Fairtrade And The Future

Two strands of the future came together for me this week. On Monday, the BBC business programme ‘Working Lunch’ carried a feature on Divine Chocolate (see news clip). Divine Chocolate is an interesting company. It is a chocolate manufacturer, but with a strong corporate ethos of fairtrade. Not only does it purchase the cocoa from Ghana for a price above the market rate, it also has helped to develop the cocoa producers into a collective body, and gives 45% of its profits to social projects within the producing villages. On the company web site (see site), it states that just under half of the company has been given to the producers.

On Tuesday, I attended a session in London on the ‘Future of Civil Society in the UK and Ireland’, co-hosted by the NCVO (see site) and Carnegie UK (see site), which provided the second strand of the future. It was interesting to meet and listen to a number of people - who are not based in mainstream corporate or governmental bodies – talk about their hopes and aspirations for the future of their work. I will put a fuller review of the day on our Blog later this year, but for now, it is enough to say that the day was quite stimulating in a number of areas. The two futures strands came together in the form of describing the Social Enterprise.

As we move away from Hierarchy World (the economics of scarcity) and towards Network World (the economics of abundance), an interesting paradox is emerging. If you are in the Network World, you create more value for your company by giving it away. Value is enhanced through sharing and co-operation. This is why I always feel uneasy about those Information Age companies who are reluctant to share and co-operate. A good part of the value in Divine Chocolate is because it has given away part of itself.

Why should that be? The chocolate sold by Divine is not a commodity. It is an experience. Not only do the customers buy the chocolate, they also buy the story behind the chocolate. It makes them feel good to eat chocolate and to know that they are contributing to global development in doing so. The experience of Divine Chocolate is an action firmly rooted in the Dream Society, where we no longer buy goods but the stories behind those goods. The act of philanthropy has created the added value within Divine. This is the upside to living in an age of spin.

Does the social enterprise need new forms of corporate ownership? According to the press release issued by Divine on the declaration of the first Divine Dividend (see release), the existing corporate structures work just fine. What is needed more is a willingness to share and co-operate. If, in the West, we do not share and co-operate more, what sort of future can we expect for ourselves?

Drawing Boundaries On Conservation

This week at the Time Bandits we looked at Drawing Boundaries on Conservation. Overall the article is a good idea. The Time Bandits think that some animals that we should be watching out for are cod, red squirrels, hedgehogs, stag beetles, eels and jelly fish. Mainly because there are so many of them being killed each year but not many people do much to help save them. The Time Bandits thought that the main ways to help cod is by not eating them and most of the other animals by leaving food out for them so they don't starve.

The article has a number of problems that the animals would face and the Time Bandits thought that the problem of paper parks is the worst because if parks are not marked down then people will keep going on and chopping down the trees, littering the areas and generally ruining the areas.

The Time Bandits were really mixed when I asked them if we should have more zoos because some thought that zoos preserve the animals, educates the people and gives people jobs. But on the other have some Time Bandits thought that the animals are in bad conditions, not given enough roaming space for it to be natural for the animals and the zoos are exploiting animals for money. The Time Bandits came to a decision that zoos are only OK when the animals have less than 100 in the wild but other than that the animals are being exploited.

I asked the Time Bandits, what animal if it became extinct would have the largest impact on the ecosystem? A Time Bandit made a really good answer by saying humans would have the largest impact as the world would change so dramatically. What do you think?

Living Without The Dudes In Suits.

An interesting news item caught my attention this week. I saw a piece on a lunch-time BBC news bulletin about a local group (Mesh 29 – see website) who have charted without a record company, a record deal, a distribution deal, or even producing anything more tangible than an internet link (see news feature). I found this to be an interesting example of disintermediation (cutting out the middle) that the internet has allowed. We might view it as the hollowed out organisation, or evidence of a flatter earth, or even an act in the long tail, but I see it just as an example of consumers getting much closer to producers.

Although the technology has allowed the spread of disintermediation, the growth of global markets has given the volume needed to cater for minority tastes. I often wonder if disintermediation – doing away with all of the middlemen (and women) – is an important corollary to globalisation. Could we have the one without the other?

Globalisation without disintermediation would represent the world of corporate hierarchies, where one mass unit would interact with another. This is the nightmare world of Orwell’s 1984, of Mussolini’s dream of a Fascist State. Equally, disintermediation without globalisation would be rather anarchic – a world of broken promises. In many respects the world was a bit like this during the dot-com boom of 2000 – orders made and taken, but with very serious problems in fulfilment. It is interesting to reflect on how far we have come in seven years.

This has some resonance for the future. There is nothing to suggest that the process of disintermediation has abated. Indeed, we speculate that part of the crisis in the retail end of the financial services industry is that people simply want to stay much closer to their savings. Additionally, despite the setbacks in the Middle East, the world is still adding connections rather than disconnecting them. If so, the future trend would be for a continuation of companies needing to be much closer to their customers.

Perhaps we all, eventually, will be represented by the switchboard business model where every consumer talks directly to every producer?

