Aplp g15 Starter Pack - Final - Compressed

ASIA PACIFIC LEADERSHIP PROGRAM (APLP) G15, 2015-2016
STARTER PACK
Arrivals
Exploring the Neighborhood
(Ho Chi Minh City, Source: APLP GIST)
Asia Pacific Leadership Program

East-West Center
John A. Burns Hall
1601 East-West Road
Honolulu, HI 96848-1601
USA
The APLP Starter Pack is a collection of shorter, non-academic

articles to get things moving and to warm up for the more
substantive resources to come. Think of these readings as being a
place you will visit. Imagine you are just arriving, so this collection is
like dropping off your bags and taking a quick walk around the
neighborhood: starting to gain a sense of the place and what you
might want to explore later on.
You may see some things that are familiar and some that are very
different or just not familiar yet. There is plenty more to investigate
later. Dont worry if some of this content landscape is new. One of
our favorite APLP sayings is If you arent willing to get a little lost,
you will never discover anything.
There is no need to study these articles just read through them as
you can and find linkages and questions. Future readings will have
more focus and we will cover many of these and other topic areas
when you are in Honolulu.
These introductory materials focus on the APLPs three questions:
1. Whats going on? (Emerging regional issues)
2. What leadership/action is needed? (What needs to be done and
how?)
3. Where do you fit? (Personal roles and goals)
Most materials in this Starter Pack emphasize the first question:
Whats Going On? and are largely regional in scope. There are also
some articles exploring different angles of leading and learning.
You can explore this content by reading through the package from
start to finish, or you can skim the topics and be selective about what
you want to read.
The guide below gives a little information on each of the pieces and
can help you plan your reading itinerary. Explore!
APLP G1 Starter Pack: Page
APLP G15 Starter Pack; Explorers Guide

1. Shifting Global Order? (Pages 6-46)
This section explores possible changes in global leadership
and the (re) Rise of Asia. There are many implications of the
shifting center of gravity in global affairs, as well as risks that
could alter the trajectory that so many see.
Selected Articles:
Asia 2050: Realizing the Asian Century (6-15)
The New Asian Hemisphere (16-19)
The Decline of the West: Why America Must Prepare for the
End of Dominance (20-23)
Asia as Global Leader Not So Fast (24-26)
A Handful of Asias Conundrums the Worlds Boardrooms
Should Chew Over (27-31)
Americas Real Manufacturing Advantage (32-43)
War Drums in Asia: Back to the European Future? (44-46)
2. Global Risks (pages 47-103)
The Second Section looks at broad global risks and changes
which the Asia-Pacific will reflect and affect. It begins with the
WEF Global Risk Report in which business leaders identify the
key risks they see going forward. Subsequent articles focus on
large-scale global trends and risks that should be considered in
most any discussion about the future, including climate change,
demography, and political stalemates.
Selected Articles:
Excerpt from The Global Risks 2015 Report (47-64 )
The End of Capitalism Has Begun (65-77)
Back to the Future: World Politics Edition (78-80)
The Shadow of the Caliphate (81-84)
Sinking States: Climate Change and the Pacific (85-92)
Great Recession was good for the environment (93)
Demography, Growth, and Inequality: Age Invaders (94-99)
Democracy is in Retreat and Theres a Surprising Culprit
(100-103)
3. Regional Overviews and Select National News (pages 104130)

The third section contains a mix of regional overviews and a
few recent articles from select countries.
Selected Articles:
Excerpt from The Human Capital Report 2015 (104-118)
The Education Myth (119)
Despite Being a Woman (120)
Southeast Asias Democracy Downer (121-122)
News of Taliban leader's death could throw wrench in
Afghan peace process (123-127)
The Trans-Pacific Partnership Trade Deal Explained (128130)
4. On Learning and Leadership (pages 131-168)
This final section incudes a few articles that the APLP staff
team has been reading, and we wanted to share them with you.
Selected Articles:
Are Marshall Goldsmiths Triggers the Only Way to Change?
(131-132)
Simonton Science of Genius (133-139)
Seek and you will find: Why curiosity is key to personal and
national success (140-142)
Study: Women are Better Leaders (143-148)
It Pays to be Nice (149-152)
The Genius of Want to Grab Coffee? (153-156)
How to Be Emotionally Intelligent (157)
Leadership is a contact sport (158-168)
NOTE: The provision of a collection like this brief introductory content
tour can involve dangers. Really what we have done here is to piece
together a set of shorter articles that are at the general level of
language we will use and which could be connected to cut an arc
across a range of our topics. The collection is meant to give a sense
of the scope ahead as you consider themes you wish to explore
more. We want you to come into the APLP to explore not as a

student but the learning leader you are. We believe that much of the
real learning will come in an experiential way as we develop
conversations and projects together. After all, when traveling it is
usually the experiences and the people one remembers as much as
the places.
Explore, enjoy, and see you soon!
ASIA
2050
Realizing
the Asian
Century
E x e c u tiv e
Su m m ary
Asia 2050:
Realizing the Asian Century
Executive Summary
Asia is in the middle of a historic transformation. If it continues to follow its recent trajectory, by 2050 its per capita income could rise sixfold in purchasing power parity (PPP) terms to
reach Europes levels today. It would make some 3billion additional Asians affluent by current
standards. By nearly doubling its share of global gross domestic product (GDP) to 52percent by
2050, Asia would regain the dominant economic position it held some 300 years ago, before the
industrial revolution (Figure 1).
Figure
1
Asias share of global GDP, 17002050
% of global GDP
70%
60%
50%
40%
30%
20%
10%
0%
1700
1870
1950
1980
2010
2030
2050
Source: Maddison (17001950) (2007); Centennial Group International estimates (19512050) (2011). Data for 17501790 are PPP and data for 19912050 are in
market prices.
But Asias rise is by no means preordained. Although this outcome, premised on Asias major
economies sustaining their present growth momentum, is promising, it does not mean that the
path ahead is easy or requires just doing more of the same. Indeed, success will require a different pattern of growth and resolution of a broad array of politically difficult issues over a long
period.
ASIA 2050
To achieve this promising outcome Asias leaders will have to manage multiple risks and
challenges, particularly:
t
Increasing inequality within countries, which could undermine social cohesion and
stability.
t
For some countries, the risk of getting caught in the Middle Income Trap (Box 1), for a
host of domestic economic, social, and political reasons.
t
Intense competition for finite natural resources, as newly affluent Asians aspire to higher
standards of living.
t
Rising income disparities across countries, which could destabilize the region.
t
Global warming and climate change, which could threaten agricultural production,
coastal populations, and numerous major urban areas.
t
Poor governance and weak institutional capacity, faced by almost all countries.
These challenges are not mutually exclusive. They can affect one another and exacerbate
existing tensions and conflicts, or even create new pressures that could threaten Asias growth,
stability, and security.
This book postulates two scenarios of Asias future growth trajectory: the Asian Century and
the Middle Income Trap. These scenarios are only two possibilities of how Asias future may
unfold. They have a dual objective: to draw attention to the longer-term implications of the broad
trends and to ask what-if questions.
Box
1
The Middle Income Trap: Unable to compete

The Middle Income Trap is illustrated in the figure, which plots per capita incomes of three
middle-income countries over 19752005. In a steadily growing economy per capita GDP rises
continuouslythe experience of the Republic
18000
do not follow this pattern. Instead, they have

bursts of growth followed by periods of
stagnation or even decline, or are stuck at low
growth rates.
They are caught in the Middle Income
Trapunable to compete with low-income,
low-wage
economies
in
manufactured
exports and with advanced economies in

high-skill innovations. Put another way, such
countriescannot make a timely transition from
GDP per capita ($)
of Korea. But many middle-income countries
Republic of Korea
15000
Avoiding the middle income trap
12000
9000
6000
Brazil
3000
0
1975
South Africa
Caught in the middle income trap
1980
1985
1990
1995
2000
resource-driven growth, with low-cost labor and capital, to productivity-driven growth.
2005
EXECUTIVE SUMMARY
Makings of the Asian Century

The Asian Century scenario extends Asias past success into the future, putting it on the
cusp of a historic transformation. It assumes that Asian economies can maintain their momentum
for another 40 years and adapt to the shifting global economic and technological environment
by continually recreating their comparative advantages. In this scenario, Asias GDP (at market
exchange rates) increases from $17trillion in 2010 to $174trillion in 2050, or half of global GDP,
similar to its share of the global population. Seven economies would lead Asias march to prosperity (Box 2). With a per capita GDP of $40,800 (PPP), Asia in 2050 would have incomes similar to
Europes today. It would have no poor countries (those with average per capita GDP of less than
$1,000), compared with eight today. The results of falling into the Middle Income Trap are outlined
further below.
Box
2
The engines of the Asian Century are the Asia-7 economies

Asias march to prosperity will be led by seven economies, two of them already developed
and six fast growing middle income converging economies: PRC, India, Indonesia, Japan,
Republic of Korea, Thailand and Malaysia.
These seven economies had a combined total population of 3.1 billion (78 percent of total
Asia) and GDP of $15.1 trillion (87 percent of Asia) in 2010. Under the Asian Century scenario,
their share of population by 2050 would be 75 percent and their GDP would be 90 percent of
Asia. They alone will account for 45 percent of global GDP. Their average per capita income
would be $45,800 (in PPP) compared with $37,300 for the world as a whole.
Between 2010 and 2050, these seven economies would account for as much as 91 percent
of total GDP growth in Asia and of almost 53 percent of global GDP growth. They will thus be
the engines of not only Asias economy but also the global economy.
Actions at three levels

