Shifting Sands

The January edition of Foreign Affairs contained a series of articles on the future of the international system. The series consisted of six articles. Richard Haas considered whether globalisation is irreversible, and if it isn't, whether we would need what he called a 'World Order 2.0'? Joseph Nye asks whether the liberal order - what is known as the Washington Consensus of liberal democracy and free market economics - can survive? Robin Niblett considers what might replace the liberal order if it is in retreat. Michael Mazarr what might come after hegemony if the American unipolar moment has passed? Evan Feigenbaum examines how the US should respond to accommodate a rising and expansive China. Finally, Kori Schake considers the implications of America embracing a doctrine of offshore balancing - a form of isolationism last seen in the 1930s. All of the authors are well respected experts in their areas. They certainly represent a body of authority that commands our attention.

The reader might be forgiven for asking what are they saying? Why are they saying it? And why are they saying it just now? The answers to these three questions provide an interesting set of answers. One that highlights the contours of an emergent future.

A common premise to the series of articles is that the election of President Trump has changed something. Exactly what has been changed remains to be seen. However, the last Presidential election is seen to have represented one of those pivotal moments when a distinct change can be identified. The Trump administration appears to have heralded a change in US policy. It seems to be based more on a transactional basis than on a value based policy. In this regard, if the early showings are continued into the future to form a new trend, then there has been a significant change.

If the rhetoric is converted into action, then we can expect a greater focus on trading relationships in US foreign policy, less emphasis on the promotion of liberal democracy, and a much reduced willingness for America to act as the world police force.

Let us suppose that this happens. The implication is that a vacuum is likely to form in the international system and some feature will expand to fill that vacuum. We might expect the autocracies of the world to feel emboldened. Russia might attempt to bully Eastern Europe a bit more, China might feel empowered to be expansionary in the South China Sea, North Korea or Iran might be tempted to actually complete their nuclear weapons programmes.

On the other side of the table, American allies around the world are likely to be wondering exactly what their American security guarantees are actually worth. This might not have a wholly beneficial effect for the United States. If the American allies conclude that their security guarantees are not worth a great deal, there would be an incentive to distance themselves from Washington in favour of a closer relationship with the local hegemon. To a certain extent, we can already see this happening in Asia.

President Trump walked away from the Trans-Pacific Partnership. He did so because he felt it to be a bad trade deal. What was not explained to him clearly enough is that there is more to it than trade. The TPP would have allowed the US to determine the trading architecture of the Pacific Rim for the best part of this century. By pulling out of TPP, President Trump has left the American allies in the Pacific wondering about the reliability of Washington. The US withdrawal created a policy vacuum which China is now seeking to fill with it's 'One Belt, One Road' policy. President Trump has handed to China the strategic initiative in East Asia in less that half a year.

In that sense, something profound has changed, and the future of the international system does need to be considered.

Stephen Aguilar-Millan

© The European Futures Observatory 2017

Strange Bedfellows

I like to run two parallel book lists at the same time. They reflect the way that I read and the amount of time that I can commit to reading. I like to have one list which I read over lunch and into the early afternoon. These are my hardcore work related books. They tend to be fairly heavy and occasionally pretty turgid. To lighten the load, I also like to have a series of books which I read in the evening and at bedtime. These tend to be lighter books, which are well written, and help me to wind down before going to sleep. On occasions, a pair of strange bedfellows enters my reading list by accident. Now is such a time.

I am currently reading 'What Next' by Daniel Hannan as my work related book, and 'Atlas Shrugged' by Ayn Rand as my bedtime book. It has come as a surprise to me how the one book fits into the other. What attracted me to Mr Hannan's book is that it outlines a positive vision of Britain after Brexit. It was often said that the Leave side in the Referendum didn't have a plan for Britain after Brexit. The purpose of this book is to address that criticism.

In reading Mr Hannan's book, I was struck by how much of the criticism of the European Union - more specifically the European Commission - parallels the corporatist and statist word described in Atlas Shrugged. Ayn Rand describes a world in which individual endeavour is stifled by collective rules, where intellectual honesty is captured by vested interests who only peddle what we now call 'fake news', and where humanity is gradually drifting backwards rather than moving forwards. These are exactly the reasons why Mr Hannan argued for Brexit.

