WELCOME TO THE TWENTY-FIRST CENTURY Mauro Guillen and Emilio Ontiveros (2012)Global Turning Points, Cambridge University Press. Roilo golez notes in course Analyzing Global Trends for Business & Society, under auspices of Coursera and University of Pennsylvania (Wharton)

WELCOME TO THE TWENTY-FIRST CENTURY

Mauro Guillen and Emilio Ontiveros (2012)Global Turning Points, Cambridge University Press

Part of Roilo Golez notes in course Analyzing Global Trends for Business & Society, under auspices of Coursera and University of Pennsylvania (Wharton)

In 2001, two momentous events shook the world. On September 11 a small group of bold terrorists mounted a series of daring attacks on the United States, and on September 17 the World Trade Organization concluded its 15-year-old membership negotiations with China.

Although the world’s preeminent geopolitical power had been the target of other terrorist attacks during the preceding decade, 9/11 was qualitatively different not only because of the large number of victims but also because it undermined the country’s sense of security. Likewise, China’s economic and financial rise had been in the making since the 1980s, but it was not until the early 2000s that the world came to the realization that Earth’s most populous country would one day also become the largest economy, and that it was already the world’s largest exporter and the second largest importer. Chinese exports, trade surpluses, and currency reserves soared, with the US reaching record deficits in its current account. These global imbalances set the stage for the most severe global economic and financial crisis in decades.
Welcome to the twenty-first century. The new centennial is not even a teenager and it has already developed its own, unique personality. This book deals with the challenges facing us in the new century.
2 • Welcome to the twenty-first century century. It is not one more exercise at projecting past trends into the future, but an analysis of the major global turning points confronting us, namely, the game-changing events and trends that are transforming the world beyond recognition. A series of such inflexion points have occurred over the last decade or so – and they will reshape the economic, socio- demographic, political, and geopolitical affairs for decades to come:
The global economy is out of balance. Most of the large rich economies, with the notable exceptions of Germany and Japan, are running large trade deficits while most emerging economies are enjoying large surpluses. After two decades of intense economic growth, emerging economies now represent about half of global economic activity. Emerging economies are also flexing their financial muscle because they own two thirds of foreign exchange reserves, of which they are accumulating an additional two billion dollars every day.
Emerging-market multinational firms are expanding around the world like wildfire. Once a marginal phenomenon, as of 2010 they represented 25 percent of the

largest 500 companies in the world, 29 percent of the total number of multinational firms, and 41 percent new foreign direct investment flows over the previous five years.
Demographic conditions are changing fast. For the first time in human history, Japan and several Western European countries have inverted age pyramids with more people above age 60 than below age 20. Also for the first time, more people live in cities than in the countryside, and greater numbers suffer from obesity or being overweight than from hunger.
The political landscape in many parts of the world has taken a turn towards uncertainty, chaos, and anarchy. For the first time since World War II there are more countries in the world affected by state failure than countries ruled by dictators. In general, there is a sharp decline in the legitimacy and capacity of the state in both developed and developing countries.
We live in an increasingly disparate world. Although income inequality across countries has decreased since the turn of the twenty-first century due to the rise of the emerging economies, inequality within countries has continued to increase, posing difficult social and political problems in developed and developing countries alike.
Sustainability has become a key priority. Top scientists predict that, without corrective action, climate change will become irreversible at some tipping point during the twenty-first century. By 2030 food prices could be twice as high as in 2012, and half of the world’s population could be affected by severe water shortages.
The global balance of power is shifting rapidly. During most of the twenty-first century India will be the biggest country in terms of population, China the largest in output, and the United States the richest among the major economies on a per capita income basis.
Some people find it hard to accept that the world order they grew up with might be coming to an end. Others feel that change is so pervasive that one can no longer assume any givens. Both reactions are understandable, precisely because the changes are so massive and they affect so many different aspects of global affairs. There are simply too many moving parts. Complexity is a key future of contemporary global society. Although the risks and the stakes were also high, the Cold War period never gave us a sense of overwhelming insecurity. Even the risk of nuclear war provided the foundation for the doctrine of “mutually assured destruction,” which made it possible for the two global superpowers to find an accommodation. The twenty- first century is different. We are at the mercy of the catastrophic disruptions that a malfunctioning component of the increasingly complex global system can bring about. Think about epidemics such

