europe faces a post-western world hamish mcrae five great medium-term global shifts and … …...
TRANSCRIPT
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Europe Faces a Post-Western WorldHamish McRae
• Five great medium-term global shifts and …
• … their implications for the world of finance
• Three big questions about the future
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Three big stories: globalisation …
It has been said that arguing against globalization is like arguing against the laws of gravity.
Kofi Annan
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… the West’s burden of debt …
I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office.
Barack Obama
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… and the pressure on Europe
Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP, and has to finance 50 per cent of global social spending ….
Angela Merkel
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The presentation's structure
• First, a long historical perspective
• The structural forces changing the world …
• … and the shorter-term cyclical outlook
• A look further forward to 2030 and beyond
• Some implications for the future of Europe
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This moment in world history
• The reversal of the Industrial Revolution
• The G20 is gradually replacing the G7
• Asia is the principal source of global savings …
• … and of additional global demand
• China is now the second largest economy …
• … India the second largest investor in the UK
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Four huge structural forces
• Demography – an ageing developed world
• The environment – concern continues and grows
• Technology – towards the level playing field
• Government – under great pressure in the West
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Ageing societies are different
• Most of Europe is ageing fast
• Much of the emerging world remains young
• So there will inevitably be a shift of power …
• … and we can see it particularly in the UK
• Attitudes in the developed world will shift …
• … and be influenced by the emerging world
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What does this mean for Europe?
• There are different patterns within Europe …
• … but Europe as a whole faces a challenge
• North America still has a positive outlook
• China benefits now; India's “sweet spot” is later
• Obviously: power shifts to Asia, though China will slow
• Less obviously: prizes go to those that adapt best
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It’s good to be green
• The end of the oil era is a long way off, but …
• … uncertain energy supplies, coupled with …
• … huge demand from the US and China
• For Europe – the problem of Russia
• But “fracking” will buy us some time
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What does this mean for Europe?
• One quick win: the value of a “green” reputation
• Some rebalancing of wealth and power to producers …
• … including the US and Canada
• Europe has to diversify its sources of energy
• Obvious beneficiaries: reliable raw material producers
• Less obvious: countries that are best at adapting
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The revolution in technology
• It is (nearly) a global level playing field
• Communications technologies are universal …
• … and Europe has no technological advantage
• But technology gives Europe global reach …
• … as well as fostering global competition
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What does this mean for Europe?
• Communications technology is universally available
• It is not quite a level playing field but a flatter one …
• … for there are new peaks of excellence …
• … including peaks in Europe
• Obvious issue: how does the “old” world compete?
• Less obvious: what do we learn from the “new” world?
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Debt 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 …
• … debt in the emerging world remains mostly low …
• … notwithstanding some concerns about China
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What does this mean for Europe?
• The debt legacy for the G7 is massive …
• … and there is a particular problem for Europe
• All Western governments have to more effective …
• … using smarter regulation, not “tax 'n' spend”
• The emerging world carries a much lower burden …
• … as well as having faster growth
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What happens next in the cycle?
• The recovery will remain a two-speed one …
• … despite some slowing in the emerging world
• Europe has to press forward on reform …
• … and will inevitably grow quite slowly
• Maybe the deep dip means a long growth run …
• … giving Europe time to make those reforms
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IMF growth forecasts for 2015• US – 3.0 per cent
• UK – 2.5 per cent
• Canada – 2.4 per cent
• Germany – 1.6 per cent
• France – 1.1 per cent
• Japan – 1.0 per cent
• China – 7.3 per cent
• India – 6.4 per cent
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A look forward to 2030 and beyond
• The BRICs model …
• … predicts China passing the US in 2027 …
• … and India around 2050
• Shanghai/Hong Kong pass Wall Street
• But is this realistic and what might go wrong?
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Outlook for Europe’s economy
• The North/South tensions will continue
• Eastern and central Europe will prosper …
• … once legacy issues are resolved
• Europe’s skill base is wonderful …
• … but its political base is weak …
• … and tensions over the euro are unresolved
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Some key conclusions …
• The shift of power to Asia is inevitable …
• … and we in Europe must learn from it
• The West’s short-term outlook is troubling …
• … and it will be a two-speed global expansion
• But a rebalancing is both inevitable …
• … and you might say just
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… and some key questions
• Is this analysis all too linear?
• Can China cope with its demographic barrier …
• … and its social and other challenges?
• Can India cope as the most populous nation?
• Can we preserve a freely-trading global economy?
• What are the pressures on the environment?
• How will the West deal with loss of leadership?
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Europe Faces a Post-Western WorldHamish McRae
• Five great medium-term global shifts and …
• … their implications for the world of finance
• Three big questions about the future