The US Government’s Future Decades’ Drill

The National Intelligence Council, which acts as a long-range think tank for State and Treasury Department policymakers, released the latest in its Global Trends series attempting to extrapolate “Alternative Worlds” out to the year 2030. It foresees “radical transformation” without the US, China or another large power dominant amid changing demographic, urbanization and commodity patterns in both industrial and developing countries. The majority of the population will become middle-class over the period but individuals will also have access to “new and lethal” technologies. Asia will be the biggest economy and in other regions Brazil, Indonesia, Nigeria and Turkey will be important while Europe, Japan and Russia will continue their decline. With emerging markets’ move to cities, housing, office and road construction over the next 40 years could equal history’s total to date. Food, water and energy demand will increase 30-50 percent and climate change will aggravate access. The US, which has already regained the gas export lead with innovations like “fracking,” could be resource-independent by mid-century but environmental costs could limit the breakthrough. The global economy will continue to run at multiple speeds, but a savings shortfall versus investment needs will raise term interest rates. The BRICS could be trapped in middle-income status and the Middle East, Central and South Asia and Sub-Sahara Africa suffer a “democracy deficit.” which can foster instability. Cross-border financial crises can be repeated in the absence of governance structure overhaul, with the Bretton Woods institutions likely to cede monitoring and rescue to fresh players.

Among troubled states Central America and the Caribbean are at risk of failure from external and internal criminal and terrorist networks. Cyber-security will be a frequent battle front but at the opposite extreme health care advances will markedly raise longevity in the developing world. The US will be a “first among equals” in government relations, but business, philanthropic and subnational groups will also exert unprecedented influence. The list of improbable near-range “black swan” events features EU or China collapse as well as liberal reform in Iran. Gloomy prognostications of a Greek exit from the euro ending the single-currency experiment have not been as prominent recently, but the scenario cannot be ruled out given the continent’s aging and productivity challenges. Russia is also on a downward trajectory the report suggests, and Central and Eastern Europe may still be tempted by populist and socialist alternatives with its own budget and competitive difficulties twenty years after the Berlin Wall fall. In Hungary far-right parties may again pose a fascist specter heading into 2014 elections, and in the Czech Republic previously spurned communists may be invited into the ever-splintering ruling coalition that cannot agree on austerity steps with recession already underway. In Poland with domestic mainstay construction in the doldrums and jobless immigrants returning from abroad, conservative public finance management is no longer the scenario as mainstream economists embrace heavy spending alternatives.