Changing Opinions

Sitting on the Fence (Photo credit: Wikipedia)

How often do you change your mind about something?

I don’t mean having difficulty deciding something and bouncing between a couple of options while doing so. I mean, once you’ve made you mind up, how often do you really change it?

If you’re like most people, the answer is, “not often”. Most people try to make big decisions in a moderately rational way. The bigger the decision, the more they try to apply logic to solve it. Small decisions like whether to order a latte or americano today, tend to be left to the more primitive parts of our brain. For the big issues, though, we like to go through a vaguely scientific process of asking a question, acquiring relevant information, balancing the information against preferred outcomes, and deciding what to do. Trouble is, most big issues are big because they’re difficult to solve logically, which means we end up having to make a final “gut instinct” judgement call in order to finally decide our opinion about the problem facing us. We end up using a heuristic rather than purely algorithmic approach; I’ve discussed such Wicked Problems before.

Heuristic problem-solving is inherently fraught with uncertainty; it’s based on a pattern-recognition approach, the validity of which varies according to the mind of the person applying the heuristic filter. Put simply, the wiser the person, the more likely they are to reach a correct result. But if the problem is truly wicked, then one can never test the result, and so we can never definitively prove who is wisest.

There are many proxy markers for wisdom, including reported or perceived happiness, wealth, position and/or influence in the eyes of others, and how well words stand the test of time. None of these is entirely satisfactory, for self-evident reasons, which means that definining wisdom itself ultimately becomes a matter of consensus and opinion. This is clearly troubling if one is concerned about creating an objective yardstick by which to measure human progress.

However, it is empowering if you are more concerned about making changes that chime in with your own personal opinion. Firstly, it allows you to define the frame of reference for success and failure. Secondly, it promotes uncertainty in other people’s decision-making, creating a space for you to influence their judgement. And lastly – if you are interested in making large-scale rather than personal changes – it provides you with a long-term tool by which to modify the broader cultural perception of what is ethically correct. As a culture, we have even given a name to this last process: Politics.

Politics is the art of persuading a sufficiently large number of people that your opinions are culturally correct. This actually applies as much to a tyranny as it does to the kinds of limited/representative democracies most readers will live in. It’s just that the violence and speed of the mechanisms of changing government that varies: revolution in the former; elections in the latter. But more than this, far-sighted politicians also understand that the optimal way of persuading people of their rightness is to modify the cultural mindset within which the choice is made. Alter the frame of reference, and you can ensure a specific answer will always emerge. This is also something tyrannies and democracies share, with only superficial differences between the two: tyrannies tend to use coercive force and single-party elections; democracies use advertising and other softer propaganda like manipulating the flow of information.

All the above is no more than I would expect an average teenager to grasp, and I actually think many do (at least on an unconscious level), even if the usual response is anomic cynicism rather than recognising the empowering potential. The more thoughtful will recognise another implication, however: even quite severe unpopularity in the short-term is irrelevant, provided you can sufficiently alter the mindset of a large enough group of people to influence their long-term cultural mindset in your favour to protect your long-term survival. This applies to individual lives as much as it does to organisations and to political parties.

Coming full circle to the start of this post, changing someone’s mind is very difficult in the short-term. Instead, you have to alter the way they make decisions. The more time you have to do this, the easier it becomes. This is partly what accounts for incumbency effect in politics: it’s harder to dislodge a known politician from a post than if two unknowns are fighting for the same position. It’s not usually that incumbents have really proven anything about whether they’re right or not; it’s just that they’ve become part of the mental furniture of voters. Even if they’re unpopular in some respects, the incumbent still usually retains a higher chance of retaining power than if they didn’t have that mindshare of reality. In a US Election year, it’s worth noting that this is a big part of the reason that most US Presidents tend to get re-elected for a second term, even if at mid-term it seems like they’re unpopular. UK politics frequently operates similarly: being in government allows you to craft the narrative in a much deeper way than being in opposition, and you can see it in many of the Budget 2012 changes being announced today (esp. personal tax statements, reducing reliefs & benefits and increasing personal allowances), despite the potential for some other changes to be unpopular in the short term. And even when the longer-term cycle of change occurs, political parties never reverse even a majority of changes imposed by their predecessors, no matter how vehemently they may have opposed them at time of their introduction.

