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Copyright information Excerpt from Chapter 10: The Uncertain Future: What Awaits Us in the Near and Distant Future, and What Say We Have in It The greatest of human migrations lies before us -- the voyage into the future. We are creating this world for ourselves, more in its cultural and economic dimensions than in the natural one. The more we know and understand, the more we will be able to create. Almost everyone thinks about the future, often with misgivings and apprehension. People are afraid of what they do not understand. We have a choice: a future of understanding or a future of misunderstandings. The latter would be, or will be, exceptionally costly for development. What we need to understand, however, is that most of the misunderstandings result not from the "clash of civilizations," but from the clash of ignorances. The clock is running. Tomorrow will be today, and today will be yesterday. If you listen to what some people in Iran think about the United States and how Americans feel about Iran, it's hard to be an optimist, but it's also hard not to see that a great deal could be achieved through a sensible, substantive dialogue without preconceptions. Yet they're not exactly falling over each other to get started. Leaving aside such extreme cases as Israel and Palestine, where there will not be any sensible conflict resolution without strong and rigorous pressure from outside, the mutual perceptions of the United States and Venezuela or Great Britain and Zimbabwe would make an objective outside observer's hair stand on end. The degree of neighborly misunderstanding between Poland and Belarus or Russia and Georgia is enormous. It's not much better if you listen to what they say about Russia in Washington and New York, or about the United States in Moscow and St. Petersburg. It's all somewhat reminiscent of Japan's relations with the rest of the world on the eve of the Meiji reform era, except that now it's twenty-four hours a day, at the speed of light, and accessible to almost anyone who cares listen in. Today such syndromes cannot be overcome by sending in the British troops or the American frigates, as was done when China was forced to buy opium or Japan was made to open up to external commercial contacts. It takes intellectual effort and political action on both sides. Just as unrestrained economic expansion helped break down the isolation of the Far East, so economic interaction can accomplish a great deal today, in reference not only to investment and trade, but also to research and education. The best example in recent years is the significant improvement in bilateral relations and mutual understanding between China and the United States, not to mention the encouraging example of the integration of the postsocialist countries into the mainstream of the global economy and world culture. The role of intellectuals and of entrepreneurs, who make direct business contacts without government interference, in creating an atmosphere of mutual understanding, tolerance, and respect should be emphasized. In searching for answers to questions about the sources and mechanisms of development, we have worried on more than one occasion about the way that practice has been led astray by ignorance, greed, or emotions, even when there was scholarly understanding of the issues. Time has been wasted. More precisely, it has been wasted from the point of view of the interests of the majority and the general population, because there were some people who were making very good money out of the situation and who continue to do so. At times, however, the fact that something that is "theoretically possible" fails to happen is proof of the superiority of practice over theory. This is true in physics at least. This is why we are still waiting for the end of the world, even though it could theoretically happen right now. If it happened now, it would result not from ignorance, but from the accumulation of immense quantities of knowledge and the success of yet another great human endeavor. At the beginning of 2008, the power was switched on at one of the most complicated devices in history (and also one of the most expensive, since it cost over $8 billion). This machine is relatively more complicated, for us, than the Antikythera Mechanism was for the ancient Greeks. We are talking about the Large Hadron Collider (LHC), the particle accelerator located in a 27-kilometer tunnel outside Geneva, which may help us to answer some questions about the structure of the universe, or universes. The fascinating thing is that the results of these experiments and theoretical studies might even show that the Big Bang never happened and that we will have to rewrite the few things we think we know in our brief chapter on the history of the world. Some people think that this "Geneva Mechanism," built by the consortium known as CERN (Conseil Européen pour la Recherche Nucléaire), could create a small black hole. Is this merely additional mumbo-jumbo, but from the world of physics? Perhaps so, although even Scientific American cautioned about such a possibility in the summer of 1999. It is "theoretically possible"; the probability is close to zero -- yet it is still greater than zero. Back then the context was a smaller collider, the RHIC (Relativistic Heavy Ion Collider) at Brookhaven National Laboratory. MIT physicist Frank Wilczek (the grandson of immigrants from Poland) explained that the threat was not really a black hole, but rather something known as strangelets. Some physicists (physicists too have opposing views, although for different reasons than economists) contend that neutron stars could be turned into this hypothetical form of matter. This would mean that something referred to as an ice-nine transition could occur, although there is still no proof. If this occurred on earth, then the entire planet could be converted to strange matter and the world we know would be gone. The administrators at the RHIC convened a special committee of scholars that ruled out such an eventuality and calmed the overexcited media speculation about the danger. Frank Wilczek went on to win the Nobel Prize in 2004, although