as SARS or the swine flu, global financial meltdowns like the one triggered by the subprime crisis in the United States, the European sovereign debt debacle, the riots generated by rising food prices in much of the developing world, or the quake and tsunami in Japan and its widespread consequences for global production and trade. The twenty-first century is the century of complexity.
Perhaps we could easily learn to cope with complexity if it did not come hand in hand with uncertainty. We know how to deal with risk: we can measure it, we can prepare for it, we can anticipate the consequences. But uncertainty is a situation in which we do not understand the variables involved and we lack the tools to quantify them. Uncertainty is difficult to grasp or comprehend. The rise of the global network society has unleashed many different kinds of uncertainties. We are just not sure as to what the effects of droughts, declining fertility rates, or political upheavals will be. We simply have little clue. The twenty-first century is the century of complex- ity coupled with uncertainty.
Another most intractable feature of the twenty-first century is that most changes appear to be paradoxical. Consider the following examples. The rise of the emerging economies is making it possible for hundreds of millions of people to overcome poverty. However, it also poses stern challenges in terms of job losses in the developed world, competition for energy and natural resources, and global economic and financial governance. We will explore this topic in Chapter 2. Another example is the rise of the emerging-market multinationals, companies that were invisible a few years ago but have suddenly become household names. The paradox about them is that their increasing power and competitiveness is not necessarily based on the possession of technology or marketing skills. They have rewritten the rules of business competition, much to their advantage and at the expense of the traditional multinational firms from Europe, the US, and Japan. We will cover the fascinating rise of the emerging-market multinationals in Chapter 3.
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Equally puzzling are the demographic changes that are taking place in the world. The decline in the average number of children born to each woman has proceeded much faster in Europe, East Asia (especially China and Japan), and to a lesser extent North America. Women in those regions now have much better economic, political, and social opportunities available to them. But these societies are aging very quickly. In the meantime, population continues to increase in Africa, South Asia, and the Middle East. It is also ironic that as economic development spreads around the world, we find ourselves in a situation in which there are more people suffering from obesity (about one billion) than from hunger (800 million). As of the first decade of the twenty-first century, the world has become predominantly urban, with more people living in cities than in the countryside for the first time in human history. Competition for natural resources now affects not only oil and rare minerals

but also food and water. We will address the causes and the consequences of these and other demographic turning points in Chapter 4.
If there is an enigma that is likely to haunt us during the twenty- first century, it is why democracy has made great strides as the dominant form of government in the world while at the same time the number of failed states has proliferated. Nearly 50 countries suffer from some degree of state failure, including not only egregious examples such as Chad, Congo, Sudan, Somalia, Iraq, and Afghanistan, but also other threatened states like Mexico, Nigeria, Pakistan, and India. This trend has caused major problems in the global economy and in trade, and made terrorism the dominant form of violent conflict, whereas in the twentieth century conventional wars were. In Chapter 5 we will explain that the confluence of rapid demographic growth, political instability, and natural resources in Africa, the Middle East, and South Asia poses serious threats to global society in the twenty-first century. Another paradoxical trend is the new emphasis on good institutional governance at a the same time that state capacity is diminishing due to the ideology of small government and the fallout from the sovereign debt crisis.
Global inequality and poverty have also come to characterize the twenty-first century in ways that are very different from the recent past. For the first time in two centuries, we are witnessing less inequality across countries at the same time that inequality within both developed and developing countries is on the increase. Enigmatically, poverty is coming down even in countries in which inequality is on the rise. We will analyze these puzzling turning points in Chapter 6.
Growth in the emerging economies has come hand in hand with environmental degradation. In developed and developing countries alike, a quest for sustainability is on. The emphasis is not only on energy, but also on green production and consumption of goods and services. Agriculture, construction, and tourism have also become targets of sustainability efforts. Technology and behavioral change are touted as the solutions. Emerging economies are making contributions of their own to global sustainability, as the cases of sugarcane ethanol in Brazil, water management in Thailand, or wind power in China and India attest. Water and food are also becoming scarce commodities. We will examine the challenge of global sustainability in Chapter 7.
These economic, demographic, and geopolitical turning points are rapidly eroding the dominance of the United States as the leading global power. In April of 2011 the International Monetary Fund shook American public opinion with its prediction that China’s economy would be the world’s largest by 2016. We will explore in Chapter 8 to what extent historical patterns in the rise and fall of dominant global powers help understand the new situation created in the twenty-first century, one in which not one but several powers may share the global stage.