Reality is like chewing gum: sticky but malleable.

The ultimate expression of this thesis of persuasion is that tactics should always be secondary to strategy, and that strategy should be guided by clear long-term insightful aims. Only that will allow you to gradually work on altering the perception of enough people for them to reach what you would consider correct decisions. Logic and argument is a poor convincer of anyone except a computer. Persuasion through modifying the frame of reference of the argument works much better on human beings. Next time you disagree with someone, or need to negotiate with them, remember these principles rather than attempting to argue with them. You won’t convince them today, but you might just change their mind tomorrow.

Measuring Power

Image by JAS_photo via Flickr

Forbes magazine loves lists. One of their annual features is World’s Most Powerful People, the latest revision of which has just been published. The names on the list change occasionally; the order of the names changes more frequently. But what is power, why does it matter, and can it really be measured?

For Forbes, a business-orientated publication, the answer is a calculus of the financial, human and physical resources an individual can draw upon. Unsurprisingly, their list is therefore dominated by global political and business leaders. This demonstrates an important feature of power: it is as much in the eye of beholder (or in this case, beholden?) as beauty is.

On a global scale, Forbes’ list is not a bad attempt. If the world is a pond, Forbes measures the potential ripple effect created by an individual landing on its smooth surface. Current #1 Barack Obama is undeniably a bigger stone to throw in than a random African villager.

Another analogy would be the distortion of the fabric of space-time by large celestial objects. Massive bodies like the Sun or Jupiter create deep gravity wells, drawing other objects into their influence, to the point of bending light around them. At a gravitational extreme, a black hole creates a gaping maw that does not permit anything else to shine. People can create a similar effect on those around them.

One theory of planet formation is that small particles gradually accrete together, eventually forming planets. This analogy allows for an understanding of how large organisations wield power. Obama is not powerful because he is Obama; he is powerful ex officio as a result of the combined wealth & military might of the United States, and there are certainly those in the world who, rightly or wrongly, like to complain that the USA doesn’t let them shine.

Maintaining the strength of an organisation is therefore one method of its leader maintaining power. A more sophisticated analysis would point to the increasing importance of networks rather than organisations. To use Obama again, the power of the President of the USA is magnified through the network of allied nations whose political favours it can draw upon. On a more modest level, an individual’s power over their own network is magnified if they are the hub or major node of the network rather than a distant spoke.

All these forms of power are extrinsic in nature; they correlate power with the ability of an individual to influence the world around them. I would argue that this is a fundamentally unwise way to measure power.

Why? Because it is ultimately dis-empowering; it is a game no participant can definitively win. It is impossible for an individual to maintain their position at the head of an organisation or network indefinitely; new players keep entering the field, and the field of play itself continuously mutates. Essentially, to play this game requires you to accept a life of running to stand still, akin to a giant hamster wheel. It is not the act of a powerful person to subjugate themselves to a system in this way.

True power is intrinsic. It is the acceptance of self that comes from being able to stop. Epicurus famously said, “I would rather be first in a little Iberian village than second in Rome”, and the logical extension of this is to reduce the circle of concern to that within which it is small enough to remain permanently first. This is of course the individual himself. Mastery over one’s own life & emotions is the real challenge, and true mastery over these domains is real power.

Epicurus goes on to describe the nature of this challenge: “the art of living well and the art of dying well are one”. In other words, in order to achieve mastery over self, it is necessary to come to terms with death and the end of one’s existence. This is easy on an abstract level, and much harder on practical/personal one. Nonetheless, it is good to acknowledge the reality of the problem facing us instead of pursuing the endless distraction of extrinsic power. “It is better for you to be free of fear lying upon a pallet, than to have a golden couch and a rich table and be full of trouble”, as the aforementioned philosopher also said.

As those who know me will attest, I am no fan of a poverty-stricken hairshirt existence. Money is important. It has an undoubted – and powerful – insulating effect, permitting an individual the necessary psychological breathing space required to focus on the self. But if I may be permitted a final quote: “Not what we have but what we enjoy, constitutes our abundance”.

