Tough Times Predicted

The International Monetary Fund's Board of Governors

The National Intelligence Council predicts a significant shift in the US risk profile between now and 2025. According to a report released last week the next two decades will feature intense international competition for markets, energy, and even water. This competition will increase friction between cultures and regions. Managing the competition will be complicated by dwindling US dominance and the weakness of international institutions.

Some key findings:

• A global multipolar system is emerging with the rise of China, India, and others. The relative power of nonstate actors—businesses, tribes, religious organizations, and even criminal networks—also will increase.


• The unprecedented shift in relative wealth and economic power roughly from West to East now under way will continue.


• Continued economic growth—coupled with 1.2 billion more people by 2025—will put pressure on energy, food, and water resources.


• Opportunities for mass-casualty terrorist attacks using chemical, biological, or less likely, nuclear weapons will increase as technology diffuses and nuclear power (and possibly weapons) programs expand.

The NIC report expects the United States to remain the single most powerful nation, but the relative power of the United States will decline as the affluence and influence of others increase.

The report joins many others in noting the current international framework - centered around the United Nations, World Bank, and International Monetary Fund - is incapable of responding effectively to current, much less emerging, challenges. This has been a topic of discussion for many years. The current economic crisis is pushing the process past talk to action.

At its November 15 Washington Summit the Group of Twenty outlined surprisingly detailed actions, including several to be implemented by March 31, 2009. These actions advance a new consensus view of much greater international cooperation in economic and financial regulation:

We call upon our national and regional regulators to formulate their regulations and other measures in a consistent manner. Regulators should enhance their coordination and cooperation across all segments of financial markets, including with respect to cross-border capital flows. Regulators and other relevant authorities as a matter of priority should strengthen cooperation on crisis prevention, management, and resolution.

We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation. The Financial Stability Forum (FSF) must expand urgently to a broader membership of emerging economies, and other major standard setting bodies should promptly review their membership. The IMF, in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response.

In remarks last April at the John F. Kennedy Library Gordon Brown, the British Prime Minister, anticipated many of these international financial reforms and pressed for similar steps across a much broader agenda:

So a new World Bank; a new International Monetary Fund; a reformed and renewed United Nations mandated and resourced that is greater than the sum of its parts; strong regional organisations from the European Union to the African Union able to bring to a troubled world the humanitarian aid, peacekeeping and the support for stability and reconstruction that has been absent for too long — all built around a new global society founded on revitalised international rules and institutions, and grounded in the great values we share in common.

In his remarks Prime Minister Brown wondered if the will to reform could be generated short of global calamity. In the unraveling of global prosperity since his speech a motivating calamity may have been provided... for better or worse.

The full NIC report is available by selecting Global Trends 2025: A Transformed World. It is a large pdf exceeding 33 megabytes.

NOTE TO READERS: Over the next several weeks new professional obligations may delay or interrupt regular publication of Monday (P)review.