It is possible to wax lyrical about life following art, but I do find this an interesting co-incidence. It is almost as if I am currently reading a theoretical treatise alongside a practical application of the theory. I guess that it's one way to use my time.

Stephen Aguilar-Millan

© The European Futures Observatory 2017

A Beginners Guide To Brexit

We recently held a retreat to think about issues that are likely to impact upon the future of the UK out to 2050. Naturally enough, Brexit appeared as one of those issues that would be very significant. We decided to give our thoughts some shape in order to help frame our conversations around these issues. In doing so, we felt that the best tool to help us here would be the Three Horizons Model, simply because it allows us to think in terms of a "before" (Horizon 1 - H1), an "after" (Horizon 3 - H3), and a "transition" period (Horizon 2 - H2). We decided that the output would be a timeline onto which our thinking could be placed. We could then use that timeline as a backdrop to some more specific scenario work following on from this review.

In stylising the three horizons, we thought that H1 would be dominated by determining what it is that the UK doesn't want from Europe. This process has been under way for some years and was given a sharper edge in the process leading up to the referendum vote in 2016. It would seem that there is a desire to assert the sovereignty of Parliament and to derogate from the four freedoms that are an essential part of the European Union. In particular, there is a desire to derogate from the free movement of labour in order to begin to control the flow of immigration into the UK. In our view, the bulk of H1 would take place in the years up to 2017. It forms the essence of the British position in the negotiations to withdraw from the EU.

The negotiations to leave the EU are the trigger for H2. We have stylised this as the "WTF Phase". It contains the complex interactions between the EU nations and the UK; the EU nations with each other; and between the EU nations, the UK, and third party nations. We have already seen some of the issues that could arise in this phase. Could Spain use this as an opportunity to resolve the question of Gibraltar? Could Greece use this as an opportunity to insist upon the return of the Elgin Marbles? Could the European Commission use this as an opportunity to create a united Ireland? There are some really difficult questions to be settled during this phase.

We took the view that the period of two years 2017-19 is not long enough to resolve these questions. Even if all sides were willing to negotiate in good faith, the matter is too complex to yield a stable solution. In our view, H2 is likely to split into three phases: (a) the negotiation phase - where the Lisbon Treaty is adhered to but not much progress is made, (b) an hostility phase - where each side tries to act to gain an advantage over the others, and (c) a resolution phase - where each side actually finds common ground to reach an accommodation with each other. In our thinking, the negotiation phase would dominate the period 2017-19, the hostility phase could occupy the period from 2019 to the mid-2020s, and the resolution phase would take the second half of the next decade to work through.

The outcome of the resolution phase of H2 is likely to determine the shape of H3. We alternately called this the phase where the dust settles and the phase of the new world. We see this as a period beyond 2030. The exact shape of the contours of this period are a bit hard to discern at this moment because we need an appreciation of how other key actors have developed in this period. For example, will the Euro have collapsed? Will the Schengen area continue? Will other members of the EU decide to leave as well?

Despite these uncertainties, of some things we can be certain. Britain will find it almost impossible to live without Europe, which suggests that some form of accommodation - with the attendant price - will be reached. Equally, Britain is such a sufficiently large European nation that the EU nations are likely to thrive better if the UK is engaged rather than isolated. This relationship, taken away from the institutional framework of the EU, is rather important to both sides. The sooner this is appreciated by both sides, the sooner we can move away from H2 to H3.

If this broad sketch of the Brexit trajectory is anywhere near correct, then it is likely to have considerable impacts upon the UK economy, especially during the hostility phase of H2. To a certain degree, to be forewarned of its likelihood allows us to hedge against its possibility. We are going to pass through some highly uncertain times during the next few years. Hopefully, enjoining conversation around those uncertainties will help to make them less opaque.