not for his work on strangelets. He is yet another Nobel Prize laureate who understands things that no one else, or hardly anyone else, understands. Theoretically possible though it may be, then, the end of the world will not take place, or at least not this year. Numerous new mistakes in economics, business strategy, and public policy are also theoretically possible. What is worse, they are inevitable for reasons with which we are familiar by this point. Nevertheless, we must go on looking for economic theories that are just as accurate as, and more comprehensible than, the intricacies of particle physics, and for practical applications of the factors that encourage progress. Despite the great volume of accumulated knowledge and the wealth of historical experience, the problems keep coming. This is one more paradox of development. Some believe that there is no point writing about the future if you cannot terrify your readers. This is not so, but it is also wrong to lull people into complacency. The one thing that is certain about the future is that it is uncertain. The signs are increasing that the world will be unable to escape the spiral into which it has fallen without a crisis and new revolutions. It would be better to escape this spiral through evolution and universal development that is politically, culturally, socially, ecologically, economically, and financially balanced, but it is both too late and too early for that. What kind of crisis will it be? We do not know. When will it happen? We do not know, but it is only a question of time, because there are more and more contradictions, and they are becoming increasingly antagonistic. Overcoming them will take movements on an almost tectonic scale: profound structural changes, the adoption of a new value system, and a different balance of power and allotment of roles on the world stage. Leo Tolstoy (1828--1910) liked to say that all his troubles came from the fact that his imagination was slightly more vivid than that of other people. He was not the only one to have such a problem. Yet it is a good problem to have, because it is an inspiration for critical thinking. People who have such good problems should not feel bad, and societies and nations should wish for more such problems. The thing to watch out for is a superfluity of really painful problems. The only way to deal with them is to stretch our imaginations about ways to shape our future. Knowledge about the future and after-the-fact speculation in the alternate-history mode should be of help. Intelligently asking "What if?" can be highly creative. We know how and why certain processes turned out the way they did, and we know that many of them could have ended otherwise. It is a certainty that this will continue to be the case in the future. The future is partially determined, and there is nothing for us to do except wait for it and take advantage of the best parts. Much else, however, depends on our actions. These in turn depend on what we have really learned from the past, both remote and recent. To have any sort of perspective, we must understand history. It is hard to evaluate hypothetical scenarios for the future because it is hard to compare them, not only because of the enormous differences of subjects, scope, depth, and time frame, but also because of the impossibility of subjecting them to the falsification test. We cannot disprove something that has not happened yet. By the time anything turns out to be true or false, it belongs to the past. All sorts of analytical and prognostic centers sketch out scenarios for the future, even such serious ones as the CIA and its affiliates. They go so far as to publish such scenarios, which might seem surprising for an intelligence agency -- not that we believe they publish all of them. The most intriguing scenarios are surely stamped "Top Secret." Yet even the ones available on the Internet can serve as inspiration. We should add that these published scenarios are intended to influence the future, because they shape expectations that have an impact on the behavior of various entities. The purpose of some forecasts is to prevent things from happening, rather than to encourage them. Other predictions aim at making it so. In the short term, this also applies to the financial analysts in the service of speculative capital, who do their part in manipulating the markets. On the most important issues, the time frame is very long, so that we will have to wait thirty or seventy years for the archives to be opened and the "Top Secret" material declassified. To avoid being shocked, we can try to have somewhat more vivid imaginations than other people. Nevertheless, we will get things wrong. Only afterward do we learn how well we did, in big matters and small. In 1975, Business Week wrote about the coming paperless office. Since that time, paper consumption in the United States has tripled. We were supposed to be flying hypersonically by now, but in fact we are flying as slow, or as fast, as we did in the 1960s, or even slower, since the supersonic service of Concorde flights has been shut down altogether (in addition, the airline meals are worse, which no one could have predicted). In the mid-twentieth century, we were promised electricity so cheap, thanks to nuclear power, that it wouldn't pay to meter it. We were supposed to be living on other planets, to eliminate pollution on earth, and to vanquish poverty and hunger. Now we are only aiming to halve these scourges by 2015. Artificial substances were supposed to solve the problem of resource scarcity. In a depiction of the year 2000 from my schooldays, I learned that there would be moving sidewalks everywhere, but the kids are still trudging up the hill to my old school building today. The science columns in the newspapers promised that robots would cook our dinner and brew our tea. Today many economists, and others as well, are just as enthusiastic about the "new economy." No "new economy" will solve our age-old problems. These blunders can have serious consequences for planning. To hold them to a minimum, we need to ask as many questions as possible. Sometimes a good question is more informative than a partial