The Oxford Course on Wine (via Outre monde)

If you’re interested in learning about wine, this will surely be a great course.

James Flewellen, one of the course organisers and tipped for great things by wine writer Jancis Robinson, writes at The Oxford Wine Blog which is also definitely worth checking out for a simple, no-nonsense approach to appreciating wine.

James Flewellen (author of the Oxford Wine Blog) and I are pleased to announce a new summer school on the appreciation of fine wine, to be held at Exeter College, Oxford between the 11th and 17th of August 2012. Amongst the highlights of the summer school are a focus session on champagne, our own ‘Judgement of Oxford’ in which you will blind taste some of the finest wines from around the world, and a friendly and informal blind tasting match to r … Read More

via Outre monde

The Soft Shoulder and Me

The photo illustrates one of the more talked-about features in menswear: the soft and natural shouldered jacket, characterised by minimal padding and extension and a smooth unroped sleevecap. Excuse the creasing and rumpling, or at least blame my pose at the time of the photo-taking!

The full history of the soft shoulder I leave to those more intimately familiar with the subject, but it’s certainly true that it achieved great popularity in 1960s USA as a collegiate style in conjunction with other features like an undarted “sack” jacket, narrow lapels, single vents and a three button front with the lapels rolling to the second button. The one pictured here is something of a modern pastiche, having all those features but being barely a few years old and designed by Thom Browne for Brooks Brothers’ Black Fleece line.

A play on classic Americana, it is also undoubtedly something else: a modern re-interpretation with a good dose of wry humour in the execution. For example, the presence of a little locker loop hanging down at the back of the collar never fails to raise a curious chuckle when people notice it for the first time.

It’s not my favourite jacket, but it’s impossible to wear it without feeling at least some connection to the States. I’ve never lived there for an extended period of time, but due to a fluke of birth I’m currently privileged to hold both US and UK passports. I’ve enjoyed this quirk of fate for years despite the extra bureaucracy having two nationalities occasionally entails. Now I must reconsider as for various reasons, it would be wiser to hand back my US passport, renounce my citizenship and be solely British.

Culturally, I’m British. I’ve lived here virtually all my life, love the country and can’t envisage emigrating. But a small submerged part of my personal identity has always been American as well. The possibility of moving there if this country ever truly went to the dogs has been a pleasant fantasy. But it’s more than that. For all its occasional malignment by some, I believe that the States remains a generally positive global influence and it’s pleased me to have an affinity with that country. In my more grandiose (and most tongue-in-cheek!) moments, I might even smile about being a living embodiment of the long-standing Special Relationship between the US and the UK!

So the prospect of relinquishing my US citizenship makes me just a wee bit sentimental. It makes perfect sense, but I’ll need to convince myself of that unanswerable logic before doing the undoubtedly right thing. The truth is that there’s a tiny element of loss mixed in there.

Perhaps it’s best thought of this way: will the soft-shouldered jacket feel a little less comfortable the next time I slip it on, I wonder?

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The Hunch

Perhaps it’s the residual imagery of that infamous Hillary Clinton advert from the 2008 Primaries, or simply my memory of too many nights on call for work, but when the phone goes off in the middle of the night, I rarely think it’s good news.

Contrast that with the widely-reported response of David Cameron, British Prime Minister, to his middle-of-the-night phone call from Barack Obama: he “had a hunch” that the call was to tell him that Osama Bin Laden had been killed.

Obviously there are a number of potential explanations for this. For instance, he could have had some advance notice of the operation either from the USA, or from British Security Services who had noted the build-up to the American action. I think the former is unlikely given just how few people knew about the operation. The latter is perhaps more plausible, given the large number of British assets that are operating in Afghanistan and Pakistan these days. Or maybe he detected something in the tone of the voice of the staff connecting him to the US President that unconsciously let him realise that the tenor of the news in advance. Alternatively, Cameron might simply be unwittingly retrofitting his memory to fit the subsequent events, something that we are all prone to do without consciously realising the distortion.