The Architecture Of Globalisation

Much has been written about Globalisation. It usually tends to focus on the really sexy aspects of the process – trade flows from exotic places, hot money sloshing around the world, gizmos and gadgets that will revolutionise the way in which we live, and so on. And yet, it is the really mundane things in life that are the more appropriate measure of the process of Globalisation.

A story this week brought it home to me. I dislike air travel very much. I don’t like airports – they are far too soulless for me. I don’t like the insincere veneer of customer care offered by airlines. I don’t like being herded around from one place to another. And I really dislike being interrogated by immigration officials who, if they had paid more attention at school, would be qualified to flip burgers. Wherever possible, I prefer an alternative form of transport.

My preferred method of travel is the train. It is relatively green, relatively relaxed, and a more enjoyable way of travelling long distances. The problem is that, in Europe, at least, the rail system is so fragmented. For example, in booking a ticket to the European Futurists Conference in Lucerne, the system will force me to buy a ticket from Ipswich to London, from London to Paris, and from Paris to Lucerne.

I welcomed with joy the news this week that a number of European train companies are to pool their ticketing arrangements (see story). Apparently, this is an attempt for the train companies to compete directly with the airlines. It is certainly the case that Ipswich to Amsterdam, via the ferry crossing, is quicker by train than by plane, if we add into the mix the travel to the airport and the hanging around in the airport terminals. At £50 return, it is also cheaper to travel by train.

This news is of great significance to our model of globalisation, as it provides an example of how the architecture of globalisation is being built. In our view, globalisation is all about the integration and the harmonisation of the world economy, global society, and the global political sphere. There is still some way to go, but the vision of the end state of globalisation is starting to take shape. Companies such as the rail companies (an interesting mix of public sector, private sector, and a hybrid group) are finding that the benefits of collaboration far outweigh the benefits of competition. This is the force of globalisation that is turning the world upside down.

The authorities in China and India are presently engaged in building a rail link across the Himalayas so that Beijing will link, by rail, to Mumbai. There is a great amount of geopolitical significance to that project – it cuts out the maritime choke point in the Straights of Malacca – but it will have quite some commercial significance as well. From my perspective, it means that I will be able to travel by train from Ipswich to Cologne, from Cologne to Warsaw, from Warsaw to Moscow, from Moscow to Vladivostok, from Vladivostok to Beijing, and from Beijing to Mumbai. And back again.

How about that for a connected world? I guess that you all now know what to buy me for Christmas!

The Wellbeing Of Nations

After every Time Bandit had finished reading the article I asked them are you surprised that Britain is so low down on the worlds happiness scale, 41 out of 178?

All of the Time Bandits replied by saying no. I asked them why and they answered by saying that there are so many depressed people in Britain and very few of them are getting help. When it comes to children and being at school many Time Bandits thought it was no surprise that people are depressed. To do well in life you need to be poplar, do well in school and be prepared to ruin your life i.e smoking, drugs and sex. If a child doesn’t fit into any of those categories then the chances are that person will be unhappy.

Unfortunately one would hope that you could forget about it in class but it seems not as teachers turn a blind eye on bullying, pile you with homework and scare you about “important” exams.

The Time Bandits came up with some ways of trying to make Britain happier. Some of which were taking away crime, poverty and the majority of depression. Stop doing pointless things like wars and mainly stop having rulers who are just in it for themselves.

Timeline Technology

This week at the Time Bandits we looked at Timeline Technology.

Overall there were very mixed views as some thought that it was a great idea but unlikely to happen whereas others thought it was wrong in many ways. The most changed subject, the Time Bandits thought, were Artificial Intelligence, Robotics and Computing and Communicating. On the other side the Time Bandits thought that the least changed were Security, Biotechnology and Environment and Resources. The overall view I was getting from the Time Bandits was that we don’t need any of this and will simply end up more screwed up.

The Time Bandits thought that the hardest thing to make would have to be the robots outnumbering all the armies, also that could be quite dangerous. But the easiest thing to make is new forms of animals simply because if you breed different animals you will get new forms of animals anyway.

Going into more detail on certain subjects, the Time Bandits kept coming back to the idea of a full direct link which can seem good but will probably end up very bad. It could easily end up helping child perverts as they could lead a child into an alleyway without their parents knowing. On a better note, electronic pets would be quite good as they can be a lot easier to look after than normal pets.

Something that should never happen, the Time Bandits thought, was thought recognition as if you think of anything and it happens then teenage pregnancies could go up, death rates could go up and many other bad things could start happening. If all this does happen, a Time Bandits pointed out, would we not end up living in a virtual world. And people may give anything to make and have these things but why would you want to give up your humanity to become just another animated person?

Here Comes the Rain Again!

It has rained this week. You might feel that there is nothing unusual in that – Britain is known for its rain. It has, however, rained this week. We have been experiencing unduly heavy rain storms that have quite disrupted the northern parts of England (see story). With the rain came flooding and destruction (see story). And then it rained again (see story). There is much of the future wrapped up in this sequence of events.

