007 [4] Social Unrest in China, CRS Report for Congress, Thomas Lum, May 8 2006. [5] India Telangana separate state protests turn violent, BBC News, 20 January 2010. [6] China issues 50-year science strategy, SciDevNet, July 6, 2009. [7] CIA Online Factbook: China, cia.gov, march 7, 2010. [8] Analysis: Greek financial crisis coming to America? By Niall Ferguson, FT.com, February 12, 2010. Nadir Belarbi - 5/5

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