Global Shifts and Implications for the World Economy

1. What Works in the World EconomyHamish McRae • Five great medium-term global shifts and … • … their implications for the world of finance • Three big questions about the future

2. A global vision is vital - but … Kofi Annan It has been said that arguing against globalisation is like arguing against the laws of gravity.

3. … growth must be sustainable … Mikhail Gorbachev We need a new environmental consciousness on a global basis. To do this, we need to educate people.

4. … and against strong headwinds Barack Obama I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office.

5. The World in 2020 will … • … be ageing and will demand more security • … want to travel but worry about conservation • … use technology to become yet more global • … find government under huge financial pressure • … and will rebalance towards the "BRICs"

6. … and for your industry? • Well, we know people need to talk! • We know that means traveling … • … but group meetings are efficient • Face-to-face supports electronic communication • The cultural dimension is vital, for … • … a rebalanced world needs cultural harmony

8. Where we are now • An historic moment of transition - in effect … • … the reversal of the Industrial Revolution • The G20 has replaced the G7 … • … acknowledging how power is shifting to Asia • China is now the second largest economy … • … India has become a key European investor

9. Global shifts change business • Demography – an ageing developed world • The environment – concerns will rise • Technology – an even more level playing field • Government – under ever greater fiscal pressure • Globalisation itself – the shift of power races on

10. Ageing societies are different • The developed world is getting "older" … • … and Europe in particular has to adapt • Much of the emerging world remains "young" • So there will be a great shift of economic power • Attitudes in developed world will shift … • … towards wanting greater security

14. What does this mean for business? • Demography has a profound impact on growth • Europe's workforce has started to decline • China benefits now; India's "sweet spot" is later • Obvious consequences: Europe must fix its finances • Less obvious: how to use the social changes of ageing … • … by adapting your industry to match changing tastes

15. Dealing with energy pressures • We can glimpse the end of the oil era • Uncertain energy supplies, coupled with … • … huge demand from the US, China and India • The desire for mobility will continue growing … • … concerns about climate change will rise … • … and continue to affect public policy

19. What does this mean for business? • One quick win: the value of a “green” reputation … • … which help protect companies from attack • A world where resources are no longer abundant … • … inevitably redistributes wealth and power • Obvious beneficiaries: the raw material producers • Less obvious: industries that are best at adapting

20. The revolution in technology • It is (nearly) a global level playing field • Communications technologies are universal … • … and deeply democratic • But technology gives global reach … • … as well as global competition

24. What does this mean for business? • It is not quite a level playing field but a flatter one … • … for there are new peaks of excellence • How do "old" economies deliver excellence? • How do technology develop in the emerging world? • How do conference centres adapt to technology?

25. Government in the 21st century • There are some things only governments can do … • … such as fight wars or rescue banks • But huge pressures as debts and demands rise … • … and revenues in the developed world are cut away • European nations are particularly vulnerable • The issue for all: how to do more with less?

29. What does this mean for business? • We are seeing a transition from plenty to austerity • But the debt legacy will be huge for all • So Western governments have to more effective … • … using smart regulation, not "tax 'n' spend" • Governments need help from business communities … • … who have to create value propositions for investment

30. Globalisation is our friend • The shift to the BRICs … • … and the rest of the emerging world … • … is a profound challenge to the "West" … • … but one that creates great opportunities • What will the world look like in 2030?

34. What does this mean for business? • The greatest shift of economic power for 200 years … • … and it has speeded up during the downswing … • … though there will be setbacks for Asia of course • Obvious consequences: the West must lift its skills … • … and help fast-growing economies apply technology • Less obvious: accept a shift in attitudes and values

35. This cycle: the prospect now • We are past the economic turning point • But there be setbacks … • … and the recovery will be a two-speed one … • … with the developed world lagging … • … and the emerging world driving ahead

37. Some immediate economic risks • All the fiscal ammunition has been fired … • … so nothing can be done if growth falters • Fiscal policy has to get back to normal • Monetary policy has to get back to normal • Meanwhile the Asian boom continues … • … but there will be bumps on the way for Asia too

38. Some general messages … • Developed countries face re-balanced world … • … but that is a great opportunity • We have to be sensitive to changing social values … • … including values different from our own • But we have a model that we can adapt • A richer but more crowded world needs our skills

39. … and some more specific ones • Flexibility is key in an uncertain world • A convention has to be nice as well as efficient … • … with emphasis on outcomes rather than kit • Culture will matter more • Luxury will matter more • Service has to be attached to product • What is there that money can't buy?

40. So what does work? • A sense of mission … • … and a way of handing that mission on • A quest for excellence (of course) • An ear for the market (of course) • A magnet for talent • A recognition that good ideas come from everywhere

41. What Works in the World EconomyHamish McRae • Five great medium-term global shifts and … • … their implications for the world of finance • Three big questions about the future