Let me begin with 2 striking contrasts:
Today, 43 percent of Nigeria’s population is under 16. Though Nigeria has high youth unemployment today, some argue that in the 21st century it will be youth, not oil that becomes Nigeria’s most precious resource.
Contrast that with China – a country poised to go through a wrenching demographic change with the doubling of the ratio of old to young people over the next 20 years – with the loss of some 200 million workers over the next 30.
· These forecasts highlight some key fundamental transformations and challenges facing the globe over the next decade and beyond.
· We are in an era of transition. Global power is shifting from west to east, from north to south, but even within the south there is no one size fits all. And today’s weaknesses – like the youth bulge – may turn out to be tomorrow’s strength.
· There are other key changes: the world’s population is increasing, is moving to cities, is becoming more connected and better armed with technology. But that also means increasing demand for natural resources – already China is the world’s biggest consumer of minerals such as copper, aluminium, and nickel – and it means coming to grips with the harsh realities of a changing climate.
Behind the Wheel of Global Growth
· So what lies behind changing patterns of global growth? As engines, Europe and the United States have stalled. The drivers of global growth are likely to be led by a handful of economies, most from the developing world.
· And in contrast to the current unequal distribution – where high income countries hold more than two thirds of the global stock of capital and wealth – the world in 2030 will likely see global capital stocks about equally distributed between high income countries and countries that are now developing ones.
Just consider a few projections:
· By 2025, the combined real output of six major emerging economies – Brazil, the Russian Federation, India, Indonesia, China and Korea – is expected to match that of the Euro Area, the largest economic area of the world today.
· By 2025, economies such as Indonesia and Brazil will likely be as important economically as Japan and the United Kingdom.
What are the implications of these changes?
· Today, people are living longer, with more access to education and health care, less chronic disease, and lower infant and maternal mortality. But there has also been another shift: – call it a residual of two successive financial and economic crises in the United States and Europe; or call it another illustration of history’s relentless rise and fall of empires – but the fact remains that after centuries of western and northern dominance, developing and emerging economies are no longer looking at Europe and North America for their economic models. Countries are looking to Mexico and Brazil for lessons on innovative poverty reduction programs – conditional cash transfers – which put money into the pockets of the poor; to India on how to build an IT outsourcing industry; and to Chinese examples of how to reach development scale.
· Many developing countries have designed and implemented solutions that have no precedents in the developed world – like the microfinance models in Bangladesh and Indonesia and some of the rapid bus transit systems in Colombia and Brazil, or the use of mobile technologies for all kinds of services in Africa and elsewhere.
· The past four decades has been marked by the outsourcing of manufacturing tasks from industrial countries to the developing world, especially East Asia. The same pattern is now obvious for services. In fact, services are the fastest growing component of world trade. Developing countries are now exporting not only traditional services, such as transportation and tourism, but also modern and skill-intensive services such as financial intermediation, computer and information services, legal and technical support and other business services.
· And the shift in economic gravity, influence and exemplars is likely to bring with it a shift in global decision making and changes in the governance of world bodies, including the United Nations, the IMF, the World Bank and the WTO.
Let me focus on four key changes.
I. First, A Rising Middle Class
· Continued rapid growth in emerging markets will give rise to an unprecedented expansion of the global middle class – by one estimate up from about 1.8 billion in 2009 to about five billion in 2030.
· By some estimates, by 2030, 8 out of 10 of the world’s middle class people are expected to be living in the South, accounting for 70 percent of total consumption expenditure. A middle class that can worry much less about basic food and housing and more about their rights and voices as citizens.
· And for the first time in decades, Africa is no exception to these trends—Africa is on the rise going through unprecedented growth. Sub-Saharan Africa has been growing at nearly 6 percent on average over the last 8 years – partly due to commodity prices.
· If Africa can deal with its three main challenges: key infrastructure constraints, conflict, and fiscal transparency, there is the opportunity of an even deeper transformation than we have seen in the past decade.
· A new World Bank Group report finds that of the 50 economies making the most improvement in business regulation for domestic firms since 2005, 17 are in Sub-Saharan Africa. The implications of this for growth and business are big.
What does this rapid expansion of the global middle class mean in practical terms?
· It will trigger an explosion in demand for housing, consumer durables, and cars. Take India. It was just 24 years ago that the first car was manufactured in Mumbai. In the 1990s job opportunities in the car, IT and other industries fuelled the wealth and purchasing power of the middle class. Today, India’s car market is poised to become the third largest automobile market next only to the United States and China.
· And India isn’t alone. It’s estimated that in just one year – 2010 – the BRIC countries – Brazil, Russia, India and China – added about 14 million cars to their circulation – a figure that implies about 46 million people were added to the middle class – roughly the population of Spain.
· More cars means more congestion and pollution highlighting an even greater need for alternative mass transport systems like the Bus Rapid Transit Systems (BRTs). From the world’s first BRT put in place in Curitiba in the 70s, the concept has spread throughout the Latin America region.