But if the hunch was genuinely his initial reaction, it speaks volumes about the man and tells us something more profound than he may have realised when he said it. There must be a remarkably strong underlying sense of optimism running through your psyche for a man – especially one in his position – to be woken up in the middle of the night, and to suspect that good news is the cause.

Optimism at a psychological trait is poorly understood but appears to be multifactorial in its aetiolog: it arises from a combination of heritable factors and learned behaviours. It is associated with better physical and psychogical health; optimists tend to suffer less mental distress from negative events. Taken to an extreme, it can become unrealistically Panglossian, but on a more proportionate level it certainly seems helpful to life.

Regardless of your voting preferences, knowing whether a politician is optimistic or not is crucial to how they will act when in office as politics is discipline involving a series of wicked problems. An optimist will approach those decisions differently to a pessimist. It is easy to be cynical about, say, Cameron’s Big Society concept, but if he really is as optimistic as the quote suggests, then it is likely to be a genuine belief of his rather than a mere political convenience. It also impacts on the austerity programme the government is undertaking to cut the deficit; an optimist would tend to want to trust research supporting the ability of the private sector to at least partially offset public spending cuts, and give less weight to the contrary position, whereas a pessimist would be unlikely to be as willing to believe. A similar argument can be made to a willingness to reform large organisations such as the NHS.

Optimism doesn’t just colour the decision itself, it can also affect the eventual outcome. I’ve already noted that optimists tend to suffer less mental distress when faced with negative situations. This can lead them to be more willing to make changes that translate the negative into the positive (adversity into success). There is also research to suggest that those suffering from clinical depression actually view the world in a hyper-realistic fashion: their pessimism lets them judge odds more accurately than optimists or even average non-depressed people would, but also demotivates them from making changes to then actively skew the odds back into their favour.

Right decisions are rarely obvious before they are taken, in politics or more generally in life. Understand how you tend to approach decision-making, and so learn to better trust your decisions.

Masters of Irrational Torments

Hermes Trismegistus, Image via Wikipedia

• Ignorance
• Grief
• Lack of Self Control
• Desire
• Injustice
• Greed
• Deceit
• Envy
• Treachery
• Anger
• Rashness
• Malice

The syncretic wisdom of The Hermetica continues to play on my mind. The above is its list of Irrational Torments.

Escape from them comes through the acquisition of Wisdom, in an iterative virtuous circle of self-reflection. In scientific language, it would be a positive feedback loop.

This is a remarkably humanist viewpoint for such an old text, where knowledge of the eternal comes not in an instant but by being willing to contemplate self-improvement:

“[God] is by nature a musician,

who composes the harmony of the Cosmos

and transmits to each individual

the rhythm of their own music.

But I have noticed

that when an artist

deals with a noble theme

his lyre becomes mysteriously tuned”

This may sound mystical and abstruse, but the practical life lessons that can be drawn from thinking in this way are omnipresent.

As I type, the Augusta Masters is approaching its climax. Golf may not be everyone’s cup of tea, but to play it well requires an ability to rise above both temporal and spiritual distractions. Mind and body must operate in harmony and irrational torments set aside. Sports professionals call it “being in the zone”, where everything becomes simple because their focus is pure. But this purity of thought is applicable to every life task, and to life itself.

As the example of Tiger Woods – currently charging through the field – shows, it is not enough to apply these lessons to one aspect of life alone. His much-publicised personal difficulties reveal an unwillingness to apply a similar degree of thoughtfulness off the course. He has been quoted in the past as saying that he’s happiest when playing a round of golf, and this is not surprising. It is at these moments when he works the hardest to achieve balance.And yet he does not make the connection that this sense of balance is something he could also find in his personal life, if he applied the same degree of effort to it.

His challenge is the same as the rest of ours; to strive to be as wise in the rough as on the fairway.

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Know your Source!

Modern life is an explosion of choice.  The art of modern living is discernment.

We are heuristic creatures, looking at the world not as a continual series of fresh situations, but through the lens of experience. It focuses and distorts information to fit within our pre-existing framework. We stereotype to rapidly understand and navigate the new. Mostly, this works to our benefit, saving us the need to algorithmically process all fresh data as a computer would. Occasionally it is detrimental, when we pre-judge incorrectly. But good or bad, it is still necessary, or we would face analysis paralysis continuously.