In its march toward the Asian Century, the region must tackle daunting policy, institutional,
and governance challenges. Given widely varying country conditions, the precise actions and
their timing must vary. Still, it is possible to draw the contours of the major changes necessary for
the region along three dimensions: national strategic and policy action; collective regional action
to bridge the national and global agendas; and Asias interactions with the global community
(Figure 2). The ability of countries to realize the promise of the Asian Century will be determined
by their success in these three areas.
National action agenda
Seven overarching intergenerational issues require national action throughout the region.
ASIA 2050
Figure
2
Strategic framework
Regional
Cooperation
National
Action
Global
Agenda
Growth and inclusion. Growth and inclusion need not be mutually exclusive; indeed they
can be mutually reinforcing. To sustain growth over the long-term, almost all Asian countries must
give much higher priority to inclusion and reducing inequalitiesrich/poor, rural/urban, literate/
illiterate, and along gender and ethnic lines. Inclusive growth must not only address poverty, but
also deal with aspects of equity, equality of access and opportunity, generation of employment
and provision of protection to vulnerable in the various facets of daily living.
Entrepreneurship, innovation, and technological development. The continuing rapid
growth of Asian economies over the next 40 years will require a harnessing of the full potential
of technology, innovation and, critically, entrepreneurship. More Asian countries need to emulate
Japan, Republic of Korea, and Singapore, and come closer to (preferably achieve) global best
practice. The fast-growing converging economies, particularly PRC and India, must move from
catching up to frontier entrepreneurship and innovation to create breakthroughs in science and
technology. A particularly fruitful area will be inclusive innovation to meet the needs of those at
the bottom of the pyramid. A core requirement is a high-quality education system at all levels that
promotes creativity.
Massive urbanization. By 2050, Asia will be transformed, as its urban population will nearly
double from 1.6billion to 3billion. Asias cities, which already account for more than 80percent of
economic output, will be the centers of higher education, innovation, and technological development. The quality and efficiency of urban areas would determine Asias long-term competitiveness and its social and political stability. Asia must take advantage of being early on its urbanization growth curve to promote compact, energy-efficient, and safe cities.
Financial transformation. As its share of global GDP rises to 50 percent or more, Asia
EXECUTIVE SUMMARY
should also have about the same share of the worlds financial assets, banks, and equity and
bond markets, etc. In transforming its financial systems, Asias leaders must remain mindful of the
lessons of the 19971998 Asian financial crisis and the Great Recession of 20072009. Asia will
need to formulate its own approach to finance, avoiding both overreliance on market self-regulation and excessive central government control of bank-dominated systems. It will also need to
become more open to institutional innovation, also to support inclusive finance.
Radical reduction in the intensity of energy and natural resource use. The anticipated
affluence of some 3billion additional Asians will put tremendous pressure on the earths finite
natural resources. Asia will be the most affected by, and responsible for, excessive reliance on
energy imports. Out of self-interest, it will need to take the lead in radical energy efficiency and
diversification programs by switching from fossil fuels to renewable energy. Asias future competitiveness will depend heavily on how efficiently it uses its natural resources and progresses to a
low-carbon future.
Climate change. Climate change could affect every human being on the planet. With over
half the worlds population, Asia has more at stake than any other region. This has far-reaching
implications for the way Asia needs to move forward: dramatically increasing energy efficiency
and reducing reliance on fossil fuels; adopting a new approach to urbanization by building more
compact and eco-friendly cities; relying much more on mass transit for urban dwellers and
railways for long-distance transport; and changing lifestyles to alleviate pressures on finite natural
resources.
Governance and institutions. The recent deterioration in the quality and credibility of national
political and economic institutions (illustrated by rising corruption) is likely to become a binding
constraint to growth in Asia. High-quality institutions will help fast-growing converging economies
avoid the Middle Income Trap, and slow- or modest-growth aspiring economies to establish the
basic institutions for moving toward sustained economic growth. Throughout Asia, an expanding
middle class will exert new demands for greater voice and participation, greater accountability
for results, and greater personal space. Although daunting, eradicating corruption is critical for all
countries to maintain social and political stability and retain legitimacy. These common challenges
all require effective governance, both at central and local levels. Asia must retool its institutions
with an emphasis on transparency, accountability, predictability, and enforceability.
These intergenerational issues apply to most Asian economies, but their relative priority will
vary over time, depending on the group a country belongs to at a given time.
High-income developed economies.1 This group of seven economiesespecially Japan,
Republic of Korea, and Singaporeshould lead the rest of Asia in two areas: making the scientific
and technological breakthroughs that are crucial to Asia; and moving beyond high economic
growth toward promoting broader social well-being.
1 Brunei Darussalam; Hong Kong, China; Japan; Republic of Korea; Macao, China; Singapore; and Taipei,China;
ASIA 2050
Fast-growing converging economies.2 Avoiding the Middle Income Trap should be the main
objective of this groups eleven countries. They shouldin addition to further reducing inequalities
and consolidating the fundamentals of developmenttrain a world-class, skilled labor force and
build credible and predictable institutions that protect property rights (physical and intellectual)
and allow fair dispute-resolution. Constantly improving the business climate will be key.
Slow- or modest-growth aspiring economies.3 The highest priority of this group of thirty
one countries must be to raise economic growth toward that in their more successful Asian
neighbors. They should focus on the fundamentals of development: faster and more inclusive
growth by reducing inequalities through better education for all; infrastructure development; and
major improvements in institutions, the business environment, and openness to external markets.
Regional cooperation
Regional cooperation (including integration) is critical for Asias march toward prosperity. It will become much more important for a number of reasons: it will cement the regions
hard-won economic gains in the face of vulnerabilities to global shocks; it could be an important
bridge between individual Asian countries and the rest of the world; it can help those Asian
economies that are rebalancing growth toward internal (domestic and regional) demand to fully
open their markets to neighbors in the region; with development assistance, it can help reduce
cross-country disparities in income and opportunities (which, if left unchecked, could generate
instability or conflict); it can be a stepping stone for poorer countries to move up the value chain
and maximize their growth potential; in technological development, energy security, and disaster
preparedness, it can help respond better to global challenges, and yield significant synergies
and positive spillovers; and, through managing the regional commons, it can contribute to Asias
long-term stability and peace.
Given its diversity, Asia will need to develop its own model that builds on the positive experience of East Asia: a market-driven and pragmatic approach supported by an evolving institutional
framework that facilitates free regional trade and investment flows throughout Asia, as well as
some labor mobility. An Asian economic community must be based on two general principles
openness and transparency. Openness will be a continuation of Asias long-standing policy of
open regionalism, a key factor in East Asias past success.
Crucial for increased regional cooperation is strong political leadership. Building Asias regionalism will require collective leadership that recognizes a balance of power among participants.
2 These 11 countries (Armenia; Azerbaijan; Cambodia; PRC; Georgia; India; Indonesia; Kazakhstan; Malaysia; Thailand; and Viet Nam) meet
the criteria of the Commission on Growth and Development for sustained long-term success and hence convergence with best practice.
3 Afghanistan; Bangladesh; Bhutan; Cook Islands; the Democratic Peoples Republic of Korea; Fiji Islands; Iran; Kiribati; the Kyrgyz Republic;
the Lao Peoples Democratic Republic (Lao PDR); Maldives; Marshall Islands; Federated States of Micronesia; Mongolia; Myanmar; Nauru;
Nepal; Pakistan; Palau; Papua New Guinea; the Philippines; Samoa; Solomon Islands; Sri Lanka; Tajikistan; Timor-Leste; Tonga; Turkmenistan;
Tuvalu; Uzbekistan; and Vanuatu.
EXECUTIVE SUMMARY
Asias major economic powers, like PRC, India, Indonesia, Japan, and Republic of Korea, will be
important in integrating Asia and shaping its role in the global economy.
Global agenda
Asias growth and larger footprint in the global economy will bring new challenges, responsibilities, and obligations. The region will need to take greater ownership of the global commons.
It will need to gradually transform itself from a passive onlooker in the debate on global rule
making and a reticent follower of the rules, to an active debater and constructive rule maker. As
an emerging global leader, Asia should act asand be seen asa responsible global citizen.
When formulating its domestic or regional policy agenda, Asia will need to consider the regional
and global implications. It will need to delicately manage its rapidly rising role as a major player in
global governance non-assertively and constructively.
As Asia becomes the center of the global economy, it will be in its own interest that the rest
of world also does well economically and politically. Peace and security throughout the world will
be essential for its long-term prosperity. The Asian Century should not be Asias alone but the
century of shared global prosperity.
Asias efforts to enhance regional cooperation must not be at the cost of its traditional
openness to the rest of the world. Asia must adhere, as mentioned, to its long-standing strategy
of open regionalism.
Need for enhanced resilience
Asias rise will almost certainly not be smooth. Economic history teaches us that there will
be many ups and downs along the way. For example, in the past 40 years, financial crises have
reoccurred roughly once every 10 years. It is most likely that between now and 2050, there will
be major crises: financial or economic (even social and political). How countries navigate through
them will decide Asias fortunes. Fortunately, with each successive crisis, Asia has demonstrated
a growing capacity to manage crises. The regions much enhanced resilience to external shocks
was demonstrated vividly during the Great Recession, as it became the first region to recover,
with a V-shaped recovery.
But the region must not become complacent. It must continue to reinforce its resilience by
following prudent macro-economic, fiscal and monetary policies and by making its financial
systems more robust. Overall, the adaptability, flexibility and capacity to respond to the changing
global economic landscape will carry a high premium.
Asian Century vs. Middle Income Trap
The agendas in this booknational, regional, and globalare wide-ranging and require
far-sighted leadership. The region has to face up to the daunting opportunity that lies before
APLP G1 Starter Pack: Page 1
ASIA 2050
10
it. How many countries will meet this challenge? The answer is unclear. Given this reality and
uncertainties about the future the book postulates two quantitative scenarios with very different
outcomes.
Most of the discussion is based on the optimistic Asian Century scenario. This scenario
assumes that the 11 economies with a demonstrated record of sustained convergence to best
global practice over the past 30 years or so continue this trend over the next 40 years and that a
number of modest-growth aspiring economies will become convergers by 2020. In this scenario,
Asia will take its place among the ranks of the affluent on par with those in Europe today; some
3billion additional Asians will become affluent by 2050. This is the desired or ideal scenario for
Asia as a whole.
The Middle Income Trap scenario assumes that these fast-growing converging economies
fall into that trap in the next 510 years, without any of the slow- or modest-growth aspiring
economies improving their record; in other words, Asia follows the pattern of Latin America over
the past 30 years. This is the pessimistic scenario and could be taken as a wake-up call to Asian
leaders.
There will be a huge difference in the outcomes of the two scenarios. The economic and
social costs of missing the Asian Century are staggering. If todays fast-growing converging
economies become mired in the Middle Income Trap, Asias GDP in 2050 would reach only
$65trillion, not $174trillion (at market exchange rates) (Figure 3). GDP per capita would be only
$20,600, not $40,800 (PPP). Such an outcome would deprive billions of Asians of a lifetime of
affluence and well-being.
Figure
3
Asian Century vs. Middle Income Trap

Asian Century Scenario
Middle East &
North Africa
3%
Rest of World
Sub Saharan
2%
Africa
2%
Europe
18%
Latin
America &
Caribbean
10%
Middle Income Trap Scenario
Middle East &

North Africa
5%
Rest of World
Sub Saharan
2%
Africa
4%
Asia
31%
Asia
52%
North
America
13%
Europe
28%
Latin America
& Caribbean
9%
Asia GDP: $174 trillion

Source: Centennial Group International projections, 2011. Figures use market exchange rates (MER).
North America
21%
Asia GDP: $65 trillion
EXECUTIVE SUMMARY
11
The possibility of a perfect storm cannot be ruled out in thinking about Asia through 2050.
A combination of bad macro policies, finance sector exuberance with lax supervision, conflict,
climate change, natural disasters, changing demography, and weak governance could jeopardize Asian growth. In this worst caseor doomsdayscenario, Asia could stumble into a financial
meltdown, major conflict, or regionwide chaos well before 2050. It is impossible to quantify this
scenario, but Asias leaders must be aware of the potential for such a catastrophe and avoid it at
all costs.
The intangibles
Four overriding intangibles will determine Asias long-term destiny. First is the ability of Asias
leaders to persevere during the inevitable ups and downs and to focus on the long term. The
regions ability to maintain the current momentum for another 40 years will require continual
adjustments in strategy and policies to respond to changing circumstances and shifting comparative advantages. This will place a tremendous premium on mature, far-sighted, and enlightened
leadership. Second is the willingness and ability of Asia to emulate the success of East Asia to
adopt a (so far) pragmatic rather than ideological approach to policy formulation and to keep
a laser-like focus on results. Third is Asias success in building much greater mutual trust and
confidence among its major economies, which is vital for regional cooperation. And fourth is the
commitment and ability of Asian leaders to modernize governance and retool institutions, while
enhancing transparency and accountability.
Many of the required actions have long gestation periods that extend over many decades.
Yet, their impact must be felt well before 2050 to allow Asia to continue on its path to prosperity.
Asias leaders must act with urgency if the promise of the Asian Century is to be realized.
Excerpt: 'The New Asian Hemisphere'