First and foremost, there is the question of dramatic climate change. We believe that opinion on climate change has shifted slightly over recent months. In our view, it now seems to be taken as a given that climate change will occur, and the discussion has moved on to what we need to do about it. Much of the discussion has been around what to do in the long term – ways of adjusting our carbon footprint. Despite this, there is also the much nearer term to think about.

The tale of Ulley Reservoir may be a portent of things to come. This reservoir became so full of water that the fabric of the dam that retained the water started to give way. There was so much water in the reservoir that the engineering tolerance built into the dam was being exceeded. (See story). As we saw this story unfold, we wondered just how much reconstruction of the infrastructure would be needed to cope with dramatic climate change. In the last week, roads and bridges were washed away because their engineering tolerance had been exceeded.

If we, in the UK, are to preserve our infrastructure, then it seems to us that we are on the verge of a fairly major construction boom, as much of our infrastructure needs to be reinforced, if not replaced. This begs the question of how such a construction programme would be financed. It also begs the question of the supply of the building resources (the global market in building materials is still very tight), the supply of the human resource to do the work (we don’t have enough engineers in the UK, can we import them or train them ourselves?), and the supply of the management know-how for such a reconstruction.

We suspect that, very slowly and immeasurably, climate change is changing the nature of the insurance industry. Those poor souls flooded out in South Yorkshire will now be unable to obtain household insurance, if they were able to in the first instance. The question of how to compensate those who are victims of natural disasters – particularly if their plight is the result of public policy – is a political issue that may well climb the agenda in the next few years.

There was some upside to the week. When we compare the floods of South Yorkshire with the flooding of New Orleans a number of key differences are striking. It is interesting how easily the public services have been able to retain control of the situation. There has not been a repeat in South Yorkshire of the mayhem that was associated with the flooding of New Orleans. If anything, according to our correspondents in the area, the recent flooding has kindled what, in the UK, we call the ‘Dunkirk Spirit’ – where personal differences are laid aside in order to resolve the emergency facing a community, where everyone accepts the authority of the rescue services, and where all agencies pull together for the public good. This has assisted recovery efforts greatly.

It is important in future terms, as both New Orleans and South Yorkshire provide different, but empirical, models of how a community can react within a disaster scenario. South Yorkshire has demonstrated that public disorder is not inevitable after a disaster, that emergency services can co-ordinate to deliver effective relief, and that engaging the local community aids rather than hinders the recovery operations. Thomas Barnett was not entirely right – the guns don’t always come out after the third day.

Are We Ready For Open Sourcing?

None of us likes to be held to account. I recall from my accounting days in organisations that the annual audit was seen as, at best, a major inconvenience, and, at worst, a holy terror that blighted and destroyed careers. When we are the provider of a service, we do not like to have our actions scrutinised. However, when we are the consumer of a service, we want our voice to count.

In recent years, politicians have scrambled to become closer to the people, whilst also taking steps to keep the people as far away as possible. For example, Tony Blair has tried to interact with ‘the people’ through the Downing Street web site, whilst his spin doctors try to ensure that media contact does not give rise to any negative footage. Occasionally, the policy scores an own goal as the on-line petition over road pricing demonstrates.

In an interesting article in the RSA Journal (see article) George Osborne and Will Davies considered what some might see as a trend towards open source government. Both authors are questioning how politics may be changed in the age of the Internet. The internet enables mass participation in government, but only if there is not too great an asymmetry of information. And therein lies the rub.

Traditionally, the government will have most of the information, which denies people the ability to make an informed choice about issues. This monopoly on information is starting to be eroded. For example, patients can now rate their hospitals (see web site) and my children can now rate their teachers (see web site). However, it is still the case that most information is still in the hands of government – the provider of public services – who are naturally suspicious in matters of accountability. The Rate My Teacher web site lists those schools that have blocked access to the site because the teachers object to it.

The issue of accountability and transparency has spilled into the world of commerce. There is always a complicated relationship between the Directors, Shareholders, and Auditors of listed companies. In a recent survey, the Institute of Chartered Secretaries suggested that the Company Secretaries of three out of four listed companies thought that the AGM was a waste of time and money. And yet, the AGM is the only place in the corporate calendar where the Directors of a company, through the Auditors, are held accountable to the owners of the company (the Shareholders).

Eventually, we will either realise that accountability is an essential part of the democratic process, or we will give up on the democratic process as a means of arranging our affairs. Later this week, the UK will be governed by a Prime Minister who has been elected to that position by nobody – not even his own party. Does that provide us with a glimpse of the future?

The Globalisation Of Crime

An article in The Economist caught my attention this week. It was about how cocaine from Latin America is now being routed through Africa prior to arriving in Europe (see article). It speculates over whether or not Guinea-Bissau is the first narcocracy in Africa. The article resonated with a talk given at the RSA by Misha Glenny in March (see lecture details and access podcast of lecture), where it was argued that global organised crime is an inevitable corollary to the process of globalisation. If we were to have a theory of globalisation, then it would also have to explain the development of global organised crime.

