23Jan 2018

Creating a Shared Future in a Fractured World

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‘Experts’ have been taken to task for being ‘close focussed’, thinking only of their own area and not connecting with the wider world.  If infrastructure decisions are to improve our world, they need to take in the wider context.  How difficult this will be is, I think, indicated in the following statement of purpose for the World Economic Forum that begins this week in Davos.

Creating a Shared Future in a Fractured World

“The global context has changed dramatically: geostrategic fissures have re-emerged on multiple fronts with wide-ranging political, economic and social consequences. Realpolitik is no longer just a relic of the Cold War. Economic prosperity and social cohesion are not one and the same. The global commons cannot protect or heal itself.

Politically, new and divisive narratives are transforming governance. Economically, policies are being formulated to preserve the benefits of global integration while limiting shared obligations such as sustainable development, inclusive growth and managing the Fourth Industrial Revolution. Socially, citizens yearn for responsive leadership; yet, a collective purpose remains elusive despite ever-expanding social networks. All the while, the social contract between states and their citizens continues to erode.

The 48th World Economic Forum Annual Meeting therefore aims to rededicate leaders from all walks of life to developing a shared narrative to improve the state of the world. The programme, initiatives and projects of the meeting are focused on Creating a Shared Future in a Fractured World. By coming together at the start of the year, we can shape the future by joining this unparalleled global effort in co-design, co-creation and collaboration. The programme’s depth and breadth make it a true summit of summits.”

18Jan 2018

Global Risks 2018

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Next week Australia will join world leaders, big business and international institutions at the World Economic Forum in Davos.   Ahead of this meeting WEF has released its Insight Report “The Global Risks Report 2018”.   It is worth reading – and fascinating! This is the world for which we need to make future infrastructure decisions. Here is a glimpse.

Also of interest for future planning is the section of the report that contains a chart showing how the risk profiles have changed year on year.

Thoughts?

16Jan 2018

Change, can we do better?

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Penny: We talk a lot about change today but as Chris Adam, Director of Strategic AM Pty Ltd, Brisbane, Qeensland, points out in this post, change has always been with us – and we have survived. But consider our reactions to the changes that have occurred within the last 100 years. Have we really done much better than just blunder through?  And, can we do better now?  Indeed, “how” do we ‘rethink the future’.

1. The Inevitability of Change

We need only reflect on the last century to recognise the inevitability of change:

  • The second decade of the 20th century was defined by “the war to end all wars” which brought destruction and dislocation on a scale never before experienced
  • The 1920s were a decade of social and economic change finishing with the most disruptive stock market crash of all time;
  • The 1930s yielded the depression with further social and economic dislocation on a grand scale;
  • The 1940s was defined by WWII with death, destruction and dislocation on a scale that dwarfed our previous efforts;
  • The 1950s were a massive social and economic challenge as the world rebuilt and millions immigrated;
  • The 1960s sexual revolution;
  • The 1970s energy crises;
  • The 1980s “greed is good” decade;
  • The 1990s with the “dot com bubble”

My point is not to undermine the idea that current forces are not indeed a major challenge but to demonstrate that change is inevitable and, as a species, we have a proven capability to respond to such challenges

2. How do we “Re Think” the Future?

We tend to see change as a threat and prefer it didn’t occur, so how do we address this challenge and avoid a “head in the sand” attitude?

We need to take the future seriously but predicting the future is problematic. With the possible exception of WWII, practically no-one forecast the massive changes that characterised each decade of the 20th century. Current predictions that IT will lead to massive unemployment as machines take over reflect the exact same claims in the 1990s where it was forecast that traditional retail was “dead” as people would abandon shopping (as an inefficient and limited way to produce what we want and need).

3. So, if we can’t predict the future, how do we “take the future seriously”?

Ideas?

29Nov 2016

Infrastructure: tinkering with broken economic policy tools

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There used to be two economic policy tools – monetary policy and fiscal policy. With monetary policy, we would raise or lower the interest rate to decrease or increase the amount borrowed and spent.  It was argued that reducing the interest rate would decrease the readiness of consumers to save and so would lead to more consumer spending and simultaneously increase the willingness of firms to borrow and invest more.  But interest rates have hovered close to zero (and in the case of Japan, below zero) for close to a decade and the expected increase in spending – either consumption or investment has not arisen.  Despite calls that suggest governments should take advantage of low interest rates to spend on infrastructure, it is noticeable that investors (playing with their own money) are not doing so.  The point is that it is only when the economy is healthy that tinkering with the interest rates is likely to work. For a long period after the end of the second world war, that was the case. We simply assumed it would always be the case, but we were wrong.

So, now we are down to one policy tool – fiscal policy.  In the recent past governments have been trying to build up their surpluses while simultaneously encouraging the population to do the reverse!  Communities have been urged to spend, while governments have struggled to save. But government savings (mostly through reductions in the public service or by outsourcing) has resulted in loss of jobs and, as this has mounted, loss of confidence. So consumers are not spending, they are saving for that inevitable ‘rainy day’.  Again, when our economy was healthy, governments used capital spending as a tap that could be readily turned on or off.  Recurrent spending was not seen to be so amenable to manipulation. This has morphed into today’s focus on infrastructure with a simultaneous reluctance to spend on the upkeep and operations that are necessary to provide service from that infrastructure. But infrastructure spending during the global financial crisis of 2008, which was seen as so successful at the time, led to severe reductions in spending subsequently in order to pay the interest bills incurred.  So a short term gain at a slightly longer term cost.

Are we now down to zero economic policy tools?  Are we clinging to the belief that infrastructure spending will save us simply because we know of nothing else?  And is infrastructure spending better than nothing?