Kishore Mahbubani
http://www.npr.org/templates/story/story.php?storyId=90132165
The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for
those brought up as most of us have been, into every corner of our minds.
JOHN MAYNARD KEYNES, ENGLISH ECONOMIST (18831946), IN THE GENERAL
THEORY OF EMPLOYMENT, INTEREST AND MONEY
The rise of the West transformed the world. The rise of Asia will bring about an equally
significant transformation. This book describes why Asia is rising now, how it will alter the world,
and why the West, even though it should celebrate Asia's rise, will have great difficulties
adjusting to these changes. It will also suggest some prescriptions for managing the obvious
new challenges coming our way.
The rise of Asia will be good for the world. Hundreds of millions of people will be rescued from
the clutches of poverty. China's modernization has already reduced the number of Chinese
living in absolute poverty from six hundred million to two hundred million. India's growth is also
making an equally significant impact. Indeed, one key reason why the United Nations (UN) will
actually meet one of its Millennium Development Goals of reducing global poverty by half by
2015 will be the success of China and India in reducing poverty significantly. By the standards
of any Western moral philosopher, from the British utilitarian philosophers of the nineteenth
century to the moral imperatives of Immanuel Kant, it is clear that the rise of Asia has brought
more "goodness" into the world. In purely ethical terms, the West should welcome the
transformation of the Asian condition.
But the benefits of Asia's rise are more than ethical. The world as a whole will become more
peaceful and stable. In September 2005 Robert Zeollick, the new president of the World Bank,
called on China to become a "responsible stakeholder" in the international system. Since then,
China has responded positively to this call. Indeed, most Asians want to become responsible
stakeholders in the international system. Recent decades have demonstrated that Asians have
become among the greatest beneficiaries of the open multilateral order created by America and
the victors of World War II in 1945. Few Asian societies today want to destabilize a system that
has helped them.
The word "modernization" will be used frequently in this book and will be defined fully in chapter
1. But any Western reader should intuitively understand what this term means. It describes both
the physical and the ethical universe of Western societies. The really good news for the world is
that the modernization of Asia is beginning to spread to all corners of the continent. Half a
century ago, there appeared to be only two modern societies in Asia, at its eastern and western
extremities: Japan and Israel. Between them lay a sea of humanity that seemed indifferent to
modernization and growth. But Japan's example triggered a whole series of Asian success
stories. First Japan was emulated by the four economic tigers: South Korea, Taiwan, Hong
Kong, and Singapore. When China began to be aware that countries on its periphery were
doing better than it was, it decided to join them by launching its own "Four Modernizations"
program. For the past three decades, China has had the fastest growing economy in the world.
China's success has in turn also inspired the rise of India. Now, billions of Asians are marching
to modernity.
The even better news for the world is that this March to Modernity is poised to enter the Islamic
world of Western Asia too. It is only a matter of time before it spreads from India to Pakistan and
then to Iran. All of Asia may well be modernized in the twenty-first century. If this happens,
Israel will not be left as a lonely outpost of modernity in
Western Asia. It could eventually have equally modernized neighbors. This may seem like a wild
dream, but it is vital to understand that Asia's growth and success in the past few decades have
exceeded most Asians' wildest dreams. This book, written by a realist, is underpinned by
optimism about Asia's role in the global future. Generally Asians today do not have to be
convinced to be optimistic. This creates a new global paradox: up until recently the most
optimistic societies of the world have been Western societies, but they seem to be losing their
optimism, at a point in time when they should be celebrating the galloping modernization of the
world.
The term "the West" will be used frequently in this book. Often, when I refer to Western policies,
some will respond that I am speaking primarily of American policies. Given the enormity of U.S.
power, American policies naturally dominate. But there is also an implicit compact between
America and Europe as well as with the Anglo-Saxon states of Australia, Canada, and New
Zealand on global policies. One of the least understood (and surprisingly least studied)
phenomena is how the West often functions as a single entity on global issues. On fundamental
challenges Western nations work together. Witness, for example, how the West came together
on Afghanistan. Canadian and European soldiers are dying in defense of policies initiated by
America. This is powerful solidarity.
When many Western eyes peer into the twenty-first century, they see only dark images, not a
new dawn in the history of human civilization. This is a strange development. For the past few
centuries, the West has been by far the most open and resilient civilization, during which it has
largely carried the world on its shoulders. It was the West that triggered the Asian March to
Modernity, so it should be cheering this positive new direction of world history. Instead, leading
Western minds are filled with dread and foreboding. I hope to explain this reversal.
Evidently, Asia and the West have yet to reach a common understanding about the nature of
this new world. The need to develop one has never been greater. We are now entering one of
the most plastic moments of world history. The decisions we make today could determine the
course of the twenty-first century. Never before have we had as much potential as we have
today to create a better world for the 6.5 billion people who inhabit our planet. The explosion of
knowledge, especially in science and technology, has delivered this opportunity. It is also clear
that the mental maps of the leading minds of the world, especially in the West, are trapped in
the past, reluctant or unable to conceive of the possibility that they may have to change their
worldview. But unless they do, they will make strategic mistakes, perhaps on a disastrous scale.
The decision by the United States and the United Kingdom to invade Iraq in March 2003 was
one such mistake. It is possible to argue convincingly that the Americans and British intended
only to free the Iraqi people from a despotic ruler and to rid the world of a dangerous man,
Saddam Hussein. Neither Bush nor Blair had malevolent intentions, yet their mental approach
was trapped in a limited cultural context: the Western mindset. Many leading American minds
truly believed that invading American troops would be welcomed with rose petals thrown on the
streets by happy Iraqis. Yet the grain of history had been irrevocably changed in the second half
of the twentieth century: no country today welcomes foreign invaders. The notion that any
Islamic nation would welcome Western military boots on its soil is ridiculous. The invasion and
especially the occupation of Iraq will be remembered as a colossally botched operation. Even if
it had been well-executed, it was doomed to failure because while the British could successfully
invade and occupy Iraq in the early twentieth century (in 1921 to be exact), no Western army
could successfully repeat this in the early twenty-first century. In 1920, as secretary for war and
air, Winston Churchill had responsibility for quelling the rebellion of Kurds and Arabs in Britishoccupied Iraq, which he achieved by authorizing the use of poison gas. Churchill said, "I am
strongly in favor of using poisoned gas against uncivilized tribes." If Blair had tried the same
actions in 2003, he would have been crucified. The world has moved on from this era. Western
mindsets have not abandoned the old assumption that an army of Christian soldiers can invade,
occupy, and transform an Islamic society.
For most of the previous three centuries, the peoples of Asia, Africa, and Latin America were
objects of world history. The decisions that drove history were made in a few key Western
capitals, most often London, Paris, Berlin, and Washington, DC. The misnamed World War I
and World War II were carried out without consulting the majority of the world's populations.
They were co-opted into fundamentally European warsat least until Japanese aggression
appeared in China and the Pacific. Today, the 5.6 billion people who live outside the Western
universe will no longer accept decisions made on their behalf in Western capitals.
So, will the twenty-first century be seen as a moment of historical triumph for the West or a
moment of historical defeat? The answer cannot be given now. It will depend on how the West
reacts to the rise of Asia. The number of people in the world who are seeking the Western
dream of a comfortable middle-class existence has never been higher. For centuries, the
Chinese and Indians could not aspire to it. Now more and more believe that it is within their
reach. Their ideal is to achieve what America and Europe achieved. They want to replicate, not
dominate, the West.
The universalization of the Western dream should therefore represent a moment of triumph for
the West. Yet many Western leaders begin their speeches by remarking how "dangerous" the
world is becoming. President Bush said in August 2006, "The American people need to know
we live in a dangerous world." Other Western leaders have made similar statements. The
French minister of foreign affairs, Michel Barnier, stated in February 2005, "We have so many
challenges to take up at the same time, in this world which is dangerous, unstable and in
disarray." The Canadian ambassador to the United States, Michael Wilson, said, "In an age
where the world has become a smaller, more dangerous place, Canada is stepping up to the
plate, refocusing our efforts on the new threats facing our people." These statements reflect a
new Western zeitgeist: the belief that the world is becoming more dangerous.
One of the great strengths of Western civilization is its belief that societies progress best when
they do not become trapped in any ideology.This is how the West believed it achieved one of its
greatest triumphs: the Soviet Union imploded because it was trapped in a dead ideology.
Western societies, by contrast, were more rational and open to new ideas, never trapped in any
ideological straitjackets.
Paradoxically, in the postCold War era, the West seems to have become an ideologically
driven entity. The iconization of democracyan unquestionably virtuous ideabecame an
ideological crusade that insisted democracy could be exported to any society everywhere in the
world, regardless of its stage of political development. Disasters followed in Lebanon, Palestine,
and Iraq. A conservative Republican, Congressman Henry Hyde, bluntly pointed out that
ideological ambition had been allowed to trump common sense and experi"nce: "We also have
a duty to ourselves and to our interests, the protection and advancement of which may
sometimes necessitate actions focused on more tangible returns than those of altruism. Lashing
our interests to the indiscriminate promotion of democracy is a tempting but unwarranted
strategy, more a leap of faith than a sober calcul"tion." He further a"ded, "We can and have
used democracy as a weapon to destabilize our avowed enemies and may do so again. But if
we unleash revolutionary forces in the expectation that the result can only be beneficent, I
believe we are making a profound and perhaps uncorrectable mistake. History teaches that
revolutions are dangerous things, more often destructive than benign, and uncontrollable by
their very n"ture."
The great paradox about failed Western attempts to export democracy to other societies is that
in the broadest sense of the term, the West has actually succeeded in democratizing the world.
One key goal of democracy is to empower its citizens and make them believe that they are the
masters of their own destiny. The number of people in the world who believe this has never
been higher. Even in the "undemocratic" society of China, citizens have seized the opportunities
provided by the new economic freedoms they enjoy to completely change their lives. The same
is true in India: the government has now increased the list of economic freedoms. In global
terms, there has been a huge democratization of the human spirit. The West should be
celebrating this, not berate countries about imperfect voting practices.
One reason above all explains why the West hesitates to celebrate the great democratization of
the human spirit. It is keenly aware that if this trend continues, a great day of reckoning must
come. As the spirit of democratization gathers strength and more and more human beings take
charge of their own destinies, they will increasingly question the undemocratic world order they
live in. Samuel Huntington effectively described this world order. Two sentences from his
famous essay "The Clash of Civilizations" explain the current situation: "In the politics of
civilization, the peoples and governments of non-Western civilization no longer remain the
objects of history as targets of Western colonization but join the West as movers and shapers of
history." He then adds, "The West in effect is using international institutions, military power and
economic resources to run the world in ways that will maintain Western predominance, protect
Western interests and promote Western political and economic values." He's right. The rest of
the world is beginning to realize it. Left unchanged it's a recipe for disaster.
From The New Asian Hemisphere: The Irresistible Shift of Global Power to the East
2008 by Kishore
Text TextMahbubani
The Decline of the West: Why America Must Prepare for the End of Dominance - The Atlantic
http://www.theatlantic.com/international/archive/2012/03/the-decline-of-the-west-why-america-must-pre...
GLOBAL
The Decline of the West: Why America Must

Prepare for the End of Dominance
CHARLES A. KUPCHAN
MAR 20, 2012
The U.S. will remain powerful, yes, but the world is changing.
A U.S. Navy officer points to a map / Reuters

Those of us who write about foreign policy--or any topic, for that matter--yearn for the day when the president of the United States
lauds our work. That is exactly what happened in January to Robert Kagan, a fellow at the Brookings Institution and an adviser to
the Romney campaign. Just before delivering the State of the Union address, President Obama told a collection of news anchors
that his thinking had been inuenced by Kagan's recent cover essay in The New Republic, "Not Fade Away: The Myth of American
Decline." It is not often that a president running for reelection praises his chief rival's counselor.
Kagan's article, which draws on his new book, The World America Made, contests the emerging consensus in foreign-policy circles
that American primacy is eroding thanks to the shift in global power from the West to the "rising rest." China and other nations are
steadily ascending, this view holds, while the United States and its allies are stuck in an economic rut. The long era of Western
hegemony seems to be coming to an end.
Kagan begs to dier. He contends that U.S. primacy is undiminished and that Americans, as long
as they set their minds to it, are poised to sit atop the global pecking order for the indenite future.
The nation's share of global economic output has been holding steady, and its military strength
"remains unmatched." China, India, Brazil, Turkey, and other emerging powers are certainly on
the move, Kagan acknowledges, but he maintains that only China will compromise U.S. interests.
The others will either align with the United States or remain on the geopolitical sidelines. The
biggest threat to U.S. hegemony is that "Americans may convince themselves that decline is
indeed inevitable"--and choose to let it happen. Kagan wants to persuade them otherwise and to
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call forth the political energies needed to ensure that the United States remains "the world's
predominant power."
Although it sounds reassuring, Kagan's argument is, broadly, wrong. It's true that economic strength and military superiority will
preserve U.S. inuence over global aairs for decades to come, but power is undeniably owing away from the West to developing
nations. If history is any guide, the arrival of a world in which power is more widely distributed will mean a new round of jockeying
for position and primacy. While it still enjoys the top rank, the United States should do its best to ensure that this transition occurs

