1. Galileo Report
The World in 2030

3. RICHARD CHANDLER
CORPORATION
Galileo Report
The World in 2030
www.richardchandler.com

4. First edition January 2012
Second edition June 2012
Copyright © 2012 Richard Chandler Corporation. All rights reserved.
28061222
No part of this document may be reproduced or transmitted in any form or by any means,
electronic or mechanical, without the prior written permission of the publisher.
Whilst every care is taken in the preparation of this document, no responsibility can be
accepted for any error or omission contained herein.
Paintings reproduced with the kind permission of Ana Tzarev.

5. RICHARD CHANDLER
CORPORATION
Contents
Galileo Report –The World in 2030 1
The Future of Social Capital 3
The Future of Economic Capital 11
The Future of Global Needs 23
Sources 30
Acknowledgments 32

6. Future Focused
Richard F. Chandler, founder
of the Richard Chandler
Corporation, outside the
company headquarters in
Singapore, March 2007

7. 1
Our challenge as a society is to provide each person
with the freedom to be creative. We will achieve global
prosperity only when more people are able to participate
in building peace and prosperity for tomorrow’s world.
In this report, we will consider the trends and innovations
that will shape our world over the next two decades. In
keeping with our holistic approach to prosperity, we will
consider culture and values, as well as economic and
political change. We have named this report after Italian
mathematician and astronomer Galileo Galilei, whose
quest to understand the world led to many groundbreaking
discoveries. Similarly we hope that looking to the future
will allow us to grasp the opportunities that present
themselves in our own time and space.
Galileo Report
The World in 2030
At the Richard Chandler Corporation, we are working to
build the foundations of broad-based prosperity. Our vision
is of a world with thriving businesses and rising wealth; a
healthy, safe and educated population; vibrant and inclusive
politics; happy families; strong communities; and
flourishing cultures.
Prosperity is usually measured in economic and material
terms. But true human fulfilment comes from prosperity
in a broader sense – the human flourishing that the Greeks
called eudaimonia. We believe in a holistic concept of
prosperity that includes material well-being while also
encompassing strong community values, self-reliance,
cultural vitality and individual economic opportunity.
Civilisation has taken great steps forward during creative
periods when new ideas emerged in philosophy, science
and art. Examples include Ancient Greece, the Tang
Dynasty in China, Renaissance Florence and the
Industrial Revolution in England. We are living in such a
period now, as advances in information technology have
brought the world closer together than ever before, allowing
an unprecedented exchange and competition of ideas. Yet
too many people are still excluded from the benefits of
today’s interconnected world.
Our mission, Building Prosperity for Tomorrow’s World, compels us to
look to the future. This enables us to prepare for the opportunities that
will present themselves within our time and space, and forces us to
confront the magnitude of the global challenges that lie ahead.
Richard F. Chandler
Founder and Chairman, Richard Chandler Corporation

9. 3
The Future of
Social Capital
“Creativity is as important
as literacy.”
Sir Ken Robinson
Author

10. 4
The Future of
Social Capital
The Future of Values
During the twentieth century, the developed world became
wealthier, better educated, healthier and safer than ever
before. But this past century also saw vast human suffering
caused by intolerance and hatred. In Cambodia, China
and Russia, totalitarian regimes inspired by collectivist
ideologies killed millions of people in political purges and
man-made famines. In Germany, an economically advanced
country in the middle of Europe, the Jewish community
was almost destroyed by the Holocaust. Longstanding
ethnic and religious rivalries have fuelled devastating wars
in Congo, the former Soviet Union, Sri Lanka, Sudan and
the former Yugoslavia. Ethnic minorities were persecuted
throughout the twentieth century, starting with the
Armenians in Turkey in 1915 and closing with the
Rwandan Tutsis in 1994.
Over the past two decades, however, changes in the
economy have led to subtle shifts in values, which may
presage a more peaceful and prosperous future.
Ronald Inglehart, a political scientist at the University of
Michigan, has used multi-country data from the World
Values Survey to track the relationship between economic
trends and values. Inglehart finds that a person’s values tend
to reflect the socio-economic conditions he experienced in
childhood. Childhood material insecurity is associated with
survival values that emphasize physical and material
security. Economic growth and fighting crime, for example,
are key concerns of people in the developing world. People
who grew up enjoying material security tend to develop
what Inglehart calls well-being values. They care about
self-realisation, quality of life, freedom of expression and
environmental sustainability.
Inglehart also finds that people in developed countries
tend to be tolerant of others, accepting differences in
religion, ethnicity and sexual preferences more readily than
in less prosperous communities. Furthermore, tolerance in
developed countries has increased steadily since the World
Values Survey began collecting data in 1980. Tolerance is
especially high in countries that enjoy holistic prosperity –
meaning that living standards, education, healthcare and
employment opportunities are all improving. If growth is
very unequal or fails to raise the quality of life for most
people, resentment and intolerance may re-emerge.
Well-being values, including tolerance, are especially strong
among young university-educated people whose jobs involve
creativity and critical thinking. This is consistent with the
findings of urban studies theorist Richard Florida, that a
new creative class in the United States places a high value
on diversity and tolerance. Globally, there is clear relationship
between intellectual creativity and tolerance: four of the
world’s five most tolerant countries, Sweden, Denmark,
Switzerland and the Netherlands, produce the most journal
papers per capita in science, engineering and medicine.
Structural changes in the economy should lead to the
expansion of well-being values throughout the developed
world and eventually the developing world. Today’s world
is characterised by decentralised communications networks,
global markets and supra-national organisations. People
from different countries, religions, ethnicities and social
backgrounds are having more and more contact with
each other in the workplace and online. As traditional
manufacturing industries become more mechanised,
people are being drawn into industries that value knowledge,
creativity and innovation. In 2001, education reformer
Societies are not static. They change over time. The most obvious changes
result from economic and social processes that are constantly in flux.
Expanding trade, technological innovation, new fashions and new forms of
entertainment seem to transform the world before our very eyes. Habits,
cultural traditions and values change more slowly. Yet changes in these
more intimate areas of life are just as important for progress and
prosperity as economic trends.

