Gordian Knots

1
Gordian Knots Alexandrian SolutionsRegions -
CorporationsThe Future of Regionsin a
Perspective of Global ChangeSeminar organized
by Ministry of Regional Development

• Dr Krzysztof Rybinski
• Partner Emeritus, Ernst Young
• Warsaw, 10 June 2038

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Political cannibalism

• Easter Islands story
• We define political cannibalism as a situation,
  when countries fail to reach broad consensus on
  how to deal with important global problems and
  they implement local tactics to maximize country
  welfare in the short run
• 2008 examples biofuels and agflation, responses
  to agflation, global imbalances and credit crunch
• Polish example of political cannibalism Polands
  CAP support, energy sector restructuring
  (blackouts)

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Last 30 years drama amid political cannibalism

• Countries failed to reach agreement of rising
  food prices (recall failure of FAO conference in
  Rome in June 2008), US, EU, Brasil continued to
  expand biofuels,
• EM demand for food and energy rose sharply
• Climate disasters
• All of that pushed food and energy prices, food
  prices trippled by 2011, oil rose to 300
• Millions died in poor countries from famine,
  millions were relocated, drive and kill the
  poor attitude prevailed
• In 2014 world slumped into 4-year long recession,
  this period is called today the Dark Teens, also
  because energy shortages caused massive
  black-outs around the globe

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We did know it was coming, did we not

• Take a look at some forecasts made 30 years ago,
  in 2008

5
In a book published exactly 30 years ago authors
warned that
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Scarce energy and climate

• Production of traditional sources of energy will
  peak before 2020
• With oil prices rising there is an increased
  tendency to use coal, which clashed with Kyoto
  goals to reduce CO2 emissions
• Clean technologies (CCS) are not ready, it will
  take time
• EU should be prepared to face serious energy
  crisis, energy wars should not be excluded
• Vision, strategy, full commitment of all
  stakeholders and innovation in a must (recall IEA
  report published on 6 June 2008)
• Without changing world governance progress on the
  climate front will be too slow to matter

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Scarce energy and climate
GDP produced per unit of energy, world average
and regions

• Current pace of increasing energy efficiency is
  not enough
• According to IEA US will become more efficient
  but the growth effect will make its CO2 emissions
  stable
• China, Asia and later Africa will increase
  emissions
• Europe should make its energy efficiency
  technology available to emerging markets (who
  will pay?)

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Climate

• Debate about CO2 mechanisms in Europe (world)
  should be redirected from CO2 production to CO2
  consumption, or more broadly to human ecological
  footprint deficit
• CO2 mechanism should not be used as a tax on
  less developed countries, it should be fair and
  designed to reach Kyoto objectives

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Climate disasters as daily life

• Countries and regions should be prepared to deal
  with climate disasters (sudden shocks as well as
  slowly moving deterministic trends)
• Today floods and tornadoes in Europe are daily
  life, water is rationed in many places

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Population 1950, 2005 and 2050
Source UN demographic forecasts
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Aging and migration
Number of children per woman Number of children per woman Number of children per woman Number of children per woman Number of children per woman
1950-1955 1975-1980 2000-2005 2020-2025 2045-2050
World 5.0 3.9 2.7 2.3 2.0
Africa 6.8 6.6 5.0 3.6 2.5
Middle East 6.5 5.0 3.2 2.3 2.0
India 5.9 4.9 3.1 2.0 1.9
China 6.2 3.3 1.7 1.9 1.9
L A C 5.9 4.5 2.5 2.0 1.9
Oceania 3.9 2.7 2.4 2.1 1.9
Eastern Europe 2.9 2.1 1.3 1.4 1.7
EU-15 2.5 1.9 1.6 1.7 1.8
United States 3.5 1.8 2.0 1.9 1.9
Japan 2.8 1.8 1.3 1.4 1.6
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Aging and migration

• Aging will have dramatic (but slow-moving)
  implications on productivity, savings, public
  finances. It will also shift voting power from
  young to old generation, which will stop reforms
• Smart migration may be a good policy-choice to
  deal with aging and falling share of active labor