Strangely enough, our path to this conclusion originated in a different direction. We were giving some thought to the ‘War on Terror’, and were contemplating the differences between the European approach (‘terror’ is an extended form of violent criminality that requires a policing solution) and the Atlanticist approach (‘terror’ is an act of war waged by a group upon a national entity that requires a military solution). Although these differences appear profound, in practice the policing solution requires the police to adopt a para-military stance and the military solution requires rules of engagement similar to armed policing operations.

An interesting feature of the current manifestation ‘War on Terror’ is how it operates internationally, using a network of groups. Previous manifestations have been essentially national and hierarchical. All of the benefits of globalisation that have assisted the development of the global economy (the internet, global communications, cheap air travel) have also assisted global terrorism (or, if you like, global organised crime). This is exactly the conclusion of Misha Glenny.

If this hypothesis is correct, then it helps to explain where we should look for the situation to develop. Although the violent organised criminality may manifest itself in the developed (interconnected and globalised) societies, much of it originates and develops in the fractured and failed states – the pre-moderns, if you wish. These ‘failed’ states are located in an arc that sweeps from Central Asia, the Middle East, through Africa, and into parts of Latin America – those areas that have been bypassed by the process of globalisation.

The analysis also gives a clue to the answer to the problem. If the absence of globalisation has assisted the development of global organised crime, then the inclusion of these states in the process of globalisation will also help to reduce the development of global organised crime. To date, the assistance given by the globalised world to Africa has been miserable. A vacuum has been created that is being filled by the drugs gangs of Latin America, the people smugglers of the Near East, and the Jihadists of South Asia.

This is why Africa matters to us. This is why poverty relief and debt reduction are such pressing priorities. It is vital to our own interests that Africa is absorbed into the global economy if we are ever to win the ‘War on Terror’. Beefing up policing operations will help to relieve the effects of the problem, but an effective solution to the cause of the problem requires much more effort on our part.

The little guy strikes back- Futurist Club

After reading The little guy strikes back I just I just had to show it to my futurist friends at last weeks meeting of the Time Bandits. Here were are overall views on it.

The whole thing with us idolising famous people is never really going to change as people are not selfless, so some feel the need to be the centre of attention and some just want money. When I say things are not going to change I mean in future generations as none of the Time Bandits thought Paris Hilton getting special treatment was not that bad. Also as many Time Bandits pointed out things won't change as long as the media keeps going on about how wonderful famous people are.

The Time Bandits thought that the next people to revolt will be high school teachers as many of them get a lot of abuse and have very little power to stop it. Also caretakers may revolt soon as many are being paid badly.

When it comes to prisons I asked the Time Bandits "Should mothers with babies in prison have their own prison, when famous people have one? The Time Bandits thought mothers should have longer with their babies but not a special prison. What most Time Bandits thought was that mothers in jail are not fit to look after a baby full time. Also what if a mother threatened to kill the baby? But when I asked about famous people having their own prisons the Time Bandits couldn't understand it because it is obvious that they will get special treatment, so why can't the famous people go in a main prison. As long as there is no bullying from other prisoners then why should they get special prisons.

When I asked the Time Bandits who they thought is the most overpaid famous types of people, the majority thought that footballers as getting paid over a million pound for kicking a ball around for ninety minutes is ridiculous. If footballers really love football they should do it for enjoyment instead of money.

The Little Guy Strikes Back.

The tale of Paris Hilton has captivated us this week. First she was going to jail (see story). However, she was not going to an ordinary jail. She was incarcerated in a special VIP and Celebrity Unit that has little connection with a more general prison population. After a couple of days inside, it seems that a ‘medical condition’ developed, and she was let out under house arrest to serve the remainder of her sentence (see story). The LA Sheriff’s Department has not released details of the medical condition, which does nothing to contradict the allegation made on the BBC that the medical condition was caused by the bed being too hard and room service not quite being up to scratch. The saga continues in uproar, with a re-incarceration (see story).

This story interests me, as it contradicts Harts Law of Jurisprudence – if there is one law that could be seen as a principle of natural justice, it is that all should be treated equally before the law. Such a blatant contradiction of natural law has given rise to quite a great deal of comment. However, we need to stand back and look at what is happening. The implication of events in LA is that we now live in a world where celebrity and wealth are above the law. We live in a naturally unjust society.

This has some important implications for the future. It means that we are comfortable with the paradox that, whilst needing the services of public servants (teachers, police, nurses, firefighters, and so on), we are prepared to deny them the ability to live comfortably – in what we might see as ‘the good life’. A story caught our attention, where public servants in the UK cannot afford housing in 70% of the UK (see story). It seems to me that this is not sustainable.

If the rich and celebrated can act is a selfish and self-absorbed way, without even obeying the law, then why can’t the little guy? A couple of stories caught our attention along this theme. First, parking wardens in Edinburgh are set to go on strike because, they claim, their salaries do not allow them to live ‘the good life’ (see story). Whilst admitting that parking wardens are not the most appreciated of public servants, if traffic chaos and gridlock ensues in Edinburgh, then they will have made their point. Second, postal workers in the UK have voted to strike (see story). Once again, the key issue is pay. A national postal strike will have a significant impact on the economy, if it goes ahead.

Does this represent the start of a much longer trend? Has the pendulum moved away from fame and celebrity and towards contribution and service?