· And we’ll see greater demand for education and millions more tertiary educated workers joining the global workforce. The signs are already evident. India has close to 20 million students in higher education, nearly as many as the United States. Both countries are outpaced by China, with 30 million post-secondary students. It’s predicted the number of Chinese college graduates could swell by 200 million over the next two decades – more than the entire labor force of the United States.
· A rising global middle class will ratchet up demand for energy, natural resources, food, and water, with climate effects exacerbating food and water shortages in some areas. Demands will change. It’s already evident in East Asia on the food front. The importance of rice is on the decline in all countries, while demand for meats, fish, poultry, fruits and vegetables and processed foods is on the rise.
· If this rising middle class consumes the same overall as rich countries do today, by the middle of this century we will need two worlds instead of one. Managing this rising demand while allowing developing countries to grow is, in my view, the defining challenge of our time.
· Climate change will only serve to amplify existing resource stresses. On current trajectories, half of the global population will be living in water scarce countries by the end of the century and 35 percent of Sub-Sahara’s cropland will become unsuitable for cultivation, with severe impacts on food security. The world’s farmers will need to produce 70 percent more food by 2050 to feed a population expected to pass nine billion people.
· And a rising middle class is also poised to trigger political changes in emerging economies. As these countries become more participatory and the middle class gets a stronger voice, the challenge is to maintain the focus on inclusive, pro poor and climate- smart growth.
II. Second, Galloping Urbanization
· We all know cities have been long been a magnet, but the numbers today are growing exponentially. Today’s urban population of about 3.6 billion people is projected to reach 5 billion by 2030. The world will then be two-thirds urban, with 90 percent of this growth in the cities of South Asia and Africa.The built up area used by cities will double from 2000 to 2030. At the same time, urban densities are decreasing which will see the cost of delivering infrastructure services rise and make housing costs higher and less affordable. The move to urbanization is of course not unique to the developing world. Virtually no country has moved up the ladder to high income status without urbanising.
· Urbanization matters for people wanting a path out of poverty. For every ten people lifted out of poverty in the East Asia and Pacific region, two were helped simply because of the urbanization process. Even in Sub-Saharan Africa, half of the drop in poverty originated in urban areas and through the urbanization process.
· But urbanization today is much more about the growth of megacities – where the sheer number of residents can easily be larger than those of many countries. In 1970, the world only had two megacities – Tokyo and New York. In 2011, there were 23 – accounting for 9.9 percent of the world urban population. Basically the number of people living in megacities had multiplied almost ten times.
· By 2025, the number of megacities is expected to increase to 37. Asia will have gained another nine, Latin America two, and Africa, Europe and Northern America one each. And it will be people living in megacities in the developing world who’ll feel those cities swell. Some estimate that in cities, one billion people will enter the global “consuming class” by 2025, with enough income to become significant consumers of goods and services – injecting around $20 trillion a year in extra spending into the world economy.
The Urban Face of Poverty
· But the growth of cities and megacities has also brought an urban face to poverty. There are now some one billion people living in urban slums in developing countries. And their numbers are projected to grow by nearly 500 million between now and 2020. Slums are growing the fastest in Sub-Saharan Africa, south-east and western Asia.
· And its women and children who bear the brunt of improper sanitation and poor health care in slums. Lack of adequate sanitation can affect a teenage girl’s schooling. In Kenya’s urban slums girls in grade 4 to 8 who’ve reached puberty miss – on average – six learning weeks a year.
III. Third, The Mobile Revolution
· Today more people have access to a mobile phone than a toilet. With some six billion mobile phone subscriptions in use worldwide, three quarters of the world’s inhabitants now have access to a mobile. The developing world is now more mobile than the developed. Innovations that began in Africa – like dual SIM card mobile phones or using mobiles for remittance payments – are now spreading across the continent and beyond.
· ICT’s directly contribute around 7 percent of Africa’s GDP, which is higher than the global average. While that’s impressive, it’s also transforming the lives of ordinary Africans with mobile phones used for financial services in Kenya, agricultural market information services in Ghana, electronic filing of taxes in South Africa or sensor based irrigation systems in Egypt revolutionizing traditional practices. New tools are helping Africans face challenges like climate change or HIV/AIDS and the wider use of ICT in government is bringing more openness and transparency. We’ve already seen mobile money has transformed the Kenyan economy, where mobile-facilitated payments now equate to a fifth of the country’s gross domestic product.
· And with improvements in fibre optic connectivity and open platforms, Africa’s now being touted as being on the verge of becoming a major beneficiary of massive open online course – leapfrogging into digital education.
· Some 68,000 kilometres of submarine cable and over 615,000 kilometres of national backbone networks have been laid in the past few years. The internet bandwidth available to Africa’s one billion citizens grew 20-fold between 2008 and 2012. These electronic highways will provide the trading routes of the future.