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People waiting to cross the street Anytown,
Europe 2038
Source Cover of the World Bank report on
migrations
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Chindia China and .
Lethal competitor or .
Paper dragon
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Chindia China and India.
Will challenge western world firms
or will remain in its historical puppet role
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Already 30 yeards ago Chindia we biggest
contributors to world growth
Source WEO, IMF, Oct 2007
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History
Source EC Globalisation Trends, Issues and
Macro Implications for the EU, Economic Papers,
July 2006
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But western politicians kept saying
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Chindia will make mistakes and will fail
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Very fast changes !!!
Source EC Globalisation Trends, Issues and
Macro Implications for the EU, Economic Papers,
July 2006
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Asia financial power
FX reserves and SWFs, Q4 2007
IPOs
China 1600
Japan 1000
UAE 900
Norway 400
Saudi Ar. 350
Singapore 330
Kuwait 250
PIMCO 693
CalPERS 247
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Politicians also failed to note China IC
development
Patent filings by office in 2005 in thousands
Data for EU-15 are the sum of patent filings
from national patent offices and the European
Patent Office. According to WIPO, EPO patent
filings in 2005 amounted to 60.8 thousands. The
total number of patent filings for EU-15 may be
overstated as the EPO grants patents on behalf of
the member states of the European Patent
Convention (EPC), the membership of which is
larger than that of the European Union because
some EPC member states are not members of the
European Union. Furthermore many European patent
applicants seek patent protection in multiple EPC
member States, therefore, non-resident patent
filings by Europeans in other EPC member State
offices and at the EPO have become common. For
the same reasons the total number of patent
filings for CEE-4 may be underrated. Data for
Italy are not available. Latin America-6
includes Brazil, Chile, Colombia, Cuba, Ecuador
and Peru. Source World Intellectual Property
Organization.
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China was banned from participation in global
governance

• IMF vote share, selected countries
• USA 16.77
• Germany - 5.88, France - 4.86, Italy 3.19
• Netherlands 2.34, Belgium 2.09
• China 3.66
• India 1.89

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Recall some facts

• In 2007 54 of places on top100 Shanghai list of
  best universities were occupied by US schools,
  they took 8 top places
• In 2038 more than 50 of top100 places are
  occupied by Asian universities, which offer
  highest wages and best research environment
• In 2010 PBoC funded an annual Thought Leadership
  Prize worth 100m renminbi (more 20m at 2010
  exchange rate), also called 21st century Nobel
  Prize, for disruptive innovation
• Since 2024 this prize has been awarded each year
  to research teams based in Asia

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World in 2038

• In 1999 there were 7 Americans on Forbes 10
  richest men list
• Already in 2007 there were 4 from India, one from
  Mexico and Russia, and only 2 Americans and 2
  Europeans
• In 2038 first 20 places on baidu.cn list (which
  took over Forbes in mid 2020s) are occupied by
  businessmen from China, India, Russia, Brasil,
  Mexico and Arab countries
• Fortune 500 list begins today with a very well
  known names such as Hunlan, Dongfeng, Huawei,
  Geely, Lenovo, Mahindra, Satyam, Tata, Wipro,
  Baidu
• It seems hard to believe today that 30 years ago
  best known brands were Coca Cola, GE, Microsoft
  or Google

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Europe in 2038

• EU has been renamed West-European Union after
  only six contries reamained
• WEU growth in the last 10 years was only 0.3,
  quality of life has deteriarated in many reigions
• Euro is still official WEU currency, but its
  share in global reserves fell to 4 from 25 30
  years ago

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Lazy, social, but innovative Europe was able to
face the charging dragon, but it failed to take
right steps 30 years ago
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It failed to create EU vision 2050

• EU - world brain
• Strategic priorities
• EU as the most intelligent part of the world
• EU as the headquarters of global corporations
• EU as a place where creative minds from South and
  North meet to live, study, work and enjoy life

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It failed to invite BRICs to strategic
decision-making

• IMF lost global mandate
• Asian-African Monetary Fund was established,
  Asia-Africa became the new axis of power
  (populated by 7 out of 9 billion people on Earth)
• TAFTA was created too late and had too little
  impact
• The proposal to form Global Strategic Council in
  2010 was rejected by rich countries

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Europe 2038, a failed state

• Energy shortages
• Water problems
• Climate disasters
• Huge gettos of migrants, social unrest
• Huge old population, very poorly taken care of
  amid funding shortages

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• Today we know the mistakes we made, some
  predicted it might happen already 30 years ago
• Politicians did not listen, they were stuck in
  20th century thinking, unable to think beyond
  4-year election cycles
• Alexandrian solutions were rejected
• What a pity we cannot turn the clock back!