Wind Energy: Power from the Prairie

This week at the Northgate High School Futurist Club we looked at Wind Energy: Power from the Prairie. The overall view was that it is a very good idea; but no one really has done enough acting, just a lot of talking on the subject. Wind turbines are a very good way of collecting energy because as long as we have wind we have an infinite supply of energy. The Time Bandits thought that we should also raise taxes on certain doodads like boats to help fund buying new turbines. But the Time Bandits didn’t think that prioritising on this was very smart as there are so many other things that we should be concered about.

On the other hand there have been some very bad stories about the effects of wind turbines like pigeons get stuck in it, whales signals get messed up and they start doing very abnormal things, they are loud and are ugly. But compared to oil stations some Time Bandits thought wind turbines were very pretty.

When the Time Bandits got on to thinking about where the turbines could actually be placed some Time Bandits were a little stuck so I asked them to think of a place where there is lots of space, at first many thought of Australia and Ireland but when I asked them about Great Britain the Time Bandits thought Wales is a good option.

Once the problems have been sorted out with wind turbines then I think that wind turbines will be a very smart way to go forward. So maybe in the future when you go on holiday to Wales you will see lots of wind turbines out and about.

Has the Long Slow Fuse Been Lit?

How long can China maintain its recent growth rate?

I was sitting on a passenger train next to a freight train that was full of containers going to and from China musing on just that question. A quick calculation revealed that, if current growth in port and shipping capacities continue, and if Chinese exports of manufactured goods continue to grow at their present rates, then by 2012 to 2014, every ship in the world will be involved in the China trade and, sadly, there will be insufficient port capacity to land the goods.

If this ridiculous scenario is to be avoided, then more carrying capacity needs to be developed (a possibility), or the Law Of Large Numbers will apply to the Chinese economy (far more likely). The Law Of Large Numbers is easy to comprehend. If we want to increase our income by 10% each year, then it is easier to move from £10 to £11 than it is to move from £100,000 to £110,000. As China weighs heavier in world trade, we would expect the rate of growth in China’s trade to diminish. This is the Long Slow Fuse.

We have seen something similar in the recent past in relation to Japan. In the 1960s, the growth rate of Japanese exports was quite considerable when compared to European and US growth rates. However, the Long Slow Fuse had been lit. It detonated in the 1980s, and consigned the Japanese economy to an unwinding that has taken the best part of a generation to work out. We are of the view that a similar process will occur to the Chinese economy.

Three recent stories support our view. First, there was a story in the Wall Street Journal about the triangulation of Chinese exports to avoid quota restrictions (see article). Second, there was an article in The Business about how the Chinese sovereign wealth fund ($300 billion this year) is being steered away from US T-Bonds, where the weight of Chinese money (currently $1.2 trillion and rising) is forcing down rates for investors, and into Private Equity in a search for higher returns (see article). Finally, there was a report on the BBC about how the Nanjing Automobile Corporation had re-opened a car plant in the UK (see story). This is part of a trend where Chinese companies assemble within the EU as a means of avoiding export quotas to the EU.

What all three of these stories have in common is that they represent actions taken by Chinese companies to avoid the Law Of Large Numbers, and represent, to our view, evidence that the Long Slow Fuse has been lit. If so, we might ask, will it end with a bang or with a whimper? That is, possibly, a more important question.

Youth Irrational Exuberance

This week at the Time Bandits we looked at Youth Irrational Exuberance. It talked about how children all over the world are aiming for goals that are too hard for most of them to achieve. So I asked the Time Bandits what their goals are, a few answers were: move away from England, be a blacksmith, have children that love you, get a good job. But there were some that were quite impossible like take over the world.

The Time Bandits really thought that what the article was saying is all true as none of the Time Bandits had much idea of how to accomplish that goal. But when the Time Bandits started talking about blaming people most of their faces were blank, so who is really to blame?

One subject that we have in school is a lesson called “careers”, which talks to you about your future and your job. The Time Bandits didn’t think this was a good lesson to have as it gives you information about jobs like being a fruit picker on a farm which not many people want to become, also when you ask about a job that you are interested in like being a futurist they can’t come up with an answer. Overall it was unanimous that “careers” were not helping us very much. A Time Bandit told me, also, that when she was in class and was constantly good she is very rarely praised but when someone who is usually bad is good for a lesson they get a ridiculous amount of praise. This could help to pollute young people’s minds to aim for goals that are out of their reach. I think the main way to stop this is for young people to be realistic in what they think about.

23rd May 07

The Revenge Of The Bean Counters

It is hard to get excited about accounting standards. And yet, these small, seemingly inconsequential, things have a great impact on our lives. This was brought to the forefront of my mind this week through an article in The Economist about accounting standards (see article). Apparently, there are two key approaches to accounting standards – the Rules Based Approach and the Principles Based Approach.

The Rules Based Approach is just that – accounts have to be produced to conform to a set of rules that govern the construction of a set of accounts. The problem is, as Enron quite ably showed, that a set of accounts may conform to a set of accounting rules, but paint a misleading picture of the state and performance of a company. This is where the Principles Based Approach has the advantage. Not only must a set of accounts conform to the letter of law, it must also conform to the spirit of the law as well. In this case, the role of the independent auditor becomes far more important, particularly if they have a statutory duty of care to a widely based community.