11. 5
Creativity Without Tolerance?
528
Sources: World Bank Development Indicators; Gallup World Poll (2011)
Sweden Ireland Italy
Poland Malaysia Jordan
Patent applications per 100,000 capita
Hostility towards homosexuality (% of population)
8 352 71 951
20 18 15 22

12. 6
43%
of citizens have no
confidence in their
country’s leadership
Sir Ken Robinson found that creative industries such as
advertising, fashion and software design were growing twice
as fast as the economy as a whole in the United Kingdom.
As countries develop and integrate into the new creativity-
based economy, we can expect tolerance and a concern for
holistic well-being to become more prevalent around the
world. It should be kept in mind, however, that economic
development will come more quickly to some parts of the
world than others. The United States, Japan and Europe are
already moving towards creativity-based economies. China
and Asia are still dominated by manufacturing and, despite
impressive progress, many people in Asia still face material
insecurity. Africa and Latin America lag even further
behind, as they are mainly natural resources exporters
where prosperity has reached only a narrow elite. Continued
inequalities in prosperity may exacerbate social divisions
and unrest in the short term.
The Future of Leadership
Technological innovation, greater mobility and new values
are transforming the nature of both business and political
leadership.
Successful business leaders such as Apple’s Steve Jobs and
Google’s Larry Page have pioneered a new management
style designed to nurture individual creativity. According
to Sir Ken Robinson, this style is very different from
traditional management systems based on rules and
hierarchies. In Silicon Valley, it is cooler to be an innovator
in a cubicle than an executive in a corner office. Creativity-
oriented leaders welcome input from everyone in their
organisations, paying little attention to status or formal job
descriptions. Work tends to be arranged around projects.
People collaborate across departments and specialities.
Experimentation and risk-taking are encouraged. This new
business culture places little importance on loyalty. Instead,
high labour turnover is accepted as a way to circulate ideas.
Even geographical boundaries are fading away, as some
companies use the Internet and cloud computing to find
and employ the best specialists from all over the world.
Political leaders in the future will have to behave more like
business leaders. As technology develops, people are
becoming more mobile. They are more open to travel and
relocating. Economist Charles Tiebout observed presciently
in 1956 that people can express their political preferences
not just by voting but also by voting with their feet –
choosing to live in places that offer the most attractive
combinations of environmental assets, government services
and tax rates. Similarly, Richard Florida has found that
American cities where tolerance and diversity are embraced,
such as Austin, Boston, San Diego and San Francisco, act as
magnets for the creative class.
For political leaders, this means that competition among
jurisdictions will become as important, and maybe even
more important, than competition among political parties.
In order to prosper, towns, cities and countries will have to
attract individuals, households, businesses and investment
capital. Entrepreneurs and workers in creative-oriented
industries will be especially valuable.
Effective political leaders will welcome this new form of
competition. They will learn to treat citizens less like
supplicants for government assistance and more like
customers who are free to choose among different packages
of policies and services offered by different political
jurisdictions. At the same time, governments will become
more like businesses, adopting policies designed to unleash
creativity in the economy, science and the arts. For example,
local policy laboratories can be used to test new ideas,
which can then be adjusted through trial and error.

13. 7
Leaders who fail to promote creativity and ignore well-
being values will lose resources to brain drain and capital
flight. As citizens become better informed, they will
demand accountability, transparency and efficiency from
their political leaders. Corruption, confiscatory taxes and
environmental degradation will not be tolerated, as people
will simply take their skills and resources elsewhere. It will
become harder to sustain policies that benefit parochial
interest groups at the expense of the general public.
The Future of Bridging Social Capital
Social capital in its most basic form consists of contact
among people. Although the concept of social capital has
been discussed by academics for decades, it was popularised
by Harvard Professor Robert Putnam in two books, Making
Democracy Work: Civic Traditions in Modern Italy (1993)
and Bowling Alone: The Collapse and Revival of the American
Community (2000). Putnam argued that social contacts
encourage honest and trustworthy behaviour, which in
turn facilitates business transactions. Thus, social capital
increases economic productivity just like physical capital
such as a screwdriver or machine tool.
Since the publication of Bowling Alone, there has been much
debate over whether the Internet and other technological
innovations are increasing or decreasing social capital.
Certainly, no technology can entirely replace face-to-face
contacts as a source of social capital. As Meric Gertler, a
professor of geography at the University of Toronto, has
written, being there is still fundamental to human
relationships. Richard Florida reports that, even in this
Internet age, people say that one of the most important
decisions in their lives is where to live.
Face-to-face social capital can be promoted by well-
designed public buildings and outdoor spaces where people
can come together to share ideas and build networks. Urban
squares in the Middle East, for example, have played a
central role, both physically and symbolically, in bringing
people together to support the ongoing pro-democracy
movements. Similarly, Tiananmen Square in China has
been a gathering place for public discussion for a century. In
countries as diverse as England, Singapore and the
Netherlands, certain public parks are known as unofficial
speakers corners, where people gather to debate ideas,
protest and organise political movements. In the United
States, the Mall in Washington D.C. was the scene of civil
rights demonstrations, including the famous March on
Washington in 1963.
Technology, however, is especially useful for building
bridging social capital. Bridging social capital, according
to Putnam, consists of contacts among people who are quite
heterogeneous. Alcoholics Anonymous, bowling leagues
and community choirs are examples of groups that build
bridging social capital. Their members come from a variety
of backgrounds and experiences, but they connect with
each other around a single shared interest. Bonding social
capital, by contrast, consists of contacts among people who
are similar to each other. They share many views and
interests and have a common ethnic or socio-economic
background. Churches, synagogues, ethnic organisations
and even urban gangs promote bonding social capital.
According to Richard Florida, bridging social capital
encourages dynamism and creativity by facilitating contacts
that produce new ideas. Organisations that promote
bonding capital, on the other hand, may encourage their
members to focus on insular communities and their
families rather than contributing to broader prosperity.
There can be no doubt that the Internet builds bridging
social capital. As technology advances, customers can
Social capital increases
economic productivity
just like physical capital
such as a screwdriver
or machine tool