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peacefully and productively. The worst thing to do is to pretend it's not happening.
By overselling the durability of U.S. primacy, Kagan's analysis breeds an illusory strategic complacency: There is no need to debate
the management of change when one denies it is taking place. Even worse, the neoconservative brain trust to which Kagan belongs
chronically overestimates U.S. power and its ability to shape the world. The last time that like-minded thinkers ran the show-George W. Bush's rst term as president--they did much more to undermine American strength than to bolster it. Neoconservative
thinking produced an assertive unilateralism that set the rest of the world on edge; led to an unnecessary and debilitating war in
Iraq, the main results of which have been sectarian violence and regional instability; and encouraged scal proigacy that continues
to threaten American solvency. Kagan would have us fritter away the nation's resources in pursuit of a hollow hegemony.
Instead, it is time for thrift: Washington should husband its many strengths, be more sparing with military force, and rely on
judicious diplomacy to tame the onset of a multipolar world.
The Clock is Running
American primacy is not as resilient as Kagan thinks. His most serious error is his argument that Americans need not worry about
the ascent of new powers because only Europe and Japan are losing ground to them; the United States is keeping pace. It's true that
the U.S. share of global output has held at roughly 25 percent for several decades. It's also the case that "the rise of China, India,
and other Asian nations ... has so far come almost entirely at the expense of Europe and Japan, which have had a declining share of
the global economy." But this is not, as Kagan implies, good news for the United States.
The long run of Western hegemony has been the product of teamwork, not of America acting alone. Through the 19th century and
up until World War II, Europe led the eort to spread liberal democracy and capitalism--and to guide Western nations to a position
of global dominance. Not until the postwar era did the United States take over stewardship of the West. Pax Britannica set the stage
for Pax Americana, and Washington inherited from its European allies a liberal international order that rested on solid commercial
and strategic foundations. Moreover, America's many successes during the past 70 years would not have been possible without the
power and purpose of Europe and Japan by its side. Whether defeating communism, liberalizing the global economy, combating
nuclear proliferation, or delivering humanitarian assistance, Western allies formed a winning coalition that made eective action
possible.
The collective strength of the West is, however, on the way down. During the Cold War, the Western allies often accounted for more
than two-thirds of global output. Now they represent about half of output--and soon much less. As of 2010, four of the top ve
economies in the world were still from the developed world (the United States, Japan, Germany, and France). From the developing
world, only China made the grade, coming in at No. 2. By 2050, according to Goldman Sachs, four of the top ve economies will
come from the developing world (China, India, Brazil, and Russia). Only the United States will make the cut; it will rank second,
and its economy will be about half the size of China's. Moreover, the turnabout will be rapid: Goldman Sachs predicts that the
collective economic output of the top four developing countries--Brazil, China, India, and Russia--will match that of the G-7
countries by 2032.
Kagan is right that the United States will hold its own amid this coming revolution. But he is certainly misguided to think that the
relative decline of Europe and Japan won't matter. Their falling fortunes will compromise America's ability to maintain global sway.
Indeed, Kagan seems to admit as much when he acknowledges, "Germany and Japan were and are close democratic allies, key
pillars of the American world order."
Kagan is ready to gloss over the consequences of the West's diminishing clout because he thinks that most emerging nations will
cast their lot with the United States rather than challenge American hegemony. "Only the growth of China's economy," he writes,
"can be said to have implications for American power in the future." Kagan is condent that the rise of others--including Brazil,
India, and Turkey--"is either irrelevant to America's strategic position or of benet to it."
But Washington simply can't expect emerging powers other than China to line up on its side. History suggests that a more equal
distribution of power will produce uid alignments, not xed alliances. During the late 19th century, for example, the onset of a
multipolar Europe produced a continually shifting network of pacts. Large and small powers alike jockeyed for advantage in an
uncertain environment. Only after imperial Germany's military buildup threatened to overturn the equilibrium did Europe's nations
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group into the competing alliances that ultimately faced o in World War I. As the 21st century unfolds, China is more likely than
other emerging nations to threaten U.S. interests. But unless or until the rest of the world is forced to choose sides, most developing
countries will keep their options open, not obediently follow America's lead.
Already, rising powers are showing that they'll chart their own courses. Turkey for decades oriented its statecraft westward,
focusing almost exclusively on its ties to the United States and Europe. Now, Ankara looks primarily east and south, seeking to
extend its sway throughout the Middle East. Its secular bent has given way to Islamist leanings; its traditionally close connection
with Israel is on the rocks; and its relations with Washington, although steadier of late, have never recovered from the rift over the
U.S. invasion of Iraq in 2003.
India is supposedly America's newest strategic partner. Relations have certainly improved since the 2005 agreement on civilian
nuclear cooperation, and the two nations see eye to eye on checking China's regional intentions. But on many other fronts,
Washington and New Delhi are miles apart. India frets, for instance, that the U.S. will give Pakistan too much sway in Afghanistan.
On the most pressing national security issue of the day--Iran's nuclear program--India is more of a hindrance than a help, defying
Washington's eort to isolate Iran through tighter economic sanctions. And the two democracies have long been at loggerheads
over trade and market access.
Nations such as Turkey and India, which Kagan argues will be either geopolitically irrelevant or solid American supporters, are
already pushing back against Washington. And they are doing so while the United States still wields a pronounced preponderance of
power. Imagine how things will look when the playing eld has truly leveled out.
Despite his faith that rising powers (save China) will be America's friends, Kagan at least recognizes that their ascent could come at
America's expense. Will not the "increasing economic clout" of emerging powers, he asks, "cut into American power and
inuence?" He oers a few reasons not to worry, none of which satises.
For starters, he claims that the growing wealth of developing nations need not diminish U.S. sway because "there is no simple
correlation between economic growth and international inuence." He continues, "Just because a nation is an attractive investment
opportunity does not mean it is a rising great power."
True enough. But one of the past's most indelible patterns is that rising nations eventually expect their inuence to be
commensurate with their power. The proposition that countries such as India and Brazil will sit quietly in the global shadows as they
become economic titans ies in the face of history. Other than modern-day Germany and Japan--both of which have punched well
below their weight due to constraints imposed on them after World War II--a country's geopolitical aspirations generally rise in step
with its economic strength. During the 1890s, for instance, the United States tapped its industrial might to launch a blue-water
navy, rapidly turning itself from an international lightweight into a world-class power. China is now in the midst of fashioning
geopolitical aspirations that match its economic strength--as are other emerging powers. India is pouring resources into its navy; its
eet expansion includes 20 new warships and two aircraft carriers.
To support his thesis that emerging powers are not rising at the expense of U.S. inuence, Kagan also argues that pushback against
Washington is nothing new. He then cites numerous occasions, most of them during the Cold War, when adversaries and allies
alike resisted U.S. pressure. The upshot is that other nations are no less compliant today than they used to be, and that the sporadic
intransigence of emerging powers is par for the course.
But today's global landscape is new. By presuming that current circumstances are comparable with the Cold War, Kagan
underestimates the centrifugal forces thwarting American inuence. Bipolarity no longer constrains how far nations--even those
aligned with Washington--will stray from the fold. And the United States no longer wields the economic inuence that it once did.
Its transition from creditor to debtor nation and from budget surpluses to massive decits explains why it has been watching from
the sidelines as its partners in Europe irt with nancial meltdown. The G-7, a grouping of like-minded democracies, used to
oversee the global economy. Now that role is played by the G-20, a much more unwieldy group in which Washington has
considerably less inuence. And it is hardly business as usual when foreign countries lay claim to nearly 50 percent of publicly held
U.S. government debt, with an emerging rival--China--holding about one-quarter of the American treasuries owned by foreigners.
Yes, U.S. leadership has always faced resistance, but the pushback grows in proportion to the diusion of global power. China may
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prove to be America's most formidable competitor, but other emerging nations will also be nding their own orbits, not
automatically aligning themselves with Washington. America's most reliable partners in the years ahead will remain its traditional
allies, Europe and Japan. That's why it spells trouble for the United States that these allies are on the losing end of the ongoing
redistribution of global power.
The Wrong Lesson
Finally, Kagan's timing is o. He is right that power shifts over decades, not years. But he underestimates the speed at which
substantial changes can occur. He notes, for example, "The United States today is not remotely like Britain circa 1900, when that
empire's relative decline began to become apparent. It is more like Britain circa 1870, when the empire was at the height of its
power." After two draining wars, an economic crisis, and deepening defense cuts, this assertion seems doubtful. But let's assume
that the United States is indeed "at the height of its power," comparable with Britain circa 1870.
In 1870, British hegemony rested on a combination of economic and naval supremacy that looked indenitely durable. Two short
decades later, however, that picture had completely changed. The simultaneous rise of the United States, Germany, and Japan
altered the distribution of power, forcing Britain to revamp its grand strategy. Pax Britannica may have technically lasted until
World War I, but London saw the writing on the wall much earlier--which is precisely why it was able to adjust its strategy by
downsizing imperial commitments and countering Germany's rise.
In 1896, Britain began courting the United States and soon backed down on a number of disputes in order to advance AngloAmerican amity. The British adopted a similar approach in the Pacic, fashioning a naval alliance with Japan in 1902. In both cases,
London used diplomacy to clear the way for retrenchment--and it worked. Rapprochement with Washington and Tokyo freed up the
eet, enabling the Royal Navy to concentrate its battleships closer to home as the Anglo-German rivalry heated up.
It was precisely because Britain, while still enjoying preponderant strength, looked over the horizon that it was able to successfully
adapt its grand strategy to a changing distribution of power. Just like Britain in 1870, the United States probably has another two
decades before it nds itself in a truly multipolar world. But due to globalization and the spread of new manufacturing and
information technologies, global power is shifting far more rapidly today than it did in the 19th century.
Now is the time for Washington to focus on managing the transition to a new geopolitical landscape. As the British experience
makes clear, eective strategic adjustment means getting ahead of the curve. The alternative is to wait until it is too late--precisely
what London did during the 1930s, with disastrous consequences for Britain and Europe. Despite the mounting threat posed by
Nazi Germany, Britain clung to its overseas empire and postponed rearmament. After living in denial for the better part of a decade,
it nally began to prepare for war in 1939, but by then it was way too late to stop the Nazi war machine.
Even Kagan seems to recognize that comparing the United States to Britain in 1870 may do his argument more harm than good.
"Whether the United States begins to decline over the next two decades or not for another two centuries," he writes, "will matter a
great deal, both to Americans and to the nature of the world they live in." The suggestion here is that the United States, as long as it
marshals the willpower and makes the right choices, could still have a good 200 years of hegemony ahead of it. But two
decades--more in line with the British analogy--is probably the better guess. It strains credibility to propose that, even as
globalization speeds growth among developing nations, a country with less than 5 percent of the world's population will run the
show for two more centuries.
Whether American primacy lasts another 20 years or another 200, Kagan's paramount worry is that Americans will commit
"preemptive superpower suicide out of a misplaced fear of their own declining power." In fact, the greater danger is that the United
States could head into an era of global change with its eyes tightly shut--in denial of the tectonic redistribution of power that is
remaking the globe. The United States will remain one of the world's leading powers for the balance of the 21st century, but it must
recognize the waning of the West's primacy and work to shepherd the transition to a world it no longer dominates. Pretending
otherwise is the real "preemptive superpower suicide."

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Asia as Global Leader Not So Fast

Will Asia mimic bankrupt Western ideas, fall victim to hubris or generate new, sustainable
visions?
Ho Kwon Ping
YaleGlobal, 14 May 2012
SINGAPORE: As the European economy
teeters on the verge of a second recession
and the US recovery wobbles, Asia is
brimming with optimism. For Asian
triumphalists attending a recent conference
in Thailand Reading the Signposts of a
Changing Landscape the signs are big,
clear and point to a happy future.
Im less sure. The wording on many
signposts is confused, with many pointing
towards dead-ends or quicksand. In the rush
of exuberant expectations that Asias time
has come, the continent could fall victim to
whats behind many failures in the history of
the world simple hubris.
The rise of Asia is not predetermined, just
as the dominance of Western civilization for
the past few hundred years was not
preordained. The rise of European
imperialism and then American hegemony
was not simply due to economic power
backed by military might. It was underpinned
by innovative, even revolutionary thinking,
about the primacy of the rule of law; the
separation of church and state; the
commitment to an empirical, scientific
worldview; and all the institutions that
brought about the modern state built on
liberal democracy and market
capitalism. Much of the intellectual vigor
propelling the West to supremacy is now
spent. In its place is frustration that the old
order is not working, with no vision as to
what the new order should be.
Rising power and hubris: Smog clouds Chinas
soaring ambition (top); Indias growing
numbers of youth, many neglected, demand
rights
So could Asia rise to the occasion and, in

the intellectual vacuum, offer new solutions
to bankrupt thinking? Is the continent
capable of creative destruction of taboos
and restrictive mindsets hobbling it during
past centuries? Is Asias economic growth matched by equally vigorous intellectual innovation?
The regional landscape offers clues.