It would appear that the Principles Based Approach (mainly adopted in Europe and Asia) is driving out the Rules Based Approach (mainly adopted in the US), as the users of accounts (primarily the investment community) demand ‘true and fair’ accounts from companies. This has two important futures points – one trite and the other profound. The trite point is that it gives an example of how ‘Europe’, as argued by Mark Leonard (see our review), will run the Twenty First Century by dominating the cultural infrastructure of globalisation.

This leads to the more profound point. If we accept, as Thomas Barnett argues in ‘The Blueprint For Action’, that globalisation consists of the harmonisation of national rule sets into a single global rule set observed by all of the ‘insiders’ to globalisation, then the harmonisation of accounting rules is central to that process. As it happens, I have recently encountered the XBRL programme (see link) which aims to harmonise the electronic infrastructure of international financial reporting. To conform to an EU Directive, all UK company accounts will have to report in XBRL from 2011.

This will have the effect of binding the process of globalisation even tighter than it is now. The Chinese companies listed on London’s AIM market will have to report in XBRL, as will the Russian energy companies that have sought listings in London. The impact of this change will be to make national differences even less significant than they are now.

I wonder how long it will be before this commercial transparency and accountability feeds into the political arena in both China and Russia?

The Dragon And The Tiger

It is often suggested that, in the longer term (say to 2050), India will have a developmental advantage over China because India is a functioning democracy and China is not. Leaving aside the question of what would constitute a functioning democracy, why India would be included in this category, and why China would be excluded; we are left with an empirical question as to whether or not democracies favour long term development. However, before looking at the facts, it is worth examining an explanatory model.

The causality of the linkage between democracy and development is rarely explained. There has been as association between the two in the past, but we do not know whether this is simply coincidental. When models are propounded, it is along the lines of platitudes rather than reason. For example, in an article in The Futurist, it was stated that ‘the incremental efficiencies of India’s democratic government are likely to overcome the greater short-term efficiencies of China’s command system’ (see abstract of article). We are not told why this should be the case.

The Economist surveyed this question a couple of years ago (see article). It would seem that the evidence suggests that autocracies have an edge over democracies when it comes to development. The causality model is quite simple. As prosperity increases, the democratic process is called into action to share the increase in prosperity more widely. In turn, this slows the process of development as funds that otherwise would have been earmarked for investment are instead used for wealth redistribution.

The Business this week carried an interesting example of this process in action (see article). The article describes how the Indian government, emulating the Chinese government, have attempted to establish special economic zones. This process has been inhibited greatly by protests – both legal and extra-legal challenges – to the detriment of the policy. In India, as the actions of government are subject to democratic review, policy-makers do not have the same freedom for action as the policy-makers in China. Local interests are not so easily swept aside for developmental projects as they are in China.

In the long term, this could develop into a situation where China is the richer country, but India is the nicer place in which to live. Perhaps this is the Asian version of the Atlantic dilemma?

Water Wars?

John Petersen of the Arlington Institute recently brought to our attention an article on Live Science that forecast a future in which nations across the globe would compete for water as a scarce resource (see article). This would result, the authors claim, in a world in which was "even more prone to wars, terrorism and the need for international intervention". Is this something that should worry us?

It would seem that the forecast relies upon two key assumptions. First, that water will become more scarce in the future, and, second, that conflict will be the appropriate response to water shortages. Each of these assumptions deserves further scrutiny.

Much of the argument that has been applied to Peak Oil is curently being applied to water as a resource. If the current rates of growth in demand and the current rates of growth in supply continue, then water will become a very scarce resource. Of course, in reality, this is unlikley to happen in quite this way. The models that predict this future tend to be linear and static, whereas the future is very often better explained by non-lienar and dynamic models. Our future may involve a scarcity of water, but the forecasts of desertification may prove to be a little too exaggerated.

Even if the linear forecasts are correct, does it necessarily follow that violent conflict will result from competition for water as a scarce resource? One the one hand, we could argue that it will. We could point to events of the summer of 2006, when many commentators felt that the Israeli push towards the Litani River was more to do with securing a watershed than anything else. Indeed, we could argue that the Israeli occupation of the Golan Heights is about securing a key water source.

On the other hand, we can see that violent conflict will not necessarily result from competition for water as a scarce resource. For example, if we take a nation in water deficit (e.g. the United States) that has a common border with a nation in water surplus (e.g. Canada), then surely it would be absurd to suggest that the water shortage in the US will result in military intervention in Canada to secure water assets? This might provide an interesting wargame, but any serious proposal along these lines is based in a world of fantasy.

It is easy for those who think in linear terms to arrive at a future that is quite undesirable for us all. However, there are feedback loops in the system, such as market based pricing mechanisms, which ensure that the system behaves in a non-linear way. Those golf courses in Arizona may well stay green through the use of Canadian water, but just how expensive will that water be?