14. 8
obtain more reach for less riches. An example is Skype.
Skype offers voice and video calling at virtually no cost –
technology that would have cost thousands of dollars just a
few years ago. People can use Skype and similar technologies
to make connections transcending nationality, location, race,
religion and socio-economic background. Another example is
the mob phenomenon – brief gatherings or demonstrations
that are organised online. Smart mobs have protested the
2000 US election results, corruption in the Philippines and
restraints on free expression in Taiwan. Vote mobs in Canada
are calling attention to issues that concern young people,
such as government accountability, economic opportunity
and environmental protection.
Over the next 20 years, technology will play a greater
role in building and shaping social capital. But the newest
innovations, such as mobs, combine new technology with
age-old traditions, such as the political demonstration or
street fair. Such hybrid forms, where technology is used to
arrange in-person contacts and events, may be the key to
social capital in the future.
The virtual world is
creating social capital,
but it will not replace
proximity and contact

17. 11
The Future of
Economic Capital
“Innovation distinguishes
between a leader and
a follower.”
Steve Jobs
Founder, Apple Inc.

18. 12
The Future of
Economic Capital
The next 20 years will see unprecedented changes in the workplace.
Technology has changed the nature of work as formal corporate forms
and hierarchies have become less important. Entrepreneurship has
become more important than ever, as entrepreneurs translate new ideas
and technologies into higher productivity. Yet entrepreneurship training and
development aid have largely been discredited. Instead, developing countries
are starting to focus on building institutional frameworks that will enable
entrepreneurship to flourish.
The Future of Work
Work in the future will be organised less around companies
and more around projects. Project-based organisation has
existed in the past in the form of joint ventures, where
companies partnered on a project for a limited period of
time and then shared the profits. Consultants usually work
on projects, moving among corporate clients and perhaps
even among different locations. The entertainment industry
has long relied on project-based organisation. Typically, a
production company is formed to create a film or
programme. It raises financing; hires a director, actors and a
technical staff; and supervises production and distribution.
But once the project is over, the company is dissolved.
Today, entrepreneurs are looking for innovative
organisational forms that are conducive to creative work.
According to Uffe Elbaek, a Danish expert in social change,
a Fourth Sector is emerging alongside the private, public
and non-profit sectors. The Fourth Sector consists of
flexible organisations that are intended to carry out a
specific project or venture over a limited period of time.
Their goal might be to make a profit, provide a public
service or solve a social problem. They may partner with
private, public or non-profit organisations. But their
guiding philosophy is to seek out the best expertise
available. People who work in the Fourth Sector are usually
independent contractors who move among different projects
and sectors. Because Fourth Sector organisations are both
highly focused and flexible, they are often more effective
than traditional corporations.
The Future of Cities
Silicon Valley in California and Manhattan in New York
are thousands of miles apart and intellectually quite
different. While Silicon Valley is the home of high-tech
entrepreneurs and venture capitalists, New York is the
centre for art, banking and finance. However, both of
these cities have achieved prosperity driven by creativity. In
Silicon Valley, semiconductors and microprocessors have
changed the way people work, think and play. New Yorkers
are among the world’s in the centuries’ old arts of painting,
music and theatre.
In both cities, creativity has thrived due to informal
networks and popular venues for collaboration. Annalee
Saxenian, a professor at the University of California at
Berkeley, interviewed dozens of high-tech professionals for
her book Regional Advantage: Culture and Competition in
Silicon Valley and Route 128. Saxenian found that Silicon
Valley’s triumph over other technology-oriented regions,
such as Boston’s Route 128 corridor, is due to its culture
of cooperation and sharing of ideas. In Silicon Valley, ideas
are generated by informal meetings and collaborations that
formed outside the workplace. The famous Homebrew
Computer Club, for example, holds regular events at the
Oasis Bar in Menlo Park. Google’s US$ 1.65 billion
acquisition of YouTube was celebrated with similar
informality, at the casual diner Denny’s. New York’s art
work revolves around similar informal get-togethers and
popular watering holes. Max’s Kansas City restaurant in
Union Square and the Chelsea Hotel were two iconic
venues where artists came together to discuss ideas in
the 1970’s.

19. 13
In both Silicon Valley and New York, informal venues
outside the workplace are more than just social centres;
they are vital to creativity. People use these venues to find
jobs, establish creative partnership and get feedback on new
ideas. Cities that are rich in such places have healthier and
more vibrant economies.
Informal networking is especially important given the
particular structure of creativity-based industries. For
the most part, these industries avoid traditional corporate
forms, with permanent employees and strict hierarchies.
Instead, they rely on flexible organisations where
outsourcing and collaboration are common. In New York,
for example, artists team up with fashion designers to
produce special collections. Graphic designers are hired
to create packaging for record labels. In Silicon Valley,
collaborative arrangements help to spread risk among
multiple firms and investors.
These non-traditional work arrangements, however, can
thrive only in places rich in diverse and creative talent.
Silicon Valley and New York have thrived because they
offer urban ecosystems that encourage networking and
attract creativity workers. They are dense neighbourhoods
that encourage walking, offer a variety of social institutions
such as galleries and restaurants, encourage a vibrant street
life and, above all, welcome diversity.
The Future of Entrepreneurship
Per capita income grows when productivity grows, and
productivity grows with the creation of new production
technologies, new organisational forms and new knowledge.
The entrepreneur drives this process by constantly
searching out and implementing innovations. It is the
entrepreneur who shifts resources from less productive
to more productive techniques. Virtually all economic
development begins with small and medium-sized
enterprises. One way to think about economic growth
is that it depends on the supply of entrepreneurs.
Joseph Schumpeter, the father of entrepreneurship
research, believed that entrepreneurs have a certain type
of personality, which he called the entrepreneurial spirit.
They are naturally competitive. They value success for
its own sake. They enjoy the creative process and thrive
on getting things done. Nobel Laureate George Akerlof
wrote that people derive utility, or personal satisfaction,
when their personal identities match their ideals. People
with entrepreneurial ideals crave autonomy and the
freedom to pursue their own projects. They tend to be
unhappy in mainstream jobs and are willing to forego
some income or economic security order to express their
entrepreneurial identities.
As these scholars suggest, the entrepreneurial spirit is
largely innate and cannot be taught. Business schools may
teach skills, such as how to write a business plan or apply
for a loan, but they cannot instil the entrepreneurial will to
conquer. In 2009, a group of Dutch economists studied an
entrepreneurship training programme for European high
school and university students. They tested the students
before and after the programme for a range of personality
traits associated with entrepreneurial achievement – such
as a need for autonomy, a propensity for risk-taking, and
creativity. They found that the training programme had
no effect at all on the students’ personality traits and
actually left them less interested in becoming entrepreneurs.
Research by Nobel Laureate James Heckman, however,
suggests that young children can be taught traits and
habits that will make them more effective if they choose
to become entrepreneurs. Heckman and other researchers
have found that successful adults tend to share certain
characteristics: self-discipline, an orientation to the future,
creativity, a sense of control over one’s life, and an ability to
73%
of Sub-Saharan Africans
would rather risk starting
a business than work
for someone
else

