What Works in the World Economy Hamish McRae Five great medium-term global shifts and … … their implications for the world of finance Three big questions about the future

A global vision is vital - but … It has been said that arguing against globalisation is like arguing against the laws of gravity. Kofi Annan

… growth must be sustainable … We need a new environmental consciousness on a global basis. To do this, we need to educate people. Mikhail Gorbachev

… and against strong headwinds I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office. Barack Obama

The World in 2020 will … … be ageing and will demand more security … want to travel but worry about conservation … use technology to become yet more global … find government under huge financial pressure … and will rebalance towards the "BRICs"

… and for your industry? Well, we know people need to talk! We know that means traveling … … but group meetings are efficient Face-to-face supports electronic communication The cultural dimension is vital, for … … a rebalanced world needs cultural harmony

Where we are now An historic moment of transition - in effect … … the reversal of the Industrial Revolution The G20 has replaced the G7 … … acknowledging how power is shifting to Asia China is now the second largest economy … … India has become a key European investor

Global shifts change business Demography – an ageing developed world The environment – concerns will rise Technology – an even more level playing field Government – under ever greater fiscal pressure Globalisation itself – the shift of power races on

Ageing societies are different The developed world is getting "older" … … and Europe in particular has to adapt Much of the emerging world remains "young" So there will be a great shift of economic power Attitudes in developed world will shift … … towards wanting greater security

What does this mean for business? Demography has a profound impact on growth Europe's workforce has started to decline China benefits now; India's "sweet spot" is later Obvious consequences: Europe must fix its finances Less obvious: how to use the social changes of ageing … … by adapting your industry to match changing tastes

Dealing with energy pressures We can glimpse the end of the oil era Uncertain energy supplies, coupled with … … huge demand from the US, China and India The desire for mobility will continue growing … … concerns about climate change will rise … … and continue to affect public policy

What does this mean for business? One quick win: the value of a “green” reputation … … which help protect companies from attack A world where resources are no longer abundant … … inevitably redistributes wealth and power Obvious beneficiaries: the raw material producers Less obvious: industries that are best at adapting

The revolution in technology It is (nearly) a global level playing field Communications technologies are universal … … and deeply democratic But technology gives global reach … … as well as global competition

What does this mean for business? It is not quite a level playing field but a flatter one … … for there are new peaks of excellence How do "old" economies deliver excellence? How do technology develop in the emerging world? How do conference centres adapt to technology?

Government in the 21st century There are some things only governments can do … … such as fight wars or rescue banks But huge pressures as debts and demands rise … … and revenues in the developed world are cut away European nations are particularly vulnerable The issue for all: how to do more with less?

What does this mean for business? We are seeing a transition from plenty to austerity But the debt legacy will be huge for all So Western governments have to more effective … … using smart regulation, not "tax 'n' spend" Governments need help from business communities … … who have to create value propositions for investment

Globalisation is our friend The shift to the BRICs … … and the rest of the emerging world … … is a profound challenge to the "West" … … but one that creates great opportunities What will the world look like in 2030?

What does this mean for business? The greatest shift of economic power for 200 years … … and it has speeded up during the downswing … … though there will be setbacks for Asia of course Obvious consequences: the West must lift its skills … … and help fast-growing economies apply technology Less obvious: accept a shift in attitudes and values

This cycle: the prospect now We are past the economic turning point But there be setbacks … … and the recovery will be a two-speed one … … with the developed world lagging … … and the emerging world driving ahead

Some immediate economic risks All the fiscal ammunition has been fired … … so nothing can be done if growth falters Fiscal policy has to get back to normal Monetary policy has to get back to normal Meanwhile the Asian boom continues … … but there will be bumps on the way for Asia too

Some general messages … Developed countries face re-balanced world … … but that is a great opportunity We have to be sensitive to changing social values … … including values different from our own But we have a model that we can adapt A richer but more crowded world needs our skills

… and some more specific ones Flexibility is key in an uncertain world A convention has to be nice as well as efficient … … with emphasis on outcomes rather than kit Culture will matter more Luxury will matter more Service has to be attached to product What is there that money can't buy?

So what does work? A sense of mission … … and a way of handing that mission on A quest for excellence (of course) An ear for the market (of course) A magnet for talent A recognition that good ideas come from everywhere

What Works in the World Economy Hamish McRae Five great medium-term global shifts and … … their implications for the world of finance Three big questions about the future