India, for example, has managed, despite numerous challenges, to remain the worlds largest
practicing democracy. But the continuing clash and contradictions between tradition and
modernity renders Indian political and social relations almost dysfunctional. And while Indian
pride in its scientific, artistic and business achievements is justified, the continuing inability to lift
millions of people out of abject poverty remains a sobering and hopefully not insurmountable
challenge.
China, the other great and ancient civilization of Asia, is today to become the second most
powerful economy in the world. Its government has, unlike India, lifted teeming masses from
abject poverty. Private capitalism thrives alongside the more dominant state capitalism. But the
absence of a dynamic civil society unlike in India and its opaque political structure, as so
glaringly revealed by the Bo Xilai scandal, is possibly unsustainable.
India suffers from a lack of political consensus; China has too much of it. India has a surfeit of
democracy and a deficit of economic equality; China has eradicated poverty, but suppressed
democracy.
Indian thought leaders realize that democracy has not reduced inequality or improved the lives
for most Indians. Chinese intellectuals recognize that the current systemic problems of political
governance, glossed over by rapid economic growth, are unsustainable and brittle. But neither
knows how to move forward beyond recognition of the need for drastic reform. Intellectual
innovation and political power are not integrated.
Japans social cohesion stands in stark contrast against China and India, but that same
homogeneity and social conservatism has left it stranded in genteel decline, with no new
thinking to break the country out of its stifling insularity.
South Korea, Taiwan and Singapore are probably the best examples of societies which grew
rapidly due what political scientists call developmental authoritarianism and have successfully
transited to liberal democracy. But their models of development are not easily transplanted to
larger, more diverse societies.
South East Asia has largely recovered from the debilitating financial crisis in the late 1990s,
which nearly crippled its private sector and brought down its banks. But internal contradictions
remain unresolved in Thailand, Malaysia and Indonesia and are, arguably, growing steadily.
While one cant deny the real achievements of an ascendant Asian civilization, its difficult to
accept the facile self-congratulations of the triumphalists who suggest that Asias success in this
century is inevitable. Even those who believe fervently that Asias time has come cannot afford
complacency. Asia requires diverse, innovative thought leadership if its economic rise will result
in a sustainable, new paradigm for civilizational progress.
In particular, Asia needs to inculcate a virtuous cycle whereby business, political and social
leaders interact to create new norms of economic, social and political behavior and values. One
example is the dire need of a replacement for the highly individualistic, American form of
capitalism which at its best, enormously rewards risk-taking, but at its worst, creates monstrous
inequalities based on speculative gambling of other peoples money. Capitalism is not
universally identical; its shaped by history and culture, resulting in the Scandinavian variant or
the German model. The American model may not be broken, but after recent financial debacles,
Asia should not blindly adopt it.
Asia needs to delve into its own history and culture for inspiration in creating an Asian variant of
capitalism. One such source can be the webs of mutual obligations which serve as a common,
recurring socio-ethical tradition of Asia. This communitarian characteristic of Asian culture can, if
thoughtfully enhanced, nurtured and developed, replace the highly individualistic, Darwinian
ethos of American capitalism. Communitarian capitalismcan be an Asian form of ethical wealth
creation, where the interests of the community of stakeholders in an enterprise owners,
employees, customers and suppliers and the larger community would be a higher
consideration than return on capital.
In other words, communitarian capitalism would be stakeholder-driven, not simply shareholderdriven.
One of the contradictions of globalization is the starkly worsening income inequalities across the
world, particularly in Asia. There is no middle way, no waffling position where Asias elite claim
credit for generating growth but deny responsibility for its negative
consequences. Such waffling unfortunately, is what most Asian business leaders are doing
today; hiding their heads under the sand, thinking that if they simply stick to what theyre good at
doing creating and consuming wealth they are part of the invisible hand of productive
capitalism. But thats just not good enough because, as weve seen, unfettered capitalism is not
an absolute good, and often businessmen deepen its imperfections.
History has shown how many institutions of a modern and progressive society, such as liberal
democracy or universal suffrage, arose out of the demands of a rising business class the
bourgeoisie. Asias rising middle class needs to play the same historic role as their counterparts
in Europe several hundred years ago.
Thought leadership need not be in grandiose or visionary ideas, but can small, practical
solutions to real problems. For example, as a tiny country, Singapore has no pretensions of
being a global thought leader. It has simply and quietly created solutions to its own set of
changing circumstances, setting a model for others.
Singapores approach to social security and public housing, launched many decades ago, has
been universally hailed as revolutionary. In the field of sustainable resource management for
cities, Singapore is probably one of the leading world examples.
Across Asia, there are many more examples of innovative, inspiring thought leadership covering
a spectrum of fields. But this is not enough. Asia needs fundamental paradigm shifts,
particularly on political and business governance, if its to reach the vision of its future. Future
generations will either blame or thank the present elite for what they do, or more disappointingly,
choose not to do.
Ho Kwon Ping is chairman of Singapore Management University and executive chairman of

Banyan Tree Holdings.
A handful of Asian conundrums the worlds boardrooms should chew over

Megatrends
Q & Asia
May 31st 2014 | The Economist
http://www.economist.com/news/special-report/21602830-handful-asian-conundrums-worldsboardrooms-should-chew-over-q-asia
OVER THE PAST decade innumerable

PowerPoint presentations have condensed Asia
into two bullet points. One is its rise as a vast
consumer market. About 30% of the worlds
middle-class spending is done by Asians, up from
20% in 2000, according to the Brookings
Institution, a think-tank, which defines the middle
class as those earning $10-100 a day at
purchasing-power parity. The other is Asia as a
production hub: 47% of world manufacturing is
now in the region. But the worlds boardrooms have started to grapple with a much broader set
of questions about Asia. The most immediate ones are higher labour costs and ageing
populations, growing consumer expectations and the way the internet will affect business there.
A rising risk of hostilities in the region is adding further complexity. And in the background looms
the broader issue of whether, and if so how much, Asian companies need to globalise (which
will be dealt with later in this special report).
Higher labour costs in China are already beginning to bite. In 2010 a Taiwanese firm, Foxconn
Technology, suffered a spate of suicides at its factories in China where over a million workers
assemble electronic products, including many for Apple. In response the company raised wages
dramatically, to protect the dignity of workers, its chairman explained. Since then higher wages
have become an accepted fact. According to Chinas current five-year plan, the average official
minimum wage across the country must rise by at least 13% every year.
An obvious consequence is that low-skilled, labour-intensive work will move elsewhere. The
globes best barometer of this is Li & Fung, a Hong Kong-based firm that sources $16 billionworth a year of clothing and other products, mainly for big American retailers. The suppliers in
its network employ tens of millions of people. William Fung, its boss, says the shift from China
has begun and will accelerate. Labour in Vietnam costs 40% less than in China and in
Bangladesh 60% less. Indonesia, Myanmar and Africa will benefit too. A question mark remains
over India. It has lots of young folk, but Asian bosses shun it because of red tape and
dysfunctional politics.
According to Chinas current five-year plan, the average official minimum wage across the
country must rise by at least 13% every year
Higher-skilled work, such as assembling electronics, may be much slower to shift from China.
Foxconn is considering building a factory in Indonesia, but other firms are staying put and trying
to lower the share of labour in overall costs by automating production instead. Zhang Ruimin,
the chairman of Chinas Haier, one of the worlds biggest manufacturer of household
appliances, says that his local workers now get 25% of the pay rates at his American plant,
against just 5% in 2000. He has cut staff by 19% since the start of 2013 and plans a lights out,
entirely automated factory in China. The number of industrial robots in China has doubled since
2010.
Manufacturers in Japan, Taiwan and South Korea are concerned that rising labour costs will
encourage Chinese firms to graduate to more complex products, providing extra competition.
South Koreas Samsung, the worlds biggest smartphone-maker, is currently being subjected to
an onslaught from Lenovo, Huawei and other Chinese firms. But the mood of sophisticated
manufacturers outside China is relaxed. It is true they will eventually be able to catch up with
us, but by then we will be well ahead in other businesses, insists Fujio Mitarai, the chairman of
Japans Canon, which makes cameras and office equipment.
Companies and investors are also conscious of the opportunities created by ageing populations
in large parts of Asia. China is getting older, as are Taiwan, South Korea and Thailand. Japan
already has one of the worlds oldest populations, and this year sales of nappies for adults will
exceed those for babies for the first time. But the most obvious growth area is in health care,
says Yu-Ming Wang, the head of investment at Nikko Asset Management. At present the sector
accounts for only 3.8% of Asias stockmarket, and only 1.3% without Japan, whereas the
average for rich countries is 12%.
Rising consumer expectations are another thing Asia needs to work on. Hong Kongs airport
now limits the amount of white powder travellers can take out of the territory. The powder in
question is not some mind-blowing drug but dried-milk formula for children. Chinese parents are
so scared of contamination that they would rather buy supplies abroad.
At the heart of the milk issue is China Mengniu Dairy, Chinas biggest dairy firm. In 2011 it
admitted that a batch of its milk contained impurities and its share price collapsed. Under a new
boss it has launched a reform drive. It has bought a stake in a big supplier to give it more control
over quality, and strengthened production partnerships with a Danish firm and with Danone, a
French company that now owns a 10% stake in Mengniu. The board has been rejigged and a
$500m international bond issued. Sales, and the share price, have recovered.
Sloppy quality can prove costly. Over the past five years Ranbaxy, an Indian generic-drugs firm
controlled by Daiichi Sankyo of Japan, has been found guilty of several production
transgressions by Americas Food and Drug Administration. Indias authorities have done little in
response, but Ranbaxys shares have been pummelled. In April Daiichi announced it was selling
its stake in Ranbaxy to Sun Pharma, a well-run Indian drugs firm.
An increasing desire for safety and quality has often been a feature of economic development in
the past. Disgust with unsavoury abattoirs in the early 20th century led to a wave of regulation in
America. As the countrys middle class grew, food brands that commanded trust, such as Heinz
and Birds Eye, did particularly well. In emerging Asia the push to quality is likely to come more
quickly than in the past because the new middle class is aware of global norms, thanks to the
web and social media, and has the choice of buying foreign products.
The quest for quality

For firms this shift to quality presents an opportunity as well as a threat. Business models based
on selling Asians cheap products may not stand up. In 2009 Tata Motors, an Indian car firm,
launched a low-cost car, the Nano, but saw it flop. Over the same period it has made profits of
$10 billion selling luxury Range Rovers and Jaguars, often to emerging-market customers.
The best firms have already adapted their model. AIA, a big pan-Asian life-insurance company,
has moved on from the industrys wild era of seeking market share at almost any cost and is
now concentrating on higher-margin products. It has also invested heavily in training its sales
agents and keeping them happy in order to raise retention rates and improve customer service.
The result has been good for shareholders, says Mark Tucker, AIAs chief executive. Value of
new business, an insurance-industry measure of the present value of profits from new policies
written, tripled between 2009 and 2013.
Green energy should boom as consumers demand a cleaner environment. But its capital
intensity, reliance on government subsidies and vulnerability to bottlenecks make it risky.
Chinas solar-equipment-makers have already seen a boom and bust. CLP Group is one of the
biggest foreign investors in renewable-energy plants in India and China. Its chief executive,
Richard Lancaster, argues for a measured approach. The company invests about half a billion
dollars a year in green energy in those two countries. More than that, he says, would
compromise the quality of its projects. Governments need to ease bottlenecks, for example by
making land available and improve the reach of their power grids, to allow the green industry
safely to absorb much more investment.
Of all Asias new industries the most hype surrounds the internet, partly thanks to Alibabas
proposed initial public offering. The frenzy has encouraged some weak Chinese firms to float.
Yet in developing the internet Asia is going its own way, diverging from the Western model.
Online retail sales in China should surpass Americas this year. Japan and South Korea are
already the worlds third- and sixth-largest e-tail markets respectively, reckons McKinsey, a
consultancy.
Asia has its own internet giants, with listed firms worth almost $300 billion, which could rise to
over $400 billion once Alibaba floats. Japan has Rakuten, which operates a mall, and SoftBank,
which owns stakes in Alibaba and Yahoo Japan. In South Korea search is dominated by Naver,
not Google. Marketplaces, where merchants interact with customers, are more important in Asia
than in other parts of the world, accounting for 90% of online retail sales in China, against 24%
in America. And Asias big online firms manage without a bricks-and mortar presence. In
America seven of the ten biggest online retailers are traditional firms such as Sears and
Walmart. In Japan only one of the top ten is a traditional firm. Conversely, Indias bricks-andmortar retailers have no credible web presence. Lastly, most new online business in emerging
Asia will be conducted by mobile phone, leapfrogging the personal computer.
Broadly speaking, Asias big internet