20. 14
see alternative points of view. These non-cognitive assets are
like muscles. They can be strengthened with practice. But
they are essentially fixed after the age of eight.
Parents and communities, therefore, can shape future
entrepreneurs by helping children to develop non-cognitive
assets. There is also empirical evidence showing that
communities that are rich in entrepreneurs tend to
perpetuate themselves, passing the entrepreneurial
personality down through generations. Innovative pre-
school and elementary school curricula designed to develop
non-cognitive assets, as well as more traditional cognitive
skills such as IQ, may also help promote entrepreneurship.
The Future of Institutions
There is a considerable gap between aspiring to become an
entrepreneur and to actually starting a business. Research
by the Global Entrepreneurship Monitor suggests that only
about 30% of people who report having entrepreneurial
abilities do then become entrepreneurs.
It is clear that institutional factors that differ from country
to country are playing an important role here. Aspiring
entrepreneurs know that their success will depend not just
on their own abilities but on a wide range of political, social
and economic institutions. Tax rates are one obvious factor.
Another factor is costs – labour costs, rental costs for space
and licensing fees. Security of property rights and access
to capital are also considerations.
Recent research shows that labour regulations can also have
a direct impact on entrepreneurship, perhaps in unexpected
ways. Non-compete contracts, for example, have become
very common for technical and management employees. It
has generally been assumed that these contracts encourage
economic growth by protecting corporate investments in
human capital and intellectual property. For example, firms
might be less willing to train employees if there was a real
risk that the employee would defect to a competitor.
In practice, however, the protection that firms gain from
non-compete contracts is outweighed by the benefits of
employee mobility and diffusion of ideas. Economists
Sampsa Samila and Olav Sorenson found that American
states where non-compete contracts are not enforced
produce more patents and more start-up businesses than
states which uphold non-compete contracts. Some
commentators have even suggested the California’s policy
of not recognising non-compete contracts contributed to
the emergence of Silicon Valley as a global technology
centre, rather than Boston, Massachusetts, where non-
competes are enforceable.
As the Samila-Sorenson study demonstrates, institutions,
laws and regulations can often have unintended and
unforeseen effects on entrepreneurs.
Classical economists like Adam Smith and, later, Peter
Bauer, Friedrich Hayek and Ludwig von Mises, believed
that a certain institutional framework is the precondition
for prosperity. The basic institutions of English common
law, including security of property rights, enforceability of
contracts and a tort system to resolve disputes, gave people
the confidence to trade and even risk their capital in
investments. Von Mises explained that the market economy
entitles individuals to the value created by their property –
as opposed to, say, communist systems where the state
claims any so-called surplus value. The market, as a result,
drives people to allocate their resources to the most
productive use, thus promoting prosperity for everyone.
Recently, economists and policy-makers have again turned
their attention to institutions, recognising the crucial role
they play in economic growth. There is a broad consensus
on the institutions that are necessary to support prosperity.
The success of
entrepreneurs depends
on a wide range of
political, social and
economic institutions

21. 24.6
2.5
11.8
1.9
10
1.8
75
58
58
23
42
14
Source: Global Entrepreneurship Monitor (2010)
Ghana Brazil China
United States Russia Japan
Perceived entrepreneurial ability (% of workforce)
New business owners (% of workforce)
Entrepreneurship: Thinking vs Doing
15

22. 16
Well-defined, enforceable and transferable property rights
are essential. Property rights must be available to everyone
on an equal basis. Low taxation is necessary to encourage
entrepreneurship. Open trade is widely recognised as the
key to long-term development, as demonstrated by South
Korea, Singapore and China. Finally, the state must be
efficiently managed, meaning that rule of law is respected,
public spending is limited, regulatory burdens are modest
and transparency is the norm.
Transforming institutions is a challenging task. There is no
single formula, as successful countries have followed
different paths of institutional reform. Often powerful local
interests unite to defend a corrupt and inefficient status quo
that benefits them at the expense of broader prosperity.
Sensitivity to history, local conditions and culture is crucial,
but this is often difficult to obtain. Some people have even
come to believe that the prosperous countries of Western
Europe were simply a lucky group that benefited from a
unique combination of culture and history, and that their
success cannot be reproduced elsewhere.
However, despite the reservations of critics, globalisation is
pushing some developing countries into a virtuous cycle of
reform. The developing countries of Georgia, Thailand,
Mauritius and Malaysia, for example, now rank higher than
many European Union countries on the World Bank’s Ease
of Doing Business Index. Even two countries in Sub-
Saharan Africa, Rwanda and Zambia, have improved.
Rwanda is ranked 58th in the East of Doing Business
Index, up from 70th in 2010. Zambia rose to 76th from
84th over the past year.
Entrepreneurs themselves are playing a role in improving
institutions – either by lobbying for better public
institutions or developing their own innovative solutions,
such as new forms of contracting. In African squatter
neighbourhoods, for example, numerous forms of real estate
property rights have been created spontaneously by
residents. Although these rights are not officially
documented anywhere, they are tacitly understood and
recognised within the informal communities.
The Future of Development
At the end of the nineteenth century, Europeans and
Americans were five times as productive as workers in Asia
and Africa. It was generally expected that this disparity
would narrow over time. Instead, it widened to a nineteen-
fold difference today.
In the 1950s, many economists argued that poverty could
be ended by a combination of government-led development
and development aid. The poorest countries, they believed,
were stuck in a poverty trap but a big push could propel
them into the modern world. Although some economists
criticised aid, most famously Professor Peter Bauer of the
London School of Economics, they were a much-derided
minority. As Professor Bauer complained, the concept of aid
disarms criticism, obscures realities and prejudges results.
Who could be against aid to the less fortunate? The term
has enabled supporters to claim a monopoly on compassion
and to dismiss critics as lacking in understanding and
sympathy.
Today, however, it is widely recognised that aid has largely
failed. While aid to the poorest part of the world, Sub-
Saharan Africa, grew steadily over the past 40 years, the
average GDP of that region has remained flat. Today, half
the population of Sub-Saharan Africa still lives below the
42%
of people have no
confidence in their
justice system