IV. Fourth: Women, the Next Emerging Market.
· Today women are the next emerging market. The financial power of women is expanding at a faster rate than at any other time in history, with much of this growth in emerging markets.
· Global consumer spending by women is projected at $28 trillion in 2014, up from $20 trillion in 2009.
· And the growth of women-owned businesses is one of the most profound changes in the business world today.
· But that potential is still grossly under-supported.
· On average only five to ten percent of women owned businesses in the developing world have access to commercial bank loans. And women owned businesses account for only 3 percent of venture capital investments globally.
· And yet we know that under-investing in women not only limits economic and social development, it puts a brake on poverty reduction. Seeds and fertilizer in the hands of a woman can boost crops. Cash in the hands of a woman can increase twentyfold the chance of her child’s survival. And a business in the hands of a woman can thrive. In the USA today women owned firms are growing at twice the rate of all other firms, contributing nearly $3 trillion to the US economy and directly responsible for 23 million jobs. we also know that Today, worldwide fewer than half of women have jobs, compared to almost four-fifths of men and yet interviews with women in 93 communities across 20 countries show that women aspire to work for pay.
· So why is there this vast untapped economic and productive potential? Worldwide, education levels of women have increased. It is barriers like legislation, cultural restrictions, informal work, and limited access to finance which are holding women back. Our Report on Women Business and the Law surveyed 141 economies to look at those barriers to gender equality. In 102 out of those 141 economies, there is at least one legal difference that can hinder women’s economic opportunities. That’s a pretty large indictment, but it also means that there is potential for a big shift in this area.
What does all this mean for the future?
· Having lived through two financial crises, we should be modest about our ability to predict the future. Perhaps the one certainty is that we will all be living amid greater volatility. The course of a lifetime will be more variable, job security or consistency will be less reliable, the divide between home and work will be more fluid.
· In developing countries and emerging markets, people will have more knowledge of what their government is spending on public services. They may be consulted more about local municipal budget priorities and where services should be located. They may, report on corruption and bribery, they may be better able to hold governments to account for service delivery, knowing whether teachers or textbooks arrive at school. If they are women they may have greater control over their household expenses which will mean more investment in their children’s health and welfare. For the first time they may work for pay, have access to a loan to join the formal economy, or grow a small business.
· Or they may not.
For let’s not forget some of the clear challenges ahead:
· The challenge of jobs: Unless employment conditions change dramatically in parlous youth-bulge states such as Nigeria, Pakistan, and Yemen, these countries will remain ripe for continued instability and state failure. More than 620 million young people worldwide are neither working nor studying. Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period, mainly in Asia and Sub-Saharan Africa.
· The challenge of inequality – which can lead to increased instability and societal tension. At this year’s World Economic Forum, rising inequality was cited as one of the top five global risks. We know that over a billion people worldwide still live on less than $1.25 a day, and income gaps are in many cases growing.
· The challenge of infrastructure – Just consider one aspect, energy. Over 1.3 billion people today have no access to electricity and to make the leap to universal access to modern energy services by 2030, new capital investments of about $48 billion will be needed every year. That’s in addition to worldwide annual investments of about $450 billion just to sustain energy services at current levels.
· The challenge of climate change: The world is barreling down a path to heat up by 4 degrees by the end of the century if the global community fails to act on climate change. That means extreme heat waves, declining global food stocks and sea-level rises affecting hundreds of millions of people. All regions of the world would suffer – some more than others – but it will be the poor who suffer most. And rapid urbanization already means much greater damage and costs in the wake of natural disasters.
· The challenge of managing the destabilizing effects of technology. Cyber security – how can we improve security without compromising on openness, transparency and accountability, so harnessing technology in a socially responsible way?
Where can we look for solutions to address these challenges?
· Some solutions can seem relatively simple – just think of Mexico which distributed almost 23 million energy saving light bulbs for free – with a bit of help from the World Bank. Or solar panels which are now delivering power to 70 percent of Mongolia’s herders.
· For some challenges we know what’s needed – educating girls to adulthood is smart economics because of its value to families and development. Will more be able to done to use technology to speed education for girls? Or to give women access to property rights through simpler land tenure systems?
· Innovation is vital. It’s an essential element of economic growth – for every country. The evidence shows – on average worldwide – half a country’s long term growth is due to innovation and technology enhancements.
· We are expecting to see advances like a growth in biotechnology pharmaceuticals, prompted by an ageing population….in innovations in energy management advances driven by the need to reduce carbon usage and reliance on fossil fuels; in desalination programs, and the development of disease resistant crops.
· So there couldn’t be a clearer – or more urgent a case- for more innovation and collaboration to help meet present and future challenges.
· It’s time to think outside the box.
· What will Intel do to help meet the challenges over the next decade and also capitalize on opportunities in a rapidly changing world? A world characterized by a young and growing middle class, living increasingly in cities, connected, tech savvy, climate-conscious, and aspiring to a quality of life similar to our own?