answer. Questions, as opposed to answers, don't insist. They hint. They give us a nudge about which direction we should be looking in. We should be looking all around the horizon. It can be divided into a dozen compass points: the Twelve Great Issues for the Future. These are the things we should keep examining all the time as we try to peer into the future and ask, "What next?" What happens next will depend on things that happen at the same time. Many events will take us by surprise, but much else should be less than totally unexpected, because it depends on conscious human actions. These twelve compass points are 1. The rate and limits of economic growth.2. The evolution of values and their cultural implications for development processes.3. The institutionalization of globalization versus the growing chaos and lack of coordination.4. Regional integration and the way it meshes with globalization.5. The position and role of nongovernmental organizations.6. The natural environment and competition over dwindling natural resources.7. Demographic processes and human migration.8. Poverty, misery, and social inequality.9. The knowledge-based economy and society.10. Scientific and technical progress.11. The evolution of networks and its economic consequences.12. Conflicts and security, war and peace. **** The first compass point, the issue of the rate and limits of economic growth, could just as well conclude our reflections as open them. If we understand the rate of growth as referring to gross domestic product, then we should be under no illusions that its average rate over the last ten or twenty years cannot be sustained in the long run, over a period of, let us say, fifty or 100 years. As surprising as this may seem to some, the facts are plain -- the world must slow down. However, "the world" does not mean everyone, or everywhere, or to the same degree. The poor countries should speed up the development of their economies in terms of the quantitative growth of output and the accompanying, interrelated structural changes. This is desirable and, as we know well, possible. However, for it to happen, these countries must base their development strategies on the correct theoretical premises, as derived from the coincidence theory of development. They must also define long-term national development strategies, based on the new pragmatism, that mesh with the continuation of globalization. There should be no illusions that they will repeat the success of Europe -- first Western, and then Eastern -- or North America. At best, they can significantly reduce the development gap with these most highly developed regions of the world. The postsocialist countries of East Central Europe should set out to maintain a rate of GDP growth twice as fast as that of the richer part of Europe through the coming generation, in the temporal perspective of 2035--2040. They have a realistic chance of doing so. This will completely eliminate the gap in income levels and reduce the gap in living standards in a tangible, visible way. However, it will not happen by itself. Transformation and integration with highly developed countries, and especially the European Union, will be a great help, but the effort will not succeed without the appropriate national development strategies. Among the post-Soviet republics, the ones endowed with rich reserves of energy resources are in a particularly good situation, on the condition that they prove capable of taking full advantage of favorable combinations of circumstances -- the bounty of nature, continuing high energy prices, and the transformation to a market economy. So far, they have not done particularly well, because they have relied too much on the easy pickings that they owe not to wisdom, organization, and hard work, but to the generosity of Mother Earth. The remaining former Soviet Republics will be in a difficult situation, and the distance separating them from the more developed parts of Europe and Asia will probably increase over the next few decades. Ukraine, of great strategic importance in post--Cold War cooperation and confrontation, finds itself in a special predicament. Its fate depends on whether it manages to become integrated with the European Union over the next decade or two, draws closer to Russia, or splits up. The most favorable variant is integration with the European Union, on the condition that it is not used as an instrument for weakening Russia, but rather as a geopolitical meeting ground for mutually advantageous cooperation. Belarus will soon face the same problems as Ukraine. The whole sweep of the postsocialist countries, however, from Mongolia and Tajikistan to Kosovo and Macedonia, will develop faster than the world average. Over time, China will slow down. Warnings issued repeatedly since the mid-1990s notwithstanding, that time has not yet come. We may assume that efforts to provoke the disintegration of China, on which the West may be relying, will not succeed. It should also be assumed that the Chinese authorities will continue, as they have for the last thirty years, to combine enlightened policies, aimed at structural reform and the construction of market institutions, with development. If they also decentralize the administration in a systematic, gradual way while slowly making the political system more democratic, the Middle Kingdom may succeed in continuing to develop more rapidly than the average for the rest of the world for another decade or two, although not as rapidly as in recent years. Taiwan may be joined to the motherland in a similar time frame, especially because the differences in levels of development with the southern regions of the mainland will disappear, which will add further to Chinese power. Africa must speed up. This region in particular must develop faster than the rich countries in order first to keep the chasm from growing, and then to begin narrowing it. All it will take -- no small matter! -- is for Africa to continue to grow faster than the rest of the world. The continent grew at 5.8 percent per year, as opposed to the world average of 5.0 percent, from 2005 to 2008. These are overall figures, which equate to about 2 percent less per capita in Africa. We