firms have less of a connection to
traditional business models than their
Western counterparts, even in mature
Japan. That may mean the web poses
more of a threat to traditional firms than it
does in the West. We are going to see
massive innovation and advancement,
says Hiroshi Mikitani, the boss of
Rakuten. For example, he thinks
traditional money might cease to exist.
One of the largest operators of malls in
Asia says that sales in less favoured
locations are already tailing off. The
head of a big Chinese firm under no
obvious threat from the internet
confesses it still terrifies him. If we make
a mistake we could collapse, just like
Kodak.
Internet firms in emerging Asia are
creating entire new parts of the
economy, or replacing crusty bits that
have not been reformed. One of Indias
internet stars, Flipkart, is building a
national logistics network from scratch
an epic task it has so far tackled
effectively. Bao Fan, the head of China
Renaissance, an investment bank that
works with many mainland technology
firms, says Chinas crummy television is
ignored by the young, who go to video sites instead. With few opportunities for traditional
entertainments such as concerts or sports, Chinas youth is obsessed with online games. And
Chinas big internet firms have launched investment products that have grabbed about 1% of
the banking systems deposits in short order.
It is safe to conclude that in the long run pure internet firms will control a bigger chunk of Asias
economy than in the rich world, which has many hybrid firms that evolved from offline
businesses. But there are still some question marks. One is whether India and Indonesia will
eventually develop their own internet giants. There is little sign of this yet. Flipkart, which is
Indias biggest internet firm, is valued at about $2 billion. That is small for the genre, but the
opportunity is huge.
A bigger consideration is whether Asias web firms will one day challenge Americas giants. It is
early days yet, but Rakuten has just bought Viber, a global messaging platform, and SoftBank
has bought a mobile-phone business in America that it could turn into a digital platform for itself.
Alibaba makes no secret of its global ambitions.
Colouring all these questions is concern about hostilities in the region. Maritime tussles between
Japan and China should be worrying investors and companies. Theres massive geopolitical
risk thats being completely ignored, says the boss of one of the worlds biggest firms. A hot
war between China and Japan, or China and India, would be an apocalyptic event all round.
The effect of deep-freezing relations would be more differentiated. India imports lots of basic
goods from China, but investment links are feeble. Conversely, Japan would be hard hit. Its
manufacturers have strong supply chains in China and its consumer firms sell plenty there. A
tenth of Japans global stock of direct investment is tied up in China.
After a row in 2012 over the Senkaku/Diaoyu islands, which are claimed by both countries,
China imposed a boycott on Japanese goods. In December total Japanese exports to mainland
China were down by a fifth on the previous year. Things are calmer now, but Japanese firms are
quietly hedging their bets. In 2013 only 7% of Japans foreign direct investment went to China,
compared with 13% in 2010. Instead, more Japanese money found a home in South-East Asia,
mainly Thailand and Indonesia. All this is happening just as Japanese banks are back in action.
Their market share of global cross-border loans outstanding has risen to 13%, against 8% in
2007.
China is a big trade partner for most Asian countries, but remains a banking and corporate
pigmy in the region. What might change that is the rise of the renminbi as a regional and global
currency. It is now used to settle 18% of Chinas trade and is the worlds seventh most actively
used currency for payments, though these figures probably overstate its role. Still, over time the
influence of the renminbi will surely rise.
The process could be hastened by Americas increasingly restrictive rules on foreigners settling
payments through Americas financial system, or even through foreign banks with American
businesses. To avoid red tape, more Asian firms and banks may seek to avoid dollar
transactions. The renminbi will become constantly used for trade settlement in Asia, the Middle
East, Africa and eastern Europe, says Stuart Gulliver, chief executive of HSBC, a global bank.
Yet if China wants its neighbours to use its currency, it will have to make an effort to get on
better with them. Its tetchy relations with America are one reason why it is nervous about most
of its own vast foreign-exchange reserves being tied up in American treasuries.
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1
AMERICAS
REAL
MANUFACTURING
ADVANTAGE
A NEW WAVE OF SOFTWARE INNOVATION IS ABOUT TO TRANSFORM INDUSTRYAND GIVE THE UNITED STATES THE CHANCE
FOR A LASTING EDGE. BY HELMUTH LUDWIG AND ERIC SPIEGEL

3
Eric Spiegel
eric.spiegel@siemens.com
is president and chief executive
officer of Siemens Corporation. He was formerly a senior
partner at Booz & Company,
and is the coauthor (with Neil
McArthur) of Energy Shift:
Game-Changing Options for
Fueling the Future (McGrawHill, 2009). He is vice chair of
the Education and Workforce
Committee at the Business
Roundtable and a member of
the board of the U.S. Chamber
of Commerce.
he industrial sector in the United

States is rebounding. Manufacturers
are boosting output, building new plants,

increasing exports, and creating betterpaying jobs that require precise skills
and in the process are helping lead the
U.S. out of the long, stubborn slump that followed the
market disruptions of 2007. A growing number of political and business leaders, economists, and commentators are taking notice, and talking about a domestic
manufacturing renaissance. Some are saying it could
add millions of new and well-paid jobs, unwind the
U.S.s long-standing trade deficit, and usher in a new
era of growth and prosperity. This is a welcome point
of viewmuch more beneficial than the idea, formerly
in vogue, that the country could survive on services and
finance, without much of a manufacturing industry. But
it is, nonetheless, an incomplete point of view. Many of
these manufacturing optimists are basing their forecasts
mainly on transitory changes in energy supply and relative labor costs that are not likely to provide the kind of
long-term improvements they envision.
We are hopeful about the future of manufacturing in the U.S. for a more fundamental reason. It is the
economy best positioned to seize on deeper changes that
can lead to a real, sustainable manufacturing renaissance, one based on software technology and its profound effect on the entire manufacturing value chain.
The pace of change in global manufacturing is
faster right now than at any time in recent history.
The technology and practice of large-scale manufacturing are moving into a new era of proficiency
not just typified by improvements in established processes, but taking the form of a software-powered
series of new production systems that are qualitatively

different from those of previous years. All aspects of
manufacturing will be affected, including the way companies address customer needs and wants, research and
development, the product development and production
process, and the platforms and footprints employed
in execution, testing, and servicing (see sidebar, pages
56 ).
The changes under way will increase productivity,
efficiency and innovation, speed-to-market, and flexibility, which will in turn lead to a powerful new cycle of
growth and value creation: an era of virtual-to-real manufacturing. As a result, the trade-off between efficiency
and customizationwhich has constrained manufacturing since the Industrial Revolution beganwill no
longer be nearly as important, and manufacturers will
gain new abilities to create and maintain products that
more specifically fit what people want and need.
The advanced manufacturing facilities of today and
tomorrow are clean and replete with robots, computers,
lasers, and other ultramodern machine technologies.
The most common tool a production worker carries at
the newest auto plants in the Carolinas, Michigan, and
Tennessee is not a wrench or screwdriver. Its an iPad.
The next chapter is about to be written in the history of
industry. Among manufacturers, competitive advantage
will flow to those that can adapt most quickly in this
changing environment.
With a proven track record in innovation, software
development, and university education, the United
States is poised to reassert the manufacturing leadership
it has been ceding to competing countries in recent decades. And the economic stakes for doing so are high.
If the opportunity is seized aggressively, it will provide
strategy+business issue 74
Helmuth Ludwig
helmuth.ludwig@siemens.com
is chief executive officer of
Siemens Industry USA. He is
also an adjunct professor at
the Cox School of Business at
Southern Methodist University
and a member of the board of
the Manufacturers Alliance for
Productivity and Innovation.
increasing numbers of skilled, well-paid jobs that can

support the middle class in the 21st century. Beyond job
creation, manufacturing plays a vital role in promoting
innovation and long-term competitiveness. Every dollar generated by manufacturing supports US$1.48 of
additional economic activity, according to the Manufacturing Institute, compared with $0.54 for retailing.
And although manufacturing accounts for 12 percent of
U.S. GDP, it provides nearly 70 percent of private-sector
R&D and 90 percent of patents issued. If the U.S. can
recharge its manufacturing prowess, it will accelerate its
own economic growthand that, in itself, could be an
engine promoting growth around the world.
But whether the U.S. can seize the opportunity
is not certain. Competitive advantage in the 21st century will be influenced by factors such as cheap energy
and wage ratesbut it will be decided by the ability of
countries and regions to enable advanced design and
manufacturing. Action is needed now to reinforce the
innovation culture in the U.S., to nurture the kinds of
institutions that can support a vibrant manufacturing
industry, and to build new types of educational support,
including the apprenticeships and other experiencebased programs that will help the U.S. workforce.
Deconstructing the Renaissance
Although some aspects of the new manufacturing renaissance have been gaining force for several years, their
impact is just now being noticed. They include renewed
investment in U.S. manufacturing plants and equipment, and some re-shoring of production jobs from Asia
and other places. Much of this activity, however, reflects
renewed competitive advantage that may not continue to
increase at its recent rate as the underlying trends change.
The most visible of these trends has been the availability of inexpensive shale-based oil and natural gas in
the United States. By lowering energy prices and broadening access to the supply of gas, this has created a competitive advantage for the country as a manufacturing
location. By late 2013, natural gas was selling in the U.S.
at roughly a third the price it commanded in Europe,
and at a quarter of the price in Asia. This makes the
U.S. particularly attractive for manufacturers in energyintensive industries such as chemicals and fertilizer,
steel and aluminum, and plastics. For well over a decade, there had been little U.S. investment in these businesses; some seemed in danger of departing altogether.
Now, as a result of new energy supplies, some $100 billion of investment is flowing into energy-intensive manufacturing industries in the U.S., with more than 100
new plants planned or under construction.
For example, the Austrian steel-based technology
and capital goods maker Voestalpine Group is building
a new iron-ore plant on Corpus Christi Bay in Texas.
Once it opens (scheduled for 2016), it will produce up
to 2 million tons per year of hot briquetted iron (a feedstock for steel mills). The plant will use a natural-gas
direct reduction process that is more environmentally
friendly than the traditional coke-based technology
and will help Voestalpine meet ambitious internal
energy efficiency and climate-protection objectives.
V&Ms tubular steel plant in Youngstown, Ohio, is
another example. The plant uses low-cost gas, and supplies tubular steel to the expanding U.S. oil and gas
industry for drilling.
Recent shifts in labor costs have also changed the
competitive landscape. A 2013 analysis by the consultancy AlixPartners estimates that the cost of offshoring
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All images courtesy of Siemens, except top row, 2nd from left,
and 2nd row, far right, courtesy of NASA/JPL Caltech
COMPETITIVE ADVANTAGE IN
THE 21ST CENTURY WILL BE DECIDED
BY THE ABILITY OF COUNTRIES
AND REGIONS TO ENABLE ADVANCED
DESIGN AND MANUFACTURING.
manufacturing to China will equal the cost of manufacturing in the U.S. by 2015. The large labor-cost advantage that Asian competitors enjoyed in the 1990s and
early 2000s has narrowed over the last 10 years. When
the higher productivity of North American workers
(three times as high as that of workers at some low-wage
competitors) and the often minor share of labor cost in
the total cost calculation are factored in, the labor-cost
advantage is insignificant.
These two forceslow-cost energy and labor
equivalencehave significantly improved U.S. competitiveness. A study by the Information Technology
& Innovation Foundation estimates that some 500,000
likely to be shared. The MIT Forum for Supply Chain