23. 17
World Bank’s official poverty line of US$ 1.25 per day.
Whether aid caused low growth in Africa, or low growth
prompted aid, is hotly debated. But it is clear that there are
very few cases of countries’ achieving prosperity after
receiving aid. Most of the countries that received aid have
stagnated.
Peter Bauer’s view that development cannot be engineered
from outside has now gained greater acceptance. Because
aid increases government revenues without the need for new
taxation, it allows developing world rulers to pursue policies
that favour themselves and their supporters. Economists
have long recognised that windfalls from the discovery of
natural resources often leave economies worse off. The
illusion of riches allows institutional reforms to be
postponed while the windfall revenues accrue to the
politically influential and well-organised, leaving most
people in destitution. The effect of aid is similar. Aid
windfalls contribute to the deterioration of institutions, as
rule of law collapses, corruption increases and rent-seeking
proliferates – all of which undermine growth in the long
run.
The Future of the Global Economy
The world economy in 2030 will be far more productive
than it is today. Assuming that global output returns to its
pre-crisis level of about 2.5 – 3% per year for the period
2017 – 2030, the average per capita income is on track to
rise 50% by 2030. While this is less impressive than the
70% growth rate achieved over the last 20 years, it is still
quite healthy.
Income growth will be concentrated in the advanced
economies, with Europe growing more quickly than the
United States and Japan. Asian incomes will also rise
rapidly. But incomes elsewhere will stagnate or even decline.
Africa will be especially hard hit as production fails to keep
up with population growth. Countries all over the world
will have to grapple with social tension, migratory pressures
and climate change.
Eight trends will shape the world economy through 2030.
1. De-industrialisation
Canada, Europe, Japan and the United States will de-
industrialise. They will largely abandon labour-intensive
manufacturing industries, such as textiles and cars, as well
as heavily polluting industries, such as steel and chemicals.
Instead, they will shift to creativity-based industries, such
as software development and service sector production.
2. The Shifting Balance of Global Power
It will take at least a decade for the advanced economies to
cut their public and private debt back to manageable levels.
As they focus on domestic recovery, the middle income
countries will become more powerful and will gain more
influence over global institutions. The sovereign wealth
funds of natural resources exporters and manufacturing
countries will come to dominate the global capital markets.
3. The Growth of Asia
Manufacturing industries will move to Asia to take
advantage of high-skilled, low-cost labour. China is
expected to surpass the United States as the world’s biggest
economy by 2030, while India is on track to become the
third largest economy.
China and India, however, will face challenges. China’s
growth since 1970 has been propelled mainly by one-off
gains, such as the massive expansion of manufacturing, the
opening to trade and foreign technology absorption. In the
future, China will need to expand its horizons, evolving
from a manufacturer to a hub for creativity and innovation.
$2.7tn
spent on aid during
the last 50 years
(USD)

24. 18
Creativity, however, depends on diversity and a free
exchange of ideas – which may be incompatible with
China’s policies of limiting free speech and suppressing
dissent.
India faces different problems. India’s urbanisation rate is
expected to rise from 30% to 50%, with 68 cities becoming
home to more than a million people each. But Indian
cities already are suffering from inadequate transportation,
sanitation, water and power infrastructures. India also must
improve its workers’ skills. Although the labour force is
growing by 8 – 9 million people per year, 37% of Indian
adults are illiterate, according to the World Bank. Only
17% of India workers are educated through secondary
school. Only 16% of Indian employers offer training to
their workers, compared to 90% in China.
4. A Larger, Older Population
Population growth rates will continue to decline, from
about 1.1% per year between 2010 and 2015 to 0.78% per
year in 2025-2030. According to United Nations estimates,
the world population will grow from 7 billion today to 8.3
billion in 2030. The aged population will rise, especially in
advanced economies, raising demand for health care and
pensions. As the global job-market becomes more skill-
driven, young people will spend more years on their
education.
5. Growing Inequality
Earnings inequality will continue to rise due the premium
placed on high-skilled labour. Inequalities will deepen
among countries and among regions, exacerbating social
tensions. Large income disparities will be especially
troublesome in middle-income countries that are
experiencing rapid social change. Social unrest and
pressure for more redistribution may emerge as a result.
6. Climate Change
Global warming will continue, although perhaps more
slowly due to carbon capture and storage technologies. As a
result, agricultural productivity will rise in temperate areas,
but desertification will worsen elsewhere. Pressure for
greater immigration to developed countries will increase.
7. Energy Substitution
Energy costs will rise due to the substitution of
renewable energy sources, such as solar and wind power,
for hydrocarbons. At the same time, the leading powers,
especially the United States and China, will strive for
self-sufficiency in energy. While the Japanese nuclear
accident has temporarily dampened demand for nuclear
power, the long-term trend is still towards hydrocarbons
substitution. Higher prices, combined with carbon taxes,
will spur new demands for mass transportation
infrastructure.
8. New Global Institutions
New inter-governmental institutions will emerge to
coordinate environmental, health, financial, security and
migration policies. While these will be structured on a
voluntary basis like the World Trade Organization, they
will nonetheless reduce the sovereignty of individual states.
106%
increase in the
developing world’s
over 60s population
by 2030