Peace In Our Time?

I was attracted to an article in the Economist that reported on a thawing of diplomatic relations between China and Japan (see article). In recent years, relations had not been as cordial as we might have hoped them to be, and the apparent thaw may imply a significant change that will impact upon the future.

In our work, we have come to the conclusion that the relationship between China and the US is highly likely to be the most important relationship for America over the next two decades. This view of the US, however, is not likely to be reciprocated as the most important relationship for China is likely to be that between China and Japan.

Both nations have a contiguous border in the East China Sea and the Yellow Sea. The borders in that area (which has Taiwan at one end and North Korea at the other) are not settled by treaty, and contain islands over which sovereignty is claimed by both nations. A factor that is complicated further by the presence of oil and gas deposits around the disputed territories. In our simulations to 2025, this area is one of the key flashpoints to disrupt the global system.

In recent years, Japan has become a major contributor to the flow of Foreign Direct Investment into China, and China has become an important supplier of manufactured goods to Japan. In our model of globalisation, the development of a harmonious relationship in East Asia is quite an important factor in the further development of the global economy over the next couple of decades.

In our scenarios, the more nationalistic either China or Japan becomes, the more political conflict is likely to prevail. Equally, the more liberal each nation becomes, the more the process of globalisation is strengthened and deepened. If the story does signify a move towards the liberal, this bodes well for us because it diminishes the liklihood of the process of globalisation being derailed.

We shall carefully watch how events unfold in the coming months.

Living In The Age Of Spin

In the book '1984', George Orwell introduced us to the concept of 'Newspeak' - a language where everything was turned around. The Ministry of Peace was the Ministry of War and the Ministry of Truth simply told lies. I reflected this week on how prophetic this book was. In the UK, we now have hospitals that cause rather than treat illness (see Article) and we have a popular party that redistributes wealth away from the poor to the benefit of the rich (see Article). How could this have come about?

In many ways, this is the result of moving towards a post-Information Age society. In a very prescient book, Rolf Jensen of the Copenhagen Institute of Future Studies introduced us to the idea of the Dream Society (we reviewed the book at www.eufo.org/dream.pdf). In the Dream Society, appearance takes precedence over substance. It is not what we are that is important, it is what we appear to be. We prefer the exclusive to the ordinary because of what it says about us as individuals.

In the public services, a consequence of this is that services are now judged not by what they deliver, but by what they appear to deliver. This is why targets and key performance indicators are so important. They create an illusion of achievement and distract us from the unintended consequences of that achievement. For example, we have greater throughput to our hospitals, which creates the illusion of achievement. It is illusory because the cost of greater throughput is the development of strains of disease that medicine cannot cure. Hospitals now cause rather than treat illness.

Of course, there is a reaction against the world of spin. This is the world of 'authenticity' and 'originality'. However, it can be hard, at times, to discern the authentic from the apparently authentic. There is a tide moving against spin, but it has yet to achieve critical mass. When it does, we are likely to see a substantial change in the paradigm of organisations.

It is worth looking out for signs of this change.

Alternative Futures

The BBC have recently run an interesting set of documentary programmes under the label of 'The Trap'. In the programmes, Adam Curtis argues that much of the current malaise in the West is the result of becoming seduced by the Thatcherite (read Reaganite in the US) agenda of the 1980s. It uses this analysis to chart the rise of political extremism throughout the world and the rise of militant Islam inparticular. (See Wiki for an article about the series, which links through to the BBC site, which has clips well worth watching).

The show started me to think about the idea of alternative futures. For example, had both Reagan and Thatcher lost their respective elections, how would the 1980s have developed? How would it have changed what we are now and how we are today? I was tempted to dismiss this as idle daydreaming, but, as I was working on the China chapter of my current book, the whole idea came into focus.

How do we classify the Chinese economy? It is certainly a market economy, but it is hardly a capitalist economy - the means of production are still, largely, owned by 'the people' and controlled by the Communist Party of China. In squaring this circle, I went back to some work from the 1930s undertaken by the Polish economist Oskar Lange, who developed a theory of market based socialism. This was really instructive in understanding how an economy could allocate resources using the markets, whilst organising the ownership and control of the economy as a collective vehicle.

Why is Lange so obscure? He published at about the same time as Keynes published his General Theory. In our interpretation of events, we rather take the view that Keynes saved market capitalism from itself (the Great Depression being a classic example of market failure), and so Lange wasn't needed. It is so interesting that he pops up again 70 years later just as, according to Adam Curtis, the whole system is starting to falter again.

If so have we always been destined towards market socialism? That would please the Marxists! Or do we chart our own unique path into the future? In which case history can't repeat itself.

The European Company

I was recently asked about the structure of the oil company Shell. For those who don't know, Shell is a company that is incorporated in the UK, which has its primary listing in the UK, but which has its head office in the Netherlands. It is increasingly difficult to think of a European company as a 'British' company or a 'Dutch' company. It is increasingly the case that we are thinking in terms of a 'European' company.