To choose correctly therefore requires a good sense of what our baseline – our frame of reference – is. Whether this provides context to the danger of radiation levels at Fukushima, or the political motivations behind airstrikes in Libya, or the most appropriate wine for dinner, a good working knowledge of reliable sources is crucial. That is the art of discernment and selectivity.

It gains internet expression in price comparison aggregator websites, physical embodiment in the  good sommelier at your favourite restaurant, scientific grounding through the process of peer review, and sartorial definition through knowing the talents and limitations of your tailor. More generally, it can be said to arise from insight: the ability to not just to be aware of new data, but to filter it correctly. Insight improves with practice: challenge yourself to actively interpret new situations, and to check your heuristic processes are running correctly by comparing your findings with trusted sources.

There are minor sources for each sphere of life. Taking clothes as an example, I like Ede & Ravenscroft for suits, jackets and trousers, Drakes for ties, and Rayner & Sturges ordered through Sartorial Executive for shirts. But however trusted these sources are, they are nothing but empty textiles without my major source for clothes: an internal image of self that I wish to project outwards. This major source has gone through iterative changes over the years, as it has been exposed to many other minor sources in the form of other people’s attire and the archetypes they embody.

If clothes are an external manifestation of the way we interact with the world, they are a first differential of our inner self: the person that we are, and the person we want to become. With insight and effort, that inner self will also go through a similar process of iterative change as we meet new (hopefully wise) people and explore new concepts. Those are our minor sources, melding together to form a major inner source of identity.

At our best, this is how we learn and grow as people.

Libya Ceasefire? Gaddafi plays Joker in the Pack

International Diplomacy is evolving from a stately Great Game into Speed Chess.

With the destabilising ramifications of Japan’s earthquake taking a temporary step back from the limelight, Libya has again taken centre stage.

British Prime Minister David Cameron, and French President Nicolas Sarkozy have achieved something I thought extraordinarily unlikely a week ago, passing a UN resolution authorising a no-fly zone over Libya.

Not just that, but the detailed wording enables a remarkably broad range of potential triggers to intervention.

This wrong-footed me. I had assumed that their efforts were words not action, designed to bolster an impression of determined humanitarian activity that would play well with their home audiences, but in reality done with an expectation of failure at the UN. And to which they would then be able to say “well, at least we tried our best”. Russia, China and Germany (and to some extent even the USA) instead all chose to call the UK and France’s bluff.

That put the ball back into their court, leading to rumours that British and French jets would be over Libya within hours. Instead, they paused to co-ordinate plans. I wonder if there was an element of realpolitik here; perhaps an expectation that the pause would allow Gaddafi to quickly take Benghazi, and so negate the practical need for any serious military intervention.

Instead, and to my even greater surprise, it is Gaddafi who has blinked first, by declaring a ceasefire.

At this stage, I admit that what happens next is beyond my ken. The situation – and Gaddafi himself – remains too unpredictable. Part of me thinks he is saying whatever it takes to prevent international airstrikes, with actual attacks continuing to take place on the ground. If this happens, will the US/UK/France deploy their forces to the fullest extent authorised by UN Resolution 1973 or will they back-pedal and implement only the barest skeleton of a no-fly zone?

It really is a compelling real-time example of international brinkmanship. It displays how nations can get swept up into a ratcheting spiral of engagement. In this kind of rapidly-evolving game, unpredictability can overwhelm careful planning and Gaddafi is a past-master at putting a spanner into the works.

Drawing parallels with individuals in crisis situations, and my professional experience in that field, the best way to contain unpredictable and dangerous behaviour is for everyone else involved to act in a co-ordinated and highly-boundaried manner. This contains the unpredictability and allows a safe management plan to be implemented to solve the problem. But this requires everyone else involved in the situation to want the same outcome, so they have the motivation to speak with one voice. In the case of Libya, each party has its own vested interests, many of which are in conflict. The danger is that this permits unpredictable behaviour to easily get an upper hand.

