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Book Review: Back To The Future

This collection is an excellent coffee table book with all the gloss, which can occupy the space for a couple of decades now, writes Madan Sabnavis

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The world in 2050 is a collection of essays which construct futuristic scenarios for the world. Looking into the future is always a tough job but Harinder Kohli is able to get some of the best professionals to do some crystal ball gazing. The book is a collection of projections by 26 authors from 12 countries and includes well-known practitioners like Michel Camdessus, Pascal Lamy, R. Mashelkar, M.S. Ahluwalia, among others.

The ideas put forth by the authors convey a simple message — the world economy is going to be dominated by the emerging markets, with Africa being the surprise part of the story. There will be wide-ranging changes in the structure of trade and finance with new roles being taken on by the existing institutions and greater participation from a wider group of countries. It is argued that while growth is fine, there is also a need to pay attention to the environment and the problems of availability of water where the challenges will be deeper. The world should also become less unequal with a frontal attack on poverty if this is to be eliminated completely. This is why governance will play a key role and will also be the key factor in deciding which countries will complete the race.

The author goes about his narrative through 10 mega trends that will emerge in the areas of demographics, urbanisation, globalisation, trade and financial sector, middle-class domination, rise of emerging markets and technological changes on the positive side as well as concerns on climate change, finite resources and fundamentalism on the downside.

Let us look at some of these interesting trends. For demographic dividend it has been argued that Africa which will gain the most while most emerging economies will benefit till 2040. Related to population growth, there will be rapid urbanisation, which will see more jobs being created. For this, we have to build the requisite infrastructure where funding challenges remain. The belief is that governments cannot provide this quantum of finance, and user charges and PPPs are the way to go forward.

Some novel thoughts have been expressed on the monetary system. It is believed that the IMF will be reformed and made more effective, with emphasis shifting to surveillance to eschew financial crises. Besides changing the structure of voting, there is an interesting suggestion to replace the hegemony of the dollar with the SDR, which will also help in bringing about discipline with the US budgets. The clamour for a neutral currency has been debated in the past too; but will become a necessity soon. The book also espouses wider participation of different countries and while G-20 is an improvement over G-7, the voices of other nations have to be also heard as they will be the future growth centres.

The growth and dominance of the emerging markets is the main theme which resonates with the authors. These countries will be the hub of future innovation and growth and will have to work to balance challenges such as finance, investment, inclusive growth while paying attention to sustainability. It has been projected that India’s share in world exports will increase from 2 per cent to 7 per cent and that of China from 12 per cent to 15 per cent. The US and Europe will witness a decline while Africa will increase sharply from 3 per cent to 10 per cent.

But there is a warning that we cannot take growth and sustainability for granted. The financial crisis exposed the cracks in the western economies, but with rapid globalisation, which will be the driver in the years to come, a contagion will always be lurking when there is integration of trade, finance, technology, etc. Therefore, there is a pressing need to create new institutions which can manage risk well. Further, the demand for food has to be satisfied with the growth of the young population besides tackling issues of inequality and poverty.

At the non-economic level, the worry which has been reiterated is the growth of fundamentalism which can send us back by years and has to be addressed continuously. This would be more prevalent in the developing countries with the Islamic nations being more vulnerable.

Quite interestingly, the Piketty proposition of the dangers in the return on capital being greater than the growth in GDP has been refuted in this book. The view here is that lowering inequality through progressive taxation does not benefit anybody and leads to sub-optimal solutions as governments are not efficient. Therefore, improvement in material well-being and social wellbeing are not mutually exclusive and can progress parallelly.

This collection is an excellent coffee table book with all the gloss, which can occupy the space for a couple of decades now. The views expressed may not be novel but are backed by research and not based on speculation. Kohli has done a good job in collating all the pieces, which makes this book engaging.

Sabnavis is Chief Economist, Care Ratings