Stephen Aguilar-Millan

© The European Futures Observatory 2017

Finding A New Career In Another World

"1843" April/May 2017

I am often asked about the impact of automation on the jobs market. The fear that is expressed to me is that, with advances in robotics and AI, there will be a certain degree of displacement as people are replaced with machines. Historically, this has proven to be an unwarranted fear because new occupations and careers arise to absorb the labour displaced by new technologies. I am told that this time is different, and that we need novel solutions such as a Universal Basic Income, to solve this problem. I am fairly unconvinced by this line of thought, but, to date, I have very few examples to hand of the process I am describing.

It would appear that someone has given me a subscription to 1843 - the lifestyle magazine from The Economist stable. Normally, I don't pay much attention to the magazine, but one article in the current edition did catch my eye. Entitled "Escape To Another World"*, it tells a tale of young people today. Apparently, young people today are over-qualified, under-employed, under-valued, and underpaid. They tend to have minimal consumption aspirations, live with their parents, and haven't really started to build a life. From the perspective of an older generation, this might be true. However, it is also worth looking at this differently, from the perspective of the young people.

The rejection of the lifestyles of an older generation is nothing new. However, in order to do so successfully, the younger generation has to determine how it wants to live. What I find interesting is that work is now seen as the servant rather than the master, and this plays out in a number of ways. The way it plays out in terms of this article is to develop a new career stream - professional gaming.

The concept of gaming as a profession is at its formative stage. A number of enterprising young people have found ways of monetising their activity. For example, the companies that develop games pay gamers to showcase their games through a You Tube channel. As the article notes, the gaming public are more likely to buy a game if they have seen it successfully played beforehand. Many professional gamers use their channel to link through to marketplaces where various products can be bought, and earn a referral fee through an associates programme. Those who achieve a modicum of stardom have even monetised the sale of their own branded merchandise.

How can a depressed, demotivated, young person get by? They can make money through social media. This might not be a 'real' job in terms of their parents, but on their own terms, they are earning enough to get by. The article makes a fair point that there is a difference between earning pocket money and earning enough to fully participate in society. However, this career opportunity is at its early stages and some young people are earning enough money to buy houses and commence household formation. This is a trend that is only set to continue.

In some respects the article is absolutely correct. We ought to be concerned at the extent to which young people are attracted to the world of gaming if we want current work patterns and aspirations to continue. However, as that world is currently not working for the young people, and society is not providing the means for them to participate in that world, ought we to be surprised when the young people redefine their lifestyle to find one that does suit them? In my view we are seeing a new career in the making, in just the way that pilates instructors, image consultants, and Feng Shui advisers, came out of the last major bout of labour displacement in the 1990s. This is Schumpeter's creative destruction in action.

In future, when I am asked how people will earn a living when they are replaced with a machine, I will answer that they will play games all day and get paid for it!

Stephen Aguilar-Millan

© The European Futures Observatory 2017

* The article referred to can be found at: https://www.1843magazine.com/features/escape-to-another-world

Ultrasociety And Spiral Dynamics

"Spiral Dynamics"

by Don Beck and Christopher Cowan

"Ultrasociety"

by Peter Turchin

I am currently working my way through Peter Turchin's book "Ultrasociety" when I came upon the lower table. It reminded me of the narrative through the spiral in Don Beck and Christopher Cowan's book "Spiral Dynamics", and prompted me to find the source, which is the upper table.

The overlap between the two narratives, in my view, is quite interesting. Both describe the progress of societal development from the foraging band - mainly a family structure - through to a more holistic mega-state structure. These are important points in measuring our progress. We can move both up and down the Spiral, and we can both progress and regress along the polity types.

I like the inclusion of a time frame in Peter Turchin's model. This gives us an idea of the perspective of history to bring to this analysis. I would imagine that the next step will be to examine the path by which society and the economy moves from stage to stage, and to assess how each subsequent stage is reached. I would imagine that a combination of conflict and co-operation will be involved in this.

I just see this as an interesting point of cross-over.

Stephen Aguilar-Millan

© The European Futures Observatory 2017

The Heretical Futurist

In order to work as a professional futurist, there are a number of orthodoxies about the profession that one must maintain. One such of those orthodoxies is that, when viewed from perspective of the present, there are any number of possible futures that could evolve. We operate in a world of multiple possible futures, all of which could happen. Some of these will be plausible futures, because we like to comb out the implausible future such as green men from Mars landing. A much smaller number of futures will be preferable, those things that we want to happen. In some cases, we may even have probable futures, those things which we think will happen if nothing significant changes. All of this orthodoxy fits nicely into the 'Futures Cone'.

