The world is not just more complex than ever before, it is also changing ever faster (1-2)

Klaus Schwab , Founder and Executive Chairman, World Economic Forum

Globalization 4.0

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The global system we are part of seems to be spinning out of control. Headlines around the world tell us something is amiss in many societies. I believe many of the developments we see today in individual countries and societies are part of an interconnected network of cause and effect. The entire global system is under stress. We must ensure it rebalances.
I believe this is possible, and I will outline below how I think this rebalancing can be achieved. But first let us consider the extent of the current global imbalances. There are four reasons why the system has spun as out of control as it has.
1. The unprecedented complexity of our global system
In a world of 7.7 billion people, it is no surprise that our global system is more complex than at any other time in history. In 1945, when the building blocks of the current global system were constructed, the world population was less than a third of what it is today. Similarly regarding the global economy, after World War II exports comprised a mere 5% of global GDP. Today, that percentage is roughly five times higher, even as global GDP has increased multifold as well.
2. The accelerating speed of change caused by the Fourth Industrial Revolution
The world is not just more complex, it is also changing ever faster. The Fourth Industrial Revolution has already introduced more new technologies than any of its predecessors, including artificial intelligence, the Internet of Things, autonomous vehicles and gene editing, among others. Moreover, the Fourth Industrial Revolution is powered by increasingly faster chips, and by an exponential rise in their computing power. All but a handful of organizations in Silicon Valley, Shenzhen and other tech hubs are falling behind in their ability to cope with this change.
3. An outdated steering mechanism for global governance
Confronted with this complex, fast-changing world, the steering mechanism for global governance created in the mid-20th century is quickly becoming outdated. The United Nations was created at a time when the People’s Republic of China – soon the world’s leading economy and already a major political power – did not yet exist. The Washington Consensus on how to achieve economic development is no longer valid in a world of automation and 3D printing. And to this day, no international organization has an actual estimate of the size of our digital economy.
4. Popular uprisings in many countries, driven by a broad-based popular urge to take back control of society
Seeing that even sovereign governments are caught off guard by the pace of technological change and are unable to cope with it, people around the world are revolting. Some direct their anger towards supranational organizations such as the European Union, others direct it towards foreigners and foreign nations, and still others revolt against other members of their own society. But many are also revolting against the political or economic system for either failing to produce widely held gains or for failing to address climate change. Almost all share one feeling: they want to take back control of a system that feels out of reach.
This is the overall state of the world in which we live today. But our global system is also a complex set of interdependent subsystems, and each of these subsystems is now out of balance too. Together, they are creating an explosive mix of threats to our future.
There are five subsystems that make up the global system: our ecological system; our economic system; our technological system; our social system; and our political system.
The ecological subsystem
This is arguably the most important of the five. Without a balanced global ecological system, none of the others can function at all. On global warming, the United Nations Intergovernmental Panel on Climate Change issued a dire warning in October 2018 that we have only 12 years left to prevent a global climate change catastrophe. Indeed, unless we drastically change course now, global temperatures will almost certainly rise by more than two degrees Celsius, and the consequences will be nearly impossible to reverse.

At the same time, we have come to realize that global warming itself is only one aspect of the Anthropocene. Our oceans, for example, are suffering in other ways too. At Davos in 2016, we were warned that there may be more plastic than fish in the oceans by 2050, if we continue to produce as much single-use plastic.
This year, primatologist Jane Goodall, documentary filmmaker Sir David Attenborough and World Wildlife Fund Executive Director Marco Lambertini warned of other irreparable harms that we are causing to our planet. This has given rise to the conviction that we need a New Deal for Nature as a whole.
The economic subsystem
The International Monetary Fund in January once again lowered its global economic growth forecast, to 3.5% in 2019 and only slightly higher in 2020. IMF Director Christine Lagarde warned that “the world economy is growing more slowly” just as “risks are rising”. This slowdown comes at a time when corporate debt levels in the United States and elsewhere are almost double what they were in 2007. Local government debt in China has risen dramatically as well, and Europe still hasn’t entirely recovered from its previous crisis. Clearly, we have little room to manoeuvre when the next recession hits.
Trade issues are generating additional economic concerns. For decades, trade helped fuel the greatest wealth increase the world has ever seen. But since a few years ago, trade has been tapering off as a percentage of global GDP. This is set to get worse as leading countries are turning to trade war as an economic policy tool. This is a dangerous gamble. In a complex global economic system, it is almost certain that trade restrictions will have unintended and negative consequences.
The technological subsystem
Connected technology is playing a more important role than ever before in our global system, yet it presents risks that are also greater than ever before. Our Global Risks Report 2019 indicated that alongside climate change and extreme weather events, one of the greatest causes for concern is large-scale cyberattacks and the breakdown of critical IT infrastructure and networks.
This looming cyber threat comes just as breakthrough technologies are affecting us to an ever-greater extent, and in ways with which we have not yet learned to cope. We have only seen the tip of the iceberg when it comes to artificial intelligence, for example. It will lead to the automation of many more tasks. It will also be able to predict many more things than it already can, owing to more abundant data collection. The next great power struggle for supremacy has already begun, and it is focused on AI.
For the use of data in AI to have positive outcomes, we must ensure that the data used is both diverse and properly obtained. On these fronts, enormous challenges are increasingly raising concerns around bias and privacy. Nations possessing large and diverse data sets, or those that create cross-border data flow protocols to create them, will be well positioned to take full advantage of machine learning. Nations with smaller populations and those with large populations but without the digital infrastructure to collect data via the Internet of Things risk falling even further behind in this race.
The social subsystem
Partly because of the technological progress of the Fourth Industrial Revolution, which puts great power in the hands of big tech companies, we once again live in a “winner-takes-all” society and economy? The power of these companies stands in deep contrast to the situation of a new “precariat” arising all over the world.
The plight of the “yellow vests” in France, of the “forgotten people” in America’s Midwest and Appalachia, and of the nationalist voters in Brazil, the Philippines and India may seem distinct at first glance. But the fact that they have all come to the fore in the space of a few years is no coincidence. Technology has left many people behind and has increased disparity, while opening a window to the world of its beneficiaries.

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