This is not entirely unexpected. The primary source of company law in Europe, irrespective of the place of incorporation, derives from the EU. Nations interpret the EU directives to suit local conditions - which is why it is much more dfficult to form a company in Belgium than the UK - and may subject the companies to a local Corporation Tax regime. However, the main trend is towards a corporate harmonisation across Europe.

Another example of this trend came to light this week. Barclays, a UK bank, announced that they were in talks to take over ABN Amro, a Dutch bank. Like Shell, the resulting company would be incorporated in the UK, with a primary listing on the London Stock Exchange, but with its headquarters in Amsterdam and a secondary listing on Euronext. This is a clever move, as it would give the bank a presence in the Eurozone without leaving the Sterling zone. (See article).

In many ways, this provides further evidence that the European Project is becoming less and less reversible. As we are now thinking in terms of European companies, national distinctions within Europe becime less relevant. I suspect that the next contentious issue will be the European taxation of European companies - possibly in the name of the harmonisation of EU-wide corporate tax rates. There is something like that already in place for VAT (an EU-wide Sales Tax), all it needs is to be extended to EU-wide profits as well as EU-wide sales.

In the coming months, we shall be scanning for progress in the field of tax harmonisation - it is the next milestone in European integration.

The Economist's Curse - Part 2

If it is the case that economic forecasting suffers from an inherent flaw (that of ceteris paribus - the future will be the same as the past), the question arises over why it is that this work continues to be produced? Even to the point of it flourishing.

We can start to understand this as part of a model of consumption - the consumption of information about the future. If there were to be no demand for information about the future, then there would be no production of information about the future. In this respect, it is the demand that creates the supply. Information about the future is demanded because we all have to make decisions in the present that have consequences in the future.

A good illustration of this point was provided this week by the decision whether or not the UK ought to act now to secure the option to renew Trident (the UK independent nuclear deterrent) in about 2020. (See article for story). The decision was whether or not to sanction the concept and design work for the Trident replacement, at a very significant cost to the UK Exchequer. Not to go ahead would mean saving the cost, but eliminating the possibility of renewal in 2020. To go ahead does not commit the UK to replacement in 2020, but does enable the possibility of its renewal.

In looking for an answer to this dilemma, an element of foresight was needed by the government. The key areas of foresight were whether or not a deterrent would be needed in the 2020s and under what circumstances a deterrent would be needed. To answer these questions, point forecasts of future deployment options were taken, and the advice was given to government that it could be envisaged that a deterrent could be needed in the 2020s and 2030s.

To deter which threat is something of a moot point, but we are living in an era of great change where we cannot presume that old relationships will last indefinitely, and Trident can target Washington just as easily as it can target Moscow. In undertaking this exercise, the probable futures have been determined. This is good government, but poor futures, as we have not considered a whole range of possible futures that could happen, but now won't because they have been excluded from consideration.

Of course, by excluding a whole range of posibilities, the act of decision making has been made that much easier. Perhaps this is why we live with the Economist's Curse? The Economist's Curse cuts the cost of making decisions about the future.

Perspectives Of Globalisation

An Evening Organised By The Tomorrow Network

The Royal Society, UK

12th March 2007

Participants:

MARTIN ALBROW, Centre for Global Governance, LSE

GEORGE YIP, Director of Research & Innovation, CapGemini

There are few who would argue against Globalisation being a feature of the Post-Modern age. However, when we go beyond the platitudes, there is little agreement about what exactly constitutes Globalisation and whether or not it is a good thing. On the one hand, it is globalisation that is blamed for throwing out of work thousands of workers in the industrialised West. On the other hand, it is the phenomenon that is responsible for 100 million people moving out of poverty in China and India each year. I was attracted to the evening by the prospect of resolving these apparent paradoxes.

READ the full report

The Clash Of Civilisations

by Samuel Huntington

ISBN 0-7432-3149-X

I came to this book through the recommendation of others. In our research for the America 2025 project, we continually bumped into references to the model laid out in this book. This made it important for us to consider the model, if only to use it as a base line in assessing the work undertaken by others. In turn, the model has been quite influential in the formation of foreign policy in recent years, particularly as it provides a metric whereby we can include the Islamic world. For this reason, it would be inappropriate for us not to consider a work of such influence.

The civilisational approach is a useful start to considering international relations. It can be used to explain a number of conflicts within the contemporary world (e.g. in the Ukraine), but it also has its shortcomings. It is a useful tool for us to use, but not the only one. For this reason, I would recommend the book.

READ the full review.

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Paradise And Power

by Robert Kagan

ISBN 1-84354-177-7

Mr Kagan sets out his stall in the very first sentence of the book. We are told that: “It is time to stop pretending that Europeans and Americans share a common view of the world, or even that they occupy the same world.” I think, more than anything, it was this first sentence that drew me into the book.

We live at a time when many in Europe are seriously questioning the role of the USA in the world. This questioning of US leadership in world affairs has caused many in America to reconsider what the commitment of the US to world affairs ought to be. The rise of a unipolar system of international relations has also seen the increased willingness of the US to act unilaterally in world affairs. In taking up the book, I hoped to gain a deeper insight into this apparent rift that is developing between the US and its key supporters in Europe.

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