This is how the world appears to a futurist, the producer of the futures work. It often looks quite different from the perspective of a client, a consumer of futures work. From the client perspective, even if they admit the possibility of multiple futures, only one single future is likely to be experienced and that is what they want to know about. The focus here is on the probable future - the thing most likely to happen. The response of many professional futurists to clients taking this position is to tell them they are wrong and to persuade them to commission a more nuanced study.

My own personal heresy is to ask what happens if the clients are right? What happens if the futurists are wrong to insist upon multiple possible futures, even if they are preferable and plausible? How can we reconcile the two positions?

It might be helpful to start with the reasons why professional futurists believe in a multiple future. The core argument is that the future consists of a very large number of complex moving parts. In many cases, there is considerable uncertainty over how those complex moving parts will behave in the future. This complexity and uncertainty are the reasons why foresight is not the same as forecasting. Professional futurists will hold that the future is inherently unknowable, and only the broadest of contours of the future can be seen from the present. As it stands, this argument is valid. It is, however, incomplete.

From the perspective of the client, to be told that the future is inherently uncertain and unknowable doesn't help to answer the question of how they ought to ready themselves for the future. At least some guidance needs to be given about the likelihood of future events. A project that concludes that the future may consist of one thing or another is unhelpful in determining what to do. On this point, it might be more fruitful to work with the grain of the wood than against it.

The one point that both futurists and their clients have in common is the idea of the probable future. It is often called the baseline scenario - what would happen if no parameters were to change. To a certain extent, this provides us with a nice starting point. Any view of the future constructed on these lines will depend upon a large number of quite important assumptions. Once the baseline scenario is in place, it is then possible to look at how the results might change if the various key assumptions are changed. This is a form of sensitivity analysis to test the robustness of the conclusions. Of course, professional futurists can quite easily say that this will define a range of alternative futures, which is the point at which we came in.

There is something to be said for single point futures. They focus on the question in hand, they provide a standard against which different versions of the future can be measured, and they fit into the popular perception of the future. They are simplistic, and they do hold themselves hostage to shifts in the underlying conditions that generated those futures. Having said that, we ought not to be too dismissive of the heresy they represent. If they are viewed as a means by which a more general public can engage with futures thinking, then a lot can be said for them.

Stephen Aguilar-Millan

© The European Futures Observatory 2017

Who Are The People Left Behind?

Since the Brexit vote, much has been made about the people left behind. This is a class of people who are closely associated with the election of President Trump and, as soon as we have seemingly interlinked events, it has been pronounced to be a trend. There is a world of difference between Brexit and the election of President Trump, but it does pay to consider the similarities between them, especially in terms of what they may bode for the future.

Exactly who are the people left behind? That is a hard question to answer because it is such a broad category that encompasses a wide variety of life experiences. In one context, they are working people who are struggling to make ends meet - the 'JAMs' (Just About Managing) who have entered our discourse. In another context, the people left behind are portrayed as an almost feral under-class, who are not working and are reliant upon a combination of state hand-outs, work in the black economy, and petty crime, to get by. There is an element of truth in both of these caricatures, but it is not the whole truth.

It might help if we were to consider how this situation came about. Over the past 40 years, we have seen the constant decline of the white working class. In the 1970s and 1980s, this was a phenomenon brought about by the automation of factory processes. This was a response to the labour militancy and wage inflation of the 1970s (robots don't strike, take extended tea breaks, and demand ever rising pay increases). It was given a political edge in the 1980s that expressed itself in the popularity of the Thatcherite social aspiration.

The direction of de-industrialisation changed in the 1990s and 2000s. Empowered by improved global transport links, the exercise of organisational control using the Internet, and the availability of very cheap labour on a global scale, companies moved their already de-populated manufacturing from Europe and North America to, primarily, East Asia. Those manufacturing jobs that survived the wave of automation were shipped abroad.