should add at once that the essential conditions for progress include a significant limitation of the rate of population increase and a fight to maintain the long-term growth in GDP per capita in the range from 2.5 to 3.5 percent. This is daunting but not impossible. The rich countries, and above all the United States, must moderate their economic growth. It is doubtful that they would do so voluntarily, and so they will have to be compelled. This will happen either gently and gradually, with growth being curbed as a result of rising prices and increasingly difficult access to certain raw materials, or radically and suddenly, as a result of An Even Bigger Crisis. Such a crisis could be set off in various ways. The classical way would involve a chain reaction of negative adaptations of the real sphere to the structurally imbalanced financial sphere. In that case, however, we would be looking not so much at a slowing of the rate of growth as at a deep collapse -- no one knows how deep -- of the level of output, and a fall in its absolute level, before growth resumes at a slower rate than previously. To some degree, this moderation of growth must be connected with a deliberate resignation from some part of financial accumulation. Instead of investing capital domestically or in other parts of the global economy as direct or portfolio investment, it should be transferred to the poorest countries in Africa, South and Central Asia, Latin America, and the Caribbean. The sooner the transfer of 0.7 percent of GDP from the rich to the poor stops being a slogan for international bureaucrats and becomes an instrument in a planetary development strategy, the better. It will also be better for the wealthier countries, which will then be under less migratory pressure from the wretched of the earth, because there will be fewer of the wretched. There is justification for warnings about the enormous risk that aid, in the form of a small fraction of the income of the wealthy countries being transferred to poor countries, could be wasted. Nevertheless, it is an undeniable fact that this aid, no matter how modest, leads to improvements. It is true that the greatest accomplishments in fighting poverty and breaking out of stagnation have been made by the countries of Southeast Asia, which have benefited to a minimum degree from external transfers while making strong progress thanks to trade expansion and their own entrepreneurship. Africa has not done this. The truth is, however, that about one percentage point of the economic growth in the poorest countries during the last generation is attributable to direct foreign aid. Without it, the misery would be worse. If there had been more aid, the present level of output would be higher. What about the fact that there is a need for special institutional and political measures to prevent these aid funds from going astray? We already know this. We must take action, and development economics tells us what action to take. By the same token, we know that aid money should not be assigned to arms imports -- another country's exports -- or returned through other channels to the "givers." Therefore maintaining the world growth rate at a real level oscillating around an annual average of about 2 percent for the next several decades would be a great success. It would be an even greater success if we managed to maintain that average with the rate being higher for the poor countries and, as a consequence, lower for the rich countries. Is this possible? It all depends on what happens in the other points of the compass in the horizon that surrounds us. Let us now look at the second of these compass points, the question of the evolution of values and their cultural implications for development processes. This is an important matter. To date, humanity has produced splendid civilizations. Some were being born while others were on the way out. Sometimes they vanished on their own, in a natural way; at other times they were helped off the stage thanks to the aggressiveness of their successors. Today we hardly face any "end of history," because no civilization -- excepting Soviet socialism, or, as some prefer, communism -- is being relegated to the scrap heap of history. There will still be great conflicts, although they will not necessarily be "clashes of civilizations." No new civilization will be born during the next few generations. However, the planetary ethnic-cultural melting pot will evolve through the interpenetration and blending of diverse values. In some sense, of course, there already is a new civilization. How lucky we are to have a global economy, worldwide finances and electronic money, transoceanic jets and mass international tourism, the Internet, and satellite television thanks to which more than a billion people could watch the landing on the moon or the World Cup finals. We have wireless communications and mass culture, and people can buy more copies of a book -- the latest volume in the Harry Potter series -- in a single day than all the libraries in the world held 500 years ago. The pursuit of material values dominates this civilization to a large degree, although spiritual values are beginning to count for more, just as they did in antiquity. The shifting of social priorities on this level could have enormous consequences for the way we do business, and the issues of economic dynamics. Stagnation and output growth, development and the lack of development may be seen in new ways. Individuals can develop "horizontally," thanks to spiritual growth and a deeper experience of nature and culture, as well as "vertically," by climbing the career ladder and amassing possessions. Something analogous could occur in models of social development, with more attention paid to the verb "to be" than the verb "to have," and the latter seen not merely in terms of "the more, the better." Of course, in order to be, you must first have at least the minimum, but there is no reason that the growth of the state of possession need necessarily outstrip experiential development. Such changes would look different in poor countries, because the priority there must be an increase in output to ensure at least a chance of satisfying