Japan Earthquake: Consequences

Map of tsunami wave height; click for source

The twists and turns wrought by the Japan earthquake have gripped and troubled me. I am by nature, and to some extent profession, a contingency planner. When faced with a difficult situation, I tend to switch into a pattern-recognition and problem-solving mode, anticipating consequences in order to take advantage of them. The Japan earthquake is troubling because its medium and long term ramifications are very unsettling.

The facts are straightforward: the 9.0 magnitude earthquake that occured off the Sendai coast on 11th March was one of the most powerful ever recorded. It generated a massive and rapidly-arriving tsunami, leading to major loss of life and catastrophic damage. Several nuclear reactors at Fukushima are in danger of core containment breach, and at time of typing, there are reports of a minor containment breach at reactor 2. The Bank of Japan has pumped trillions of yen into the economy to prop it up during the crisis, and the emergency services and military appear to be doing the best they can under trying circumstances.

The consequences are much harder to define.

The loss of life is of course immensely tragic on personal, national and global levels. However, the calculating side of me is bound to point out that on that global scale (comparing it to previous natural disasters such as Haiti’s earthquake) it is not disproportionate.

Many tens of thousands (probably hundreds of thousands) of lives were undoubtedly saved by Japan’s affluence. Its wealth enabled adherence to strict building codes, making deaths from the earthquake itself relatively limited. This is a triumphant testament to technology and its careful widespread implementation.

The tsunami killed many more. It is much harder to prevent tsunami deaths. One would assume that Japan will respond by implementing more safety restrictions into its building code for coastal properties, such as mandating the orientation of buildings to permit the force of tsunami waves to pass through rather than destroy. These would be relatively straightforward regulations and I have little doubt Japan will respond well in this regard.

The economic consequences are more painful. Natural disasters are generally associated with an immediate GDP hit, followed by a rebound 6-18 months later as reconstruction kicks in. Under normal circumstances, Japan would follow this overall neutral pattern (as it did following Kobe’s earthquake). But Japan’s national debt is enormous at about 200% of GDP, and interest rates are already in the basement following decades of stagnation and the 2008 financial crisis. This limits economic room for manoeuvre and magnifies the impact of that short-term GDP hit, making it more likely to be prolonged. If Japan’s GDP is negatively affected for more than 6 months, it may trigger a global slowdown. Although it has been stagnating for 20 years, Japan is still the world’s 3rd biggest economy and a major recession would impact global demand chains.

This is particularly concerning for the UK, given that the success of the austerity programme being implemented by the coalition government is dependent on moderately strong private sector growth. Direct UK-Japan trade is in the order of about £10-20bn only, so although knock-on effects via the USA are harder to quantify, it’s possible that the fallout to the UK economy will be relatively contained. It’s simply too early to be sure about the impact on the UK beyond noting that several large insurers will bear major, but largely absorbable, losses.

Fallout of another nature is perhaps more troublesome in the long term. It’s highly unlikely that radiation from Japan will cause the UK any problems whatsoever. Even within Japan, the impact should hopefully be fairly limited, especially if the cores at Fukushima do not lose further containment. But the effect on our energy policy may be significant.

Elements of the Green movement have been swift to use the incident to buttress their more generalised anti-nuclear policies. While some environmentalists now support nuclear power as being cleaner than coal or oil, and therefore helpful in mitigating climate change, the majority still push very strongly against an expansion of fission plants. Public opinion has gradually been shifting back towards nuclear power in the decades since Chernobyl, but this progress is likely to be reversed in the emotional knee-jerk response to what we are seeing unfold in Japan. The longer it takes to control the cores, the worse that response is likely to be.

No method of power generation is risk and impact free, but nuclear is in many ways safer, cleaner and more cost-effective than other methods. It has some major drawbacks of course, not least that if all the lines of defense do collapse, then the consequence of a fully exposed core are very significant. Nuclear power stations are designed with significant depth of defense and I hope and pray that the depth is sufficient to allow the Fukushima cores to be brought under control. Newer designs of plant are more defended still (Fukushima is about 40 years old), with passive as well as active lines of retreat in case of emergency.