Innovation and Supply Chain Digest surveyed 340 supply chain managers in 2012, and found that in addition
to costs, an important decision driver for those considering re-shoring is faster speed-to-market. Indeed, as
corporate leaders make decisions about plant location,
a key risk they face is uncertainty about future growth
in demand. One way to reduce that risk is to locate
manufacturing facilities close to markets, enhancing
their ability to understand customer requirements and
react quickly throughout the entire value chain when
requirements change. Thus the U.S. will be favored for
production that is slated for U.S. consumption.
Softwares Impact on the Five Steps of Product Development and Production
product design:
Increasingly powerful visualization and

simulation software
is enabling manufacturers to speed
and improve product
design, testing, and
optimization.
production
planning:
Automation design
technology makes
it possible to
digitally design
entire factories or
individual pieces
of equipment, and
then simulate and
optimize against a
range of production
scenarios for cost,
speed, productivity,
utilization, energy
usage, and quality.
manufacturing jobs have been created in the country

since 2010, supported in part by re-shoring in industries as varied as aerospace, appliances, autos, textiles,
and toys. But changes in energy and labor prices are not
likely to provide lasting advantage. Other countries will
tap into their gas resources with similar technologies,
and global trade in liquefied natural gas will inevitably
increase, narrowing the price differential. The change
in labor costs will most likely be moderated by increasing productivity in other regions, which will limit
future improvements in competitive advantage for the
United States.
Fortunately for the U.S., one other key trend driving the domestic resurgence of manufacturing is less
To make the most of the manufacturing renaissance, however, the U.S. will also have to compete as
a manufacturing location for high-value-added products
designed for export. It is for this reason that the advantages the U.S. offersas a base for the advanced, virtualto-real manufacturing that is transforming the global
industrial landscapewill become increasingly important. To understand why this transformation is so profound, it helps to look at how todays advances fit within the historical context of manufacturing technology.
Efficiency, Innovation, and Flexibility
From its beginnings in the 18th century, the Industrial Revolution was all about efficiency and affordabil-
ity. Previously, all goods had been made from scratch

by craftsmen, who tailored each itemand often the
process of making itto the requirements and circumstances of each customer. But making things this
way was expensive and slow. Few people other than the
wealthy could afford to own much more than the simplest household objects and rudimentary tools.
Then, as industrialization advanced from the late
18th through the 19th century, the efficiencies enabled
by steam power and mass production drove prices of
manufactured goods to levels low enough to be affordable for the mass market. Manufacturing efficiency
made a further leap forward in the 20th century with
45
engineering:
execution:
Modern production
may have hundreds
of interrelated automation components.
New software
makes it possible
for engineers to program and coordinate
all automation tasks
from a single portal,
optimizing workflows and improving
productivity.
Manufacturing
execution systems
monitor production
performance in
real time, enabling
short-term control
of manufacturing
output and longterm optimization
of production-unit
configuration.
service:
Mobile devices, powerful networking,

and big data analytics are enabling
technology-based
services opportunities such as remote
monitoring and
advanced predictive
failure analysis that
will reduce costs and
improve utilization
and productivity.
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tools to accept commands via punched tape. These

evolved over the next few decades to become sophisticated computer numerical control (CNC) machines,
which perform a vast range of tasks such as milling, laser cutting, and welding. Computers were also adapted
to product design, first in the 1960s, and then more extensively in the 1970s as computer-aided design hardware and software proliferated.
Since the early 2000s, however, automation and design software have begun to merge, and manufacturing
software in general has become far more sophisticated.
The result is an integration of the virtual and physical worlds. Before anything is constructed or set into
Images courtesy of Siemens
the advent of the moving assembly line, more systematic

approaches to operations, and advances in technology.
But some things were lost in the move to mass production, including the ability to shift production quickly
to new goods, to incorporate new features, and to offer
variety in product lines.
The next major cycle of manufacturing advancement, which is in its early stages now, greatly reduces
the need to make this trade-off, thanks to the connection of increasingly powerful software with dramatic
leaps in the performance of hardware.
The use of computer software in manufacturing is
nothing new. The first numerically controlled machines
date to the 1940s, when engineers adapted machine
physical operations, it can be simulated, modeled, and

testedinexpensively and rapidly. Virtual design, planning and development of products and the production
process, and optimized control are having a powerful
effect, especially in highly complex manufacturing systems such as auto assembly. This has led to three important benefits: further gains in efficiency, a step-change
improvement in production innovation and speed-tomarket, and a new ability to incorporate flexibility into
mass production.
More efficient production. To this day, manufacturers continue to lower costs and raise efficiency by
improving processes and upgrading technologies and
machinery. There are still significant productivity gains

7
to be made in many sectors of manufacturing, especially

in emerging economies. Coca-Cola Vietnam, for example, increased its production rate by 30 percent recently,
when it replaced some of its legacy machinery with automated hardware and software. This enabled the company to meet demand that has grown by 35 percent per
year since 2009.
More efficient machinery and controls also pay dividends in energy savingsboosting productivity while
reducing manufacturers carbon footprints. An auto
plant with a daily output of 1,000 vehicles can consume
several hundred thousand megawatt-hours of electricity
per yearas much as a medium-sized city. The electric motors used to drive conveyer systems, robots, and
other machinery use two-thirds of this power, and optimized control systems can reduce their consumption
by as much as 70 percent. Further efficiencies are within
reach. Siemens, for example, has joined with Volkswagen and the Fraunhofer Institute for Machine Tools
and Forming Technology to study ways to make robots
more energy efficient. Simply optimizing the software
that controls their movement patterns can save up to 24
percent in energy costs.
Innovation and speed-to-market. The ability to
model, visualize, and test in the world of virtual-to-real
manufacturing is changing the nature of innovation.
Research and development and operations can now become a single integrated process extending from design
through product development and manufacturing to
aftermarket service.
The Mars Curiosity rover, created by the National
Aeronautics and Space Administration (NASA), which
landed on Mars in August 2012, is a vivid example of
how sophisticated software technology has become.
The rover is the size of a small SUV and contains,

among other things, a small nuclear power plant and
two chemistry laboratories. Previous unmanned space
missions, with smaller and less delicate payloads, were
dropped onto the planet surface by parachute, with
a rough landing cushioned by airbags. The Curiosity needed to be set down much more gently, as well
as more accurately. Engineers designed an entry vehicle
that would be slowed by parachute at first, then fly itself the rest of the way using thruster rockets, slow to
a hover 60 feet above the planet, and finally lower the
rover carefully to the surface.
The big question was, Would it work? Traditional
practice runs were not an option, since conditions on
Mars could not be replicatedor even approximated
on Earth. Doug McCuistion, the former NASA director who led the Mars Exploration Program, notes some
of the complexities: Thousands of different softwaredriven events had to occur throughout the seven-minute
landing process. Seventy-six pyrotechnics had to fire, all
at exactly the right time. If any one of those events is
not successful, you have a mission failure. McCuistion
says he was confident about the landing because of the
extensive trial runs NASA had been able to simulate
in the virtual world, combined with targeted testing.
The technology used, he explains, is a combination of
deep analysis through software coupled with modeling,
which allowed us to develop simulations of amazingly
complex descent systems, and to run thousands and
thousands of iterations. It could only be done with the
design and simulation software we have today.
The visualization and simulation software used in
the Mars Exploration Program, provided by Siemens, is
similar to the software that manufacturers such as Ford,
THE ABILITY TO MODEL, VISUALIZE,

AND TEST IN THE WORLD OF
VIRTUAL-TO-REAL MANUFACTURING
IS CHANGING THE NATURE
OF INNOVATION.
tion that not only enables mass customization, but also

allows the company to build different vehicle models in
the same plant, or build the same model in dissimilar
plants around the world all using, and maximizing, the
same global manufacturing standards. This capability is
increasingly important as automakers produce vehicles
in different configurationsincluding gasoline, electric, and hybrid powertrainsfor different markets.
To make this possible, Ford partnered with Siemens to
create an enterprise bill-of-process software capability that allows engineers to simulate the entire assembly
process at different plants. The application was recognized in the industry through Fords Manufacturer of
the Year award from the Manufacturing Leadership
Council in 2013.
Our goal is to lead the industry in flexible manufacturing and global vehicle program development, says
Alan Baumgartner, technical leader of virtual manufacturing at Ford. It starts with having a software system
that enables us to build vehicles that are innovative and
loaded with technology, but in a way that makes them
affordable. We can do that by driving standardization
and reuse of our vehicle programs on a global scale.
Another game-changing manufacturing innovation enabled by software and advanced technology is
the increasing use of three-dimensional (3D) printing
and additive manufacturing technology in a factory
setting, wherein products are built by machines laying
down one thin layer of material at a time according to
digital blueprints. The technology has been in use since
the 1980s, but until recently applications in industry
had been limited to prototyping parts or products for
analysis and testing. Increasingly, 3D printing technology can fabricate complex, high-value parts using pow-
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Unilever, Canon, Dyson, and Callaway use to design

and optimize production processes before changes or alterations are made to products or production machinery.
This enables the companies to bring products to market
much more quickly and efficiently than in the past. The
further impact of visualization software will be greatest
in discrete manufacturing (production of distinct items
such as autos, appliances, or toys), whereas process manufacturing (products such as oil and gas) will benefit
mostly in the design of the production facilities.
When simulation software is used on the factory
floor alongside the machinery that it models, it gives
operators a digital twin of the machine on screen,
which looks and acts exactly like the machine itself.
Index-Werke, in Esslingen, Germany, has built this
virtual machine capability into its state-of-the-art
CNC lathes. Operators can test and optimize a new
process without taking the machine out of production. According to Eberhard Beck, the head of control
technology at Index-Werke, the digital twin approach
increases operational productivity by 10 percent, and
reduces machine downtime during the setup process
for new jobs by 80 percent.
Greater flexibility. The integration of virtual and
real production is making mass customizationthe
ability to make more customized and varied products
without adding significant costa reality. When Fords
Model T assembly line started up 100 years ago, the
company famously offered the car in any color you
want, so long as its black. Today, Ford can build its
F150 pickup truck to customer specifications in millions
of possible configurations involving the body, drivetrain,
wheels, accessories, and trim.
Ford has been a leader in designing flexible produc-
hardware are performing. Production machines will be

self-optimizingable to look at what they are doing,
change themselves to operate more effectively, and thus
continually improve their own productivity, efficiency,
speed, and flexibility. Managers and production workers
will still be in charge, naturally, but they will be controlling software and processes, rather than the machinery itself.
All these advances depend on sophisticated software design and architecture, which explains why the
U.S. is well positioned to succeed as the manufacturing
transformation proceeds. The U.S. remains the most
advanced country for software development: Sixty-five
of the PwC Global Top 100 Software Leaders are headquartered in the U.S., and an analysis by the Business
Software Alliance found that 79 percent of the $243 billion software revenue from the top 100 firms in 2011
was accounted for by U.S. companies. Clusters of software expertise exist in other countries, of course. Germany, for example, leads in shop-floor control software,
because of the strong relationships between leading machine companies and control providers. India is known
for its software-based services. But the U.S. leads in the
particular kind of decision-support software architecture and programming that will be most essential in
visualization, modeling, and other ways of integrating
the virtual and real worlds of manufacturing. This lead
arose partly from the countrys traditionally strong position in computer-science education and research, but
also because of the culture of innovation, opportunity,
and entrepreneurialism that grew up around the industry in Silicon Valley and has drawn the best talent from
around the world. To preserve this advantage, however,
the U.S. needs to take action.