the elementary material needs. A reevaluation of consumer preferences may take place. Poor countries will not uncritically replicate the patterns of rich countries, not only because objective physical barriers may rule this out in some places, but also because doing so will not seem worthwhile. The world is not going to become one big North America, but it is not going to become one big Bhutan either. It will be somewhere in the middle, between these two extremes. In the new civilization, working together, coexisting, and tolerance exist side by side with conflicts, marginalization, and ruthlessness. This civilization is developing to an increasing degree through cooperation and coordinated action, and to a decreasing degree through dominating others. It is more a civilization of a multiplayer game than of people struggling against each other. Games must always have rules, but struggles often have none. This aspect of things will be increasingly important in terms of the cultural conditioning of development processes. An increasing level of global regulations will be negotiated among the players in the game, rather than being imposed on the weaker by the stronger. There will be a fundamental value shift in the direction of the democratization of economic processes. Economic growth itself will contribute to this, because there is a positive correlation between the level of development and the advancement of democracy. The world is not democratic. Moreover, even if democracy triumphed in all countries -- something we are closer to than ever before -- the sum of national democracies would not equal planetary democracy. Recent events at the United Nations illustrate how far we are from such democracy. A record number of countries, 182, voted in the General Assembly in 2005 to condemn the U.S. trade embargo against Cuba. Voting against were only the United States, its faithful ally Israel, and two small island states from the Pacific, Palau and the Marshall Islands. The United States took no notice, because it is not some world quasi-democracy that should decide what is right, but rather the caprices of a group of old-school politicians. This will change, and it will happen before our eyes. Until these qualitative changes occur, countries can focus on the bottom line when voting. Interesting research by two Harvard economists proves that the American government corrupts some countries. They found that fifteen countries that served as rotating members of the U.N. security council received 59 percent more foreign aid when they held voting rights in that body than before or after. This enhanced level of aid is maintained during the two years they have seats on the council, after which, as soon as they give up their seats, the level of foreign aid drops back to its previous level. This is called democracy in action. A system of feedback relationships and mutual influences between regulation and democratization in a multipolar world is now taking shape. It will be more supportive of increased output and the sensible division of this output than the world that was divided between two opposing camps in the second half of the twentieth century, or the world that was dominated by a single superpower at the beginning of the twenty-first century. A multipolar world must find a way to govern itself. Perhaps it would be better to say that it must find a way to steer processes with global consequences that must be supervised but that exceed the supervisory capacity of even the most powerful individual country. This is not a call for a world government, which would be the height of naïveté. However, there is a need for institutionally simple solutions, namely, coordinated action and international agreement. Institutions of this type, coordinating policy on a global scale in order to control events, will become increasingly common. In the coming decades, they will have more impact than technological change on the way things are run. More of a sense of justice in distribution and less action from a position of economic strength, less ignorance about the cultures of other countries and deeper mutual understanding, more formally equal rights and genuine respect for partners -- these are the cultural traits that have a chance to develop in the coming decades. It is worth doing everything possible, because this is the way to have fewer conflicts, disputes, and wars, and more cooperation and development. However, we should not have illusions or encourage them in others. The twenty-first century will be a time of cultural confrontations, but not the same as in previous epochs. This is the result of the overlapping of various phenomena and processes in science, technology, economics, and politics. Technology will force the desired cultural changes no less than politics, and the economy will benefit. Politics will interfere, spoiling things at times but encouraging development at other times. If we manage the great feat of coming up with knowledge-based politics, then policy will be more of a catalyst than a roadblock to balanced growth. In evaluating growth and development, we will rely less and less on the inadequate category of gross domestic product, which still dominates the thinking of economists and the actions of politicians. It will be replaced by new concepts and measures. We can hope that one of them will be the ISI -- the Integrated Success Index, which I proposed earlier. It offers an all-around reflection of the complexity of socioeconomic progress. This is not so much a matter of changing the way we measure the scale and rate of economic change as of doing it the right way. *** COPYRIGHT NOTICE : Published by Columbia University Press and copyrighted © 2008 Grzegorz W. Kolodko. Translation copyright © 2011 Columbia University Press All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher, except for reading and browsing via the World Wide Web. Users are not permitted to mount this file on any network servers. For more information visit the permissions page on our Web site. Excerpted from Truth, Errors, and Lies: Politics and Economics in a Volatile World by Grzegorz W. Koodko All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.