At this point, we might ask about what happened to the displaced labour. The impact of the wave of automation was to swell the numbers of unemployed. The 1970s and 1980s were decades of mass unemployment. In the 1970s, unemployment stayed within the band of 4% to 6%. This was at a time when full employment was a policy objective. In the 1980s, full employment was no longer a policy objective and the unemployment rate rose to 12%, stayed in that region for the best part of the decade, and then started to fall until the early 1990s.

In John Major's recession of the 1990s, the unemployment rate went from 7% to over 10%, but the nature of it was quite different. Whilst Thatcher's recession of the 1980s was essentially a blue collar recession, Major's recession was essentially a white collar one. The impact of automation had moved from the factory floor into the office. There then followed a long period of prosperity during the New Labour years. Unemployment fell from over 10% to under 5% in this period. During the financial crisis of 2007, it rose again to 8%, but has trended downwards over this decade to currently stand in the region of 5%. We now find ourselves at broadly the same place as we were in the 1970s, when full employment was a target objective of government. Why don't we have mass unemployment with all of this de-industrialisation?

The surplus labour displaced by the decline of manufacturing has been absorbed by the growth of the service sector in the economy. Manufacturing, as a percentage of GDP, has declined from over 40% in 1973 to just 19% in 2009. The important change here is that service sector jobs, compared to manufacturing sector jobs, tend to have a wider span of skill sets and a much varied degree of productivity. Some jobs, such as specialist legal staff, are highly skilled and highly productive, and command very high salaries. Some jobs, such as flipping burgers, are relatively low skilled and have low productivity, and consequently are stuck in the region of the minimum wage. This is really important because it is a critical factor in explaining the dramatic rise in inequality over this period.

To the narrative of de-industrialisation, falling productivity, and growing inequality, we need to add the final toxin - immigration. The former Chancellor, George Osborne, used to boast that the UK, between 2010 and 2015, created more jobs than the other EU 27 nations together. In the absence of mass unemployment, one can see that immigration was an employment escape valve that prevented wages from rising amidst a potential labour shortage. The evidence suggests that immigration has helped to keep wages low, and this has fuelled the resentment towards newcomers in some traditional working class communities.

We can focus on the impact of immigration in the jobs market, but that is not the whole story. Coupled with the immigration of the last 15 years or so is the era of austerity since 2010. The scope and provision of public services has been reduced significantly. There is fierce competition for school places, hospital beds, even library books. However, the impact of austerity has not been spread evenly. It has disproportionately been felt in local authority provision - the point at which most state provision is enjoyed by most of the population. It has created the feeling that government is some remote object and has nurtured a resentment across England. Local communities feel that they have not received their fair share of public resources, and that London has received far more than it's fair share. This is borne out by the data, local authority spending per head is far higher in London than elsewhere in England. It has created an anti-metropolitan mood in the country.

That mood was expressed in the Brexit vote. It is seen that London benefits greatly from membership of the EU, whilst the rest of the country pays the cost in terms of depressed wages and over-burdened public services. A similar phenomenon has been experienced in the United States. It has the familiar theme of factory automation followed by off-shoring. In the face of stagnant wages, people maintained their standard of living by taking on debt. The credit crunch exposed the perils of this strategy, which has fuelled much of the anger in the US. The focus in America appears to be more on jobs moved abroad than in the UK, but it also has the toxic narrative of immigration holding down wages and burdening public services. This is the backdrop to President Trump winning the US Presidential election.

In considering who the people are who have been left behind, there appears to be a sharp dichotomy between those who have gained from the process that we could view as globalisation - the movement of jobs out of the US and UK, and the movement of people into the US and UK - and those who have lost from it. The stark rise in inequality suggests that the mechanisms to allow the 'winners' to compensate the 'losers' are either not in place or are not functioning properly. This is what is fuelling the anger amongst those left behind.

The angry people left behind have given us Brexit in the UK and President Trump in the US. Both sets of voters see a form of disengagement as the answer to their problems. Perhaps they are right? However, a far more interesting question concerns what happens if they are wrong? What happens of Brexit goes badly? What happens if President Trump fails to 'Make America Great Again'? These are questions to which we shall turn in the future.

Stephen Aguilar-Millan

© The European Futures Observatory 2017