25. 19
China
US$ 73.5 trillion
Source: IMF; Standard Chartered Research
Japan
US$ 9.4 trillion
Brazil
US$ 11.9 trillion
India
US$ 30.3 trillion
United States
US$ 38.2 trillion
United States
US$ 14.6 trillion
France
US$ 2.6 trillion
Japan
US$ 5.4 trillion
China
US$ 5.7 trillion
2010 2030
Germany
US$ 3.3 trillion
The Five Largest Economies by Scale

26. 20
Possible Discontinuities
These projections are vulnerable to events and
discontinuities that seem to be, on balance, unlikely – but
could significantly alter the economic outlook if they occur.
1. Protectionism
The advanced economies may react to growing
competition from the developing world with greater
protectionism. Already, American agricultural subsidies
depress world prices and have a lethal effect on poorer
countries, especially in Africa. Another possibility is
that the developed world will impose environmental
preconditions on trade with developing and middle-income
countries. Any type of protectionist policies could reduce
growth around the world.
2. Political Instability
Rising wealth in the developing world will strengthen
popular demands for democratic institutions. However,
there is a risk that new political institutions will be captured
by special interests who squander the newfound wealth
rather than investing in further development. The recent
election crises in Kenya and the Ivory Coast demonstrate
that political reforms may be troubled in regions with deep
social divisions.
3. The End of the Euro
A breakup of the European Union could affect productivity
as well as the currency markets. However, this is relatively
unlikely due to the absence of any kind of exit mechanism
from the Eurozone. More likely, the European Union will
move towards closer fiscal coordination, collective debt
management and a more powerful European Central Bank.
4. Conflict in Asia
China’s increasing regional dominance may bring it into
conflict with its neighbours, such as Russia, Japan or
South Korea, particularly if it continues to enhance and
demonstrate its military capabilities in the region. There
will be plenty of other potential flashpoints in the region,
such as responses to any territorial fragmentation in China
and Russia or tensions over water and other resources.
Conflict could bring an abrupt end to the spiral of
growth in Asia.
5. Mass Migration
Migratory pressures are likely to increase due to greater
global wealth inequities and climate change. In a worst-case
scenario, immigration to Europe could trigger a nationalist
or populist backlash. Unmanageable migration flows
within the southern regions could destabilise the more
successful developing countries.
The Future of the Middle Class
Poverty is still widespread, with 27% of the world’s
population living on less than US$ 1.25 per day as of 2005.
However, there are about 550 million fewer poor people
today than in 1981. China has been very successful in
raising people out of poverty. In India, a nascent middle
class is also emerging. Even in Africa, the middle class is
growing in urban centres. The middle class drives
prosperity with its aspirations for further upward mobility.
Freed from the necessity to worry constantly about survival,
the middle class spends its resources on education and
investment. Middle class people try to emulate the lifestyles
of their counterparts in the developed world, as seen
through new global telecommunications technologies.
1 5people would move
to another country
permanently given
the opportunity

27. 21
The most important policy issue for the middle class is jobs.
Unemployment rates persist at 20-50% in the developing
world. Yet the Arab Spring in North Africa and the Middle
East demonstrates the importance of job opportunities for
educated young people.
A growing middle class will demand more food, consumer
goods and services. Fortunately, there is still room for
productivity increases in agriculture. In South American
countries such as Brazil, agricultural productivity has
increased 5.8% over the past eight years. In addition, there
are substantial amounts of unused arable land in Africa.
The governments of agricultural countries must provide a
positive environment for reform – including access to
capital, access to yield-enhancing technologies, training
opportunities, open markets, and storage and
transportation infrastructure.
It is also possible to achieve a growing supply of consumer
goods and services. Global supplies of metals and minerals
are still adequate. While dislocations from the 2008-09
economic crisis may linger for several years, investment
should recover in the medium term, as the potential for
Africa and other emerging markets remains strong.
However, a growing middle class will put pressure on
natural resources. Water shortages are already a concern in
some regions and desertification is a real possibility.
Conflicts over water both within countries and
internationally are a threat to future stability. Energy
shortages are also possible, especially if planned new
investments in nuclear power are delayed due to the
Fukushima plant accident in Japan. A partial solution to
this problem would be a slowdown in population growth.
Although population growth rates have been declining for
the past 50 years, the global population is still on track to
reach about 8.3 billion 2030. The key to limiting this
growth is empowering women in the developing world.
Investments in family planning are a start. But fundamental
shifts in social and religious attitudes are also needed to
enable women to become more educated and self-reliant.
The environmental impact of growth can also be mitigated
by private-sector innovation. Low-carbon goods and
services, more energy-efficient technologies and less
polluting technologies will be needed. Governments should
avoid heavy-handed regulation or efforts to change
consumer spending patterns. But governments can help to
spur innovation and support research and development.
Empowering women
is the key to stemming
population growth

29. 23
The Future of
Global Needs
“The future belongs to
those who prepare for
it today.”
Malcolm X
Human Rights Activist