While it is absolutely right that nuclear plants should be designed with the precautionary principle uppermost in mind, I believe it is fundamentally wrong to construct an entire energy policy around such worst-case scenarios. Any energy policy has to be balanced not solely against the risk of incredibly unlikely catastrophe, but against the far more likely effects on the economy, and the need to securely keep the lights on.

Britain is a much more geologically stable country, and with newer reactor designs, I firmly believe that nuclear power is easily a safe enough option. It is also going to be necessary in order to maintain power grid stability in the face of our international obligations to mitigate climate change. Renewables alone simply cannot fill the gap in the short time we have. I hope there isn’t a knee-jerk response against nuclear fission’s planned expansion in this country.

Of course, a more lasting solution would be cost-effective large-scale nuclear fusion, and there is a very strong international effort to develop the technology required, which I touched upon in an earlier entry. That would be both cleaner and safer than fission.

National disasters can paradoxically bring out the best in people. All the reporting from Japan conveys images of an understandably shocked and frightened populace, but one attempting to work with authorities to rebuild their country. Having visited and worked there, I believe they will succeed.

An eye on the main chance: Britain in a future global economy

Summarising recent efforts by Citigroup and HSBC to peer into the crystal ball of global economic development, Ambrose Evans-Pritchard ‘s Telegraph article makes fascinating reading.

The two reports agree with the conventional wisdom of BRIC (Brazil, Russia, India, China) countries continuing their inexorable rise up the GDP league table, as traditional Western powers gradually slip down, but vary hugely in the degree of the change by 2050.

Citigroup projects a world heavily dominated by the East, with China and India together adding up to four times the GDP of the USA and Indonesia alone surpassing the UK, Germany, France and Italy combined. HSBC favours a more modest scenario of China taking the leader’s jersey from the USA, but then slipping back somewhat. The differing outcomes are largely due to variation in methodology between the two reports in how they account for demographic changes.

Living in the UK, I was impressed to see that even in Citigroup’s vision of Asian economic supremacy, we would be the sole EU country to retain a top 10 GDP ranking. This is mainly due to the UK’s population growth creating more workers to minimise the financial impact of an ageing population in a way that other EU countries cannot. Or as Evans-Pritchard cheekily puts it: “the UK faces a less disastrous ageing crisis than much of Europe… thanks to our unrivalled leadership in unwed teenage pregnancies.”

Of course, all modelling exercises are to some extent intellectual navel-gazing, especially when projecting so many decades into the future. Forecasting models get worse the more distant the outcome being scrutinised. Small errors in initial assumptions used are magnified, and microfissures in methodology become gaping crevasses.

But despite these caveats, it’s still fun to play in the sandbox.

The overall trend is one where the division between rich and poor will be less about which country you live in than about your access to capital and your skill-set. The middle-classes in currently advanced countries will face an inevitable squeeze in living standards, relative to the growing middle-classes of currently developing countries. World GDP will boom, but more so in the youthful large countries than the mature ageing economies. This will be politically difficult for the leaders of these older nations to manage. It may be good for the world as a whole, but individual countries will face a very different future with a different range of incomes than they’ve become accustomed to.

And the UK’s role in such a world?

For decades, the UK has worked hard to (often successfully) punch above its economic weight in world affairs. It’s done this through historic global diplomatic ties and through military expenditure. In the future, even if it slips to 10th in the economic league table, it will still gain position – in relative terms – compared its European neighbours.

By that time, the EU will have either sunk or swum its way through the current Euro debt crisis. It will be a looser alliance of free trading states with a more tightly integrated core; or it will be a closely-linked federated structure. And given events of the past month or so, it may well include elements of North Africa. The UK’s relatively thriving economy would give it a louder say than at present and that opens up intriguing possibilities. Would it be able to tilt the economic axis of the EU rightwards? Would it encourage transatlanticism? Or would it return to its historical roots and advocate a global approach to trade?

The relatively-thriving island of the UK could end up being surprisingly influential as a central broker in a world with disparate economic centres of gravity. A multipolar economic world (albeit with the relative heavyweights of the USA and China) represents an opportunity for vibrant middle-ranked countries to wield disproportionate influence that a world with just one economic axis does not. If the UK keeps an eye on the main chance, the future isn’t so depressing after all.

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