30. 24
The Future of
Global Needs
World Population
Any answer to this question – and, indeed, to each of its
constituent parts – entails complex and daunting
interactions between demographic, political, economic,
technological and environmental forces and constraints.
Taking poverty as the starting point, the World Bank’s
latest global estimate (for 2005) placed 1.4 billion people
below its international poverty line of US$ 1.25 a day, a
reduction of 450 million since 1990. However, the
reduction in China alone was 475 million, implying that
the number of people in poverty elsewhere in the world had
risen – for example, by 21 million in India and 91 million
in Africa. While the reduction in China is clearly very
welcome, it offers little comfort for the wider global
challenge, since the specific political, cultural and social
conditions that allowed China to reduce absolute poverty
are not likely to be readily replicable in many other
countries.
Absolute and Relative Poverty
Moreover, lifting people out of the most extreme forms of
poverty is only the beginning of the challenge. First, if the
poverty line is raised to US$ 2 a day, the number affected
rises to 2.6 billion – virtually unchanged since 1981. At
US$ 2.50 per day – scarcely a comfortable standard of
living – more than half the global population is still in
poverty. All these people lack access to some or all of
adequate food, clean water, basic sanitation, adequate
shelter, reliable energy supplies, essential health services and
basic education.
Second, being lifted out of absolute poverty still leaves most
people in relative poverty, usually with powerful aspirations
for further upward movement. Freed from the necessity to
spend virtually every waking minute ensuring their
survival, people naturally start to aspire to more. A growing
phenomenon of the past two decades in the developing
world has been the emergence of a middle class, a rapidly
expanding cohort of mostly young, increasingly educated
and upwardly mobile citizens determined to emulate the
lifestyle of their counterparts in the developed world. This
aspiration has been strongly fed and validated by the digital
and wireless revolutions in telecommunications. The
growth of the middle classes in China is widely recognised.
In Africa alone, the middle class is already projected to
encompass 120 million households by 2014, most of them
living in rapidly expanding towns and cities.
The Emergence of the Middle Classes in
Developing Countries
These families will expect their consumption patterns to
develop accordingly, with consequential exponential growth
in demand for utilities and for consumer goods and services
of all kinds, including those derived from depletable
15x
increase in consumption
by China and India’s
middle classes
by 2030
Our ability to meet global needs over the next two decades depends on
whether the world can produce enough food and other goods to end
endemic poverty, without disadvantaging those accustomed to a higher
standard of living, or degrading the environment and supply of resources a
point that makes continued prosperity unsustainable.

31. 25
resources and those with the most serious adverse impacts
on the environment. Moreover, they will want jobs in
circumstances where the global growth of employment
opportunities is lagging seriously behind the growth in the
working-age population. As the Arab Spring in North
Africa and the Middle East suggests, the implications of
this mismatch are also potentially explosive, with highly
uncertain political, economic and social consequences.
Indeed, across the world, it may well be in the shortage of
jobs – and not only in the many developing countries in
which unemployment rates typically range between 20-50%
– that one of the greatest threats to stability will lie.
Without reliable sources of income at levels sufficient to
satisfy their perceived needs, a potential discontinuity in the
next 20 years will see the replacement of the old problem of
the predominantly rural poor with the new problem of the
urban poor – highly vulnerable, visible, volatile and vocal.
Resources
Leaving aside for the moment the issues of environmental
pollution and putative climate change, the capacity to meet
this potential explosion of demand for goods and services
over the coming two decades need not be seriously in
question, at least in principle (although this may not be true
for much longer time-horizons). There is vast scope for
increased productivity in agriculture. For example, take
Vietnam, a country that had major food shortages as
recently as the 1980s. It is now the world’s second largest
rice exporter and has increased agricultural output by 4.2%
per year since 2006. Add to this the extent of unused arable
land in Africa and the generation of sufficient food supplies
would not be beyond reach.
More generally, there is also no serious reason to doubt the
potential global capacity to maintain a growing supply of
consumer goods and services. While some natural resources
such as fish stocks and forests are under pressure, there is
little current evidence that global supplies of essential
metals and minerals, including oil and natural gas, are in
imminent danger of exhaustion. Moreover, a succession of
recent reports has proclaimed the almost unlimited
investment potential in Africa and in the numerous other
emerging markets around the world. Admittedly, some of
the dislocations occasioned by the 2008-09 international
economic and financial crises still linger, and growth
impulses in many countries are still fragile. Even so, barring
a prolonged global downturn of Great Depression
dimensions, sufficient new investment, combined with
further advances in productive technologies, could be
forthcoming to ensure continuing growth in productive
capacity. Although some physical and economic
infrastructures may creak under the strain, implementation
of most of the multitude of planned and proposed
investment programmes around the world should suffice to
prevent severe or systemic breakdown.
Water
The two key exceptions to this relatively sanguine outlook
lie in potential insecurities in water and power supplies.
Water shortages are already becoming manifest in some
regions as demand escalates, and delays to planned new
investments in nuclear power are possible in a number of
countries in the wake of the recent damage to the
Fukushima plant in Japan. The very long lead times – and,
in the case of power, the absence of politically acceptable
alternatives on the required scale – could increase the
intractability of the problem.
Food Security
Furthermore, there may well be other practical reasons
inhibiting the postulated expansion of output. For example,
the necessary improvements in the general business and
investment climates in the developing world may not
materialise. In particular, food security will be undermined
if developing countries’ governments fail to provide a more
enabling framework for the crucial expansion of agricultural
output in the form of access to credit, availability of
yield-enhancing inputs, training opportunities, market
access and storage and transport facilities. The scenario
outlined above also presupposes that food production will
not be significantly disrupted by civil conflicts in major
producing regions and that international trade in foodstuffs
will not be subject to restrictive politically-motivated export
controls. Should food supplies fall short on account of these
or other contingencies, prices will rise sharply, living
standards will be squeezed and hopes of resolving large-
scale grinding poverty will be severely disappointed.

32. 26
Climate Change and the Environment
More fundamentally, of course, the issues of environment
and climate change cannot be left aside. It is at least
debatable whether economic growth on a scale required to
provide for the consumption demands of a still-growing
population can be achieved without inflicting severe,
irreparable, politically destabilising and, ultimately,
growth-inhibiting damage on the planet. The larger the
world’s population, and the faster global output grows, the
greater the danger of a downward spiral towards a tragedy
of the commons, in which the life-generating and life-
sustaining capacities, particularly of the atmosphere and of
the oceans, will be increasingly compromised.
Responding to Shifts
One obvious, albeit only partial, solution to the problem
would lie in a (further) slowdown in the rate of population
growth. Although the rate has been falling for almost 50
years now, on current trends the world’s population is still
projected to rise from almost 7 billion at present to around
8.3 billion in 2030, an increase of over 18%. This increase
could be reduced if many more women in developing
countries wereto be empowered to exercise greater control
over their lives.
While more financial investment in this objective would be
helpful, its attainment would require further fundamental
shifts in social and religious attitudes. Objectively, these
shifts are unlikely to be realised in the short or even the
medium term.
In practice, if the prediction of impending environmental
disaster is valid, escape seems likely to depend on securing a
significant reduction in the resource intensity of spending
and production. This would entail a three-pronged
approach embracing a major reshaping of consumption
patterns in the direction of low-carbon goods and services;
rendering existing production technologies more energy
efficient, less polluting and less resource-intensive; and –
probably most important – generating a panoply of new,
and as yet unimagined, green technologies. Environmental
optimists believe that these outcomes are achievable; others
are more sceptical.
The first two prongs will require hitherto unprecedented
degrees of governmental intervention and regulation, both
at the national and international levels. On past experience,
inducing voluntary changes in consumer spending away
from high-carbon and high-resource intensive goods is a
challenging policy option. Imposing such changes is likely
to meet with political opposition, which will probably rise
dramatically as the scale of intervention increases. Reducing
the carbon footprint by encouraging savings (and, hence,
lowering total consumption expenditure) offers a short-term
option, but not one that is consistent with the desire for
ever-increasing material well-being.
2 3
of the world’s 774 mn
illiterate adults
are women

33. 27
Argentina
Armenia
Australia
Austria
AzerbaijanBahrainBangladeshBelarusBelgiumBeninBosniaandHerzegovina
Bulgaria
Burundi
Cam
bodia
Cam
eroon
Canada
Chad
China
Comoros
Congo Kinshasa
Costa Rica
Croatia
Cyprus
Czech Republic
Denmark
Djibouti
Ecuador
Egypt
El Salvador
Estonia
Finland
France
Gabon
Georgia
GermanyGhana
GreeceGuatemalaGuineaHaitiHonduras
Hong Kong
Hungary
India
Indonesia
Iran
Iraq
Ireland
Italy
Japan
Jordan
Kazakhstan
Kenya
Kosovo
Kuwait
Kyrgyzstan
Laos
Latvia
Lebanon
Afghanistan
Albania
Algeria
Lithuania
Luxembourg
Macedonia
Madagascar
Malaysia
Malta
Mauritania
Mauritius
Mexico
Moldova
Mongolia
Montenegro
Mozambique
Nepal
N
etherlands
N
ew
Zealand
N
icaraguaN
igeria
Pakistan
PalestinianTerritoriesPanamaPhilippinesPolandPortugal
Qatar
Romania
Russia
Rwanda
Saudi Arabia
Senegal
Serbia
Sierra Leone
Singapore
Slovakia
O
man
Somaliland Region
South Africa
South Korea
Spain
Sri Lanka
Sudan
Sweden
Syria
Taiwan
Tajikistan
Tanzania
ThailandTogoTunisiaTurkey
Slovenia
TurkmenistanUgandaUkraine
UnitedArabEmirates
UnitedKingdomUnitedStates
Uzbekistan
Vietnam
Yemen
Zambia
Zimbabwe
4080100 60 20
Source: Gallup World Poll (2011)
Percentage of population that has been unable to afford food in the past 12 months
Going Hungry

34. 28
Channelling innovation towards improving the energy and
resource efficiency of agricultural and industrial production
technologies would make a useful contribution to a more
environmentally friendly production structure. However,
these innovations must also be affordable to adopt, or they
will have profound implications for competitiveness and, if
compensated by subsidies, for fiscal sustainability.
Achieving these improvements at a national level is
challenging enough. International declarations by the G20
and other organisations and institutions of commitment to
more sustainable and green economic growth are obviously
symbolically important first steps. However, in the absence
of any mechanism for translating them into binding
obligations, they are of limited practical relevance.
The third prong offers potentially the most significant hope
for salvation, but it demands an unwavering political and
financial commitment to a creative and facilitative research
and development strategy. Unfortunately, neither the
timing nor the content of the output of such a strategy is
amenable to policy influence, with the result that there is
no guarantee that it will deliver against expectations.
All this still abstracts from the possibility of climate change,
which threatens dire humanitarian consequences across
large swathes of the planet. Even small changes in sea levels
would pose some risk to settlements in low-lying coastal
locations all around the world, and the phenomenon of
creeping desertification in some regions of the world seems
indisputable. Established agricultural practices and patterns
could yet be subject to profound and disruptive changes,
and destructive inter-communal, or even international,
conflicts over land and water supplies are not inconceivable.
At the minimum, the possibility of climate change seriously
muddies the already-troubled waters faced by all policy-
makers confronted with the challenge of meeting and
managing the global needs of the future.
The needs and challenges
over the next 20 years
are as great as the
opportunities

36. 30
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38. 32
With thanks to
Oxford Analytica
David Emanuel Andersson, PhD
Associate Professor of Public Affairs Management at National Sun Yat-sen University in Kaohsiung, Taiwan
Jesmond Blumenfeld
Honorary Associate Senior Lecturer in Economics and Finance at Brunel University, London
Elizabeth Currid-Halket, PhD
Assistant Professor at University of Southern California’s School of Policy, Planning, and Development
Oliver Falck, PhD
Senior Researcher at the Ifo Institute for Economic Research in Munich, affiliate of the CESifo research
network and external fellow of the Entrepreneurship, Public Policy and Growth Group of the Max Planck
Institute of Economics
Professor Edmund Valpy FitzGerald, PhD
University Reader in International Economics and Finance and Director of the Finance and Trade Policy
Research Centre at Queen Elizabeth House, Professorial Fellow of St Antony’s College
Stephan Heblich, PhD
Lecturer in Economics at the University of Stirling, UK, and former Senior Research Fellow
in the Entrepreneurship, Growth, and Public Policy Group at the Max Planck Institute of Economics
Frederic Sautet, PhD
Affiliated to the Mercatus Center at George Mason University and Visiting Adjunct Professor of Economics
at George Mason University
Kevin Stolarick, PhD
Associate Director and Research Associate at the Martin Prosperity Institute, Rotman School of
Management, University of Toronto
Acknowledgments