9
dered metals and lasers. General Electric, for example, is

printing cobaltchromium fuel nozzles for jet engines,
as well as other engine components.
Advances in 3D printing technology are enabling
customization at increasingly granular levels. Medical
device manufacturers can now make personalized orthopedic joint replacement kits custom-fitted to an individuals anatomy. The 3D printers might be located
in hospitals rather than in a central production facility.
Another application, which could have significant impacts for product life spans and inventory management,
would be the manufacture of replacement parts where
demand is both low and uncertain.
Over the next couple of decades, we will see continued improvements in each of these three areas: Ongoing gains in efficiency will raise productivity and
add value for all manufacturers. Innovation will flourish and speed-to-market will increase as virtual-to-real
manufacturing becomes more commonplace. And mass
customization will usher in a new era of choice and flexibility for manufacturers and consumersin some ways
renewing many of the advantages of the craftsman era
that were either lost or deemphasized during the era of
mass production, but in a modern factory setting.
Advanced manufacturers are actively pursuing the
next frontier in production capabilities, which we refer
to as Industry 4.0. Still largely in the conceptual stage,
the next cycle of software integration, advanced digitization, and networking will harness big data feedback in real time from customers and suppliers, as well
as information about the operation of the production
machinery and the product as it is used. Today, for example, Apples iPhone can send diagnostic data back to
the company about the way the operating system and
ONE SIMPLE INITIATIVE TO

SUPPORT U.S. INNOVATION IS
TO REFORM THE RESEARCH AND
DEVELOPMENT TAX CREDIT.
A Sustainable Renaissance
1981, but other nations were quick to emulateand in

many cases to surpassthe U.S. approach. Worse, this
tax credit has always been treated as temporary; Congress
extends it every few years, sometimes on an ad hoc basis.
Nurturing institutions. Another imperative should
be to preserveand to further build and strengthen
the institutions that enabled the U.S. technology and
software sectors to grow and flourish in the first place.
These include the national research laboratories and the
university system, but also the venture capital industry, which is a crucialand uniquebridge between
academia and the marketplace. State, local, and public
private initiatives should also aim to foster the continued
growth and development of the regional clusters of technology and software innovation that have played a crucial role in building the United States advanced manufacturing capacity and productivity. These are a vital
part of what Harvard Business School professors Gary
Pisano and Willy Shih refer to as the U.S. manufacturing commons (in Producing Prosperity: Why America
Needs a Manufacturing Renaissance [Harvard Business
Press, 2012]), which provides the expertise, skilled workers, and infrastructure that manufacturers need.
Education and training. To enable real job growth
in the coming era of advanced, virtual-to-real manufacturing, the U.S. will need to build on its strengths in
educationsuch as its leading research universities
while filling gaps that have appeared in recent decades.
There are significant shortfalls in STEM (science, technology, engineering, and math) educationparticularly
technology and engineering. U.S. students, the National
Science Board reports, are earning only 11 percent of the
worlds 4 million undergraduate S&E degrees, compared
to 21 percent in China and 19 percent in the European
features title
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of the article
& manufacturing
What can U.S. business leaders and policymakers do

to ensure that the manufacturing renaissance solidifies,
gains force across industries, and realizes its potential
in fostering economic growth during the years ahead?
Action should be focused in three areas: maintaining the U.S.s established culture of innovation, nurturing the institutions that have made the U.S. a leader
in software, and raising the quality of education and
training, particularly in those aspects that will matter
to manufacturing. Above all, policy needs to reduce
uncertainty, reflecting broad agreement and a focus on
long-term success.
Innovation culture. One of the most important
things that business leaders will look for as they locate advanced manufacturing facilities is access to the
leading-edge research and technology development that
flows from major universities, along with the availability of engineers, executives, and production workers
with the right skills. To ensure the continued robustness of U.S. R&D, in fact, it is necessary to make sure
that manufacturing itself stays in the United States. As
Dow Chemical chairman and CEO Andrew Liveris
notes in Make It in America: The Case for Re-Inventing
the Economy (Wiley, 2011), You cannot separate innovation from manufacturing. Where manufacturing
goes, innovation inevitably follows.
One simple initiative to support U.S. innovation is
to reform the research and development tax credit (referred to in current law as the research and experimentation tax credit). It should be extended, simplified,
and made permanent. There is broad bipartisan support for this change. The U.S. was a leader in encouraging innovation when the tax credit was enacted in
10
computer engineering), a journeymans certificate recognized by thousands of companies, and a job, with
no loans to pay off. IBMs P-Tech initiative, launched
in 2011, is another example. (P-Tech stands for Pathways in Technology Early College High School.) The
program starts in ninth grade, offering an integrated
high school and college curriculum focused on STEM
subjects, along with workplace skills such as leadership,
communication, and problem solving. Students receive
both their high school diploma and an associates degree
in computer information systems or electromechanical
engineering technology, and are first in line for entrylevel positions at IBM.
Programs like these are models for the kind of experience-based educational paths that must be expanded
nationwide. These programs are similar to Germanys
youth apprenticeships, which have helped enable that
nation to maintain a leading position in manufacturing
and to boast the lowest youth unemployment rate in the
European Union. At 7.5 percent, the jobless level among
young people in Germany is less than a third of the
E.U. average rate of 24 percent, and less than half the
U.S. rate of 16.2 percent. An extensive, well-supported
apprenticeship system, and other programs through
which people receive hands-on experience coupled with
academic training, will prepare young Americans for
the jobs that advanced manufacturing will offer: skilled,
well-paid, and secure jobs that can support a new middle class. Developing such programs will require a partnership among government, educational institutions,
industry, and laborand will provide a collective power
no single sector can match.
The Case for Optimism
Public perception about manufacturing has been changing for the better in the U.S. over the past few years.
From the 1980s through the 1990s, many policymakers
and prominent economists had argued that the decline
of manufacturing in the U.S. was an inevitable evolution, and that the expanding service and financial sectors would continue to provide growth and prosperity.
The dot-com bust in the early 2000s, the housing and
financial debacle later in the decade, and the worsening

11
Union. Gaps at the primary- and secondary-school levels are also wide. Although STEM knowledge and skills
are improving, U.S. students still lag behind international averages in mathematics.
Most of all, the public and private sectors must
close the nations training gap. The commonly used
phrase skills gap implies that this is a matter of capable individuals needing proficiency, but the problem
is broader and more systemic. The U.S. will never meet
its future challenges until managers and policymakers
put the burden on those who do the training, rather
than those who need to be trained. In Why Good People
Cant Get Jobs: The Skills Gap and What Companies
Can Do about It (Wharton Digital Press, 2012), Wharton professor Peter Cappelli notes that in 1979, U.S.
workers received an average of 2.5 weeks of training per
year. By 1995, the average company offered just under
11 hours per year. In 2011, Accenture found, only 21
percent of U.S. employees had received any employerprovided training in the previous five years.
To succeed in advanced manufacturing workplaces,
workers need to possess the production skills to set up,
monitor, and control the manufacturing processes, and
the process design and development skills to continuously improve them. They will need strong computer
skills, the ability to understand sophisticated production processes, and the knowledge of how to work effectively in teams.
A number of pilot programs are under way today
that show how the training gap can be closed. Siemens
is a partner in an apprenticeship program in North
Carolina, along with Apprenticeship 2000, Central
Piedmont Community College, and six other technology corporations. High school graduates joining the
program alternate between studying at the college and
working at Siemenss advanced turbine plant in Charlotte. Students are paid while training and attending
school for three and a half years, and upon graduation
are offered full-time jobs at competitive salarieshigher, in fact, than the average salaries for graduates with
four-year liberal arts degrees. Best of all, they have an
associates degree in mechatronics (a multidisciplinary
field that includes mechanical, electrical, control, and
innovation, its strong position as the world leader in

software development, and its robust education infrastructure, is well positioned to lead in this cycle. To seize
the opportunity, the business and policy communities
will need to work together to build on these strengths.
If they do, the conditions will be in place for a new approach to manufacturing, ensuring that the investment
and expansion we have seen over the last several years
can continue and grow, and eventually lead to an age
of enlightenment in which advanced manufacturing becomes a central pillar in building a U.S. economyand
a stronger middle classfor the 21st century. +
Reprint No. 00240
Resources
Robert D. Atkinson and Stephen J. Ezell, Innovation Economics: The Race
for Global Advantage (Yale University Press, 2012): Why the U.S. needs
a coherent innovation policy to remain competitive, from two officers of
the Information Technology and Innovation Forum.
Peter Cappelli, Why Good People Cant Get Jobs: The Skills Gap and What
Companies Can Do about It (Wharton Digital Press, 2012): The director
of Whartons Center for Human Resources makes a case for changing the
way talent is developed, recruited, and retained.
Kaj Grichnik and Conrad Winkler, Make or Break: How Manufacturers
Can Leap from Decline to Revitalization (McGraw-Hill, 2008): Former
Booz & Company consultants show how top companies are reinventing
themselves to compete in a new world.
Andrew N. Liveris, Make It in America: The Case for Re-Inventing the
Economy (Wiley, 2011): The chairman and CEO of Dow Chemical
makes the case for manufacturing in the United States.
Gary P. Pisano and Willy C. Shih, Producing Prosperity: Why America
Needs a Manufacturing Renaissance (Harvard Business Press, 2012): Two
professors at Harvard Business School show why manufacturing really
matters in an innovation-driven economy.
Harold L. Sirkin, Justin Rose, and Michael Zinser, The US Manufacturing Renaissance: How Shifting Global Economics Are Creating an American
Comeback (Knowledge@Wharton, 2012): Analysis and recommendations
for U.S. manufacturing from the Boston Consulting Group.
Vaclav Smil, Made in the USA: The Rise and Retreat of American Manufacturing (MIT Press, 2013): An authoritative history of U.S. manufacturing
by a noted business historian and author.
Gene Sperling, The Case for a Manufacturing Renaissance, speech
delivered at the Brookings Institution, July 2013: The director of the
National Economic Council discusses U.S. competitiveness in advanced
manufacturing.
For more thought leadership on this topic, see the s+b website at:
strategy-business.com/operations_and_manufacturing.
features title
feature
operations
of the article
& manufacturing
employment situation for workers in the U.S. have revealed the weaknesses of that argument.
Today, policymakers and consumers are becoming
more receptive to the idea that manufacturing is an important source of jobs, competitiveness, and economic
strength and security, even if some are basing their expectations of a manufacturing renaissance on the wrong
factors. The federal government has been hands-on in
convening business leaders and researchers to create
new programs to foster manufacturing, focusing school
curricula on STEM subjects, providing funding for
community college grants to expand job training, and
proposing new programs such as the Advanced Manufacturing Partnership and institutions such as the Digital Manufacturing and Design Innovation Institute.
One important effect of the current debate has
been to further build public support for manufacturing. A growing body of intellectual capitalincluding
research conducted by organizations like the Brookings
Institution, the Business Roundtable, the Manufacturers Alliance for Productivity and Innovation, and the
National Association of Manufacturers, as well as articles and books by an array of thought leadersis helping bring about a change in the American psyche.
Nevertheless, manufacturing still has a branding
problem. Lacking knowledge of what the future of advanced manufacturing looks like, too many students,
parents, educators, and policymakers reflexively associate manufacturing with archaic factory settings and low
pay. This suggests a need for further education about
the opportunities for high-paying, high-tech jobs in the
manufacturing facilities of today and tomorrow.
The coming era of advanced, virtual-to-real manufacturing will reorder the global business landscape for
decades. The key success factors for companies, nations,
and regions will be innovation, software, and education.
Manufacturers should be examining their operations,
looking for opportunities where software and advanced
technology can lead to step-change improvements.
Manufacturers that capitalize on these changes across
their entire development and production process will set
the tone that others will be forced to follow to remain
competitive. The U.S., given its historical strength in
12
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War Drums in Asia: Back to the European Future?

Old grievances, shifting power balance, spur Asian tensions as in 1914
Alistair Burnett
YaleGlobal, 11 February 2014
http://yaleglobal.yale.edu/content/war-drums-asia-back-european-future
LONDON: Historical analogies often take the place of
analysis even more so when the implications of
analogy are too horrendous to be spelled out. As we
prepare to mark the centenary of the outbreak of First
World War, ominous parallels are being drawn
between rising tension between Japan and China and
that between Germany and Britain before the
outbreak of the World War. Such comparisons are
relevant. China and the United States and its ally,
Japan, today may not be the mirror image of
European powers which came to blows, but the
cascading alliances that led to the conflagration in
1914 still hold lessons for today.
The parallel to 1914 grabbed international headlines
when, during a meeting in Davos Japanese Prime
said the situation between China
and Japan was similar to that between Germany and
Britain a century ago. Officials tried to clarify
afterwards, insisting Abe had not suggested there
would be a war. By evoking 1914, the prime minister
knew the image he conjured.
The reaction to Abes comments suggest that
drawing analogies between 2014 and 1914 may not
only be potentially misleading, it can also add to the
tension: China responded by accusing Japan of being
a troublemaker the role many have ascribed to
Germany in the run-up to the First World War.
Echo of ancient war drums? Japanese
compares tension in East Asia with that
prevailing in Europe before 1914 (top);
German officer announces the Kaisers
order for mobilization leading to the
Great War (Photo: IWM)
If those 1914 comparisons are to hold true, then

China would be seen as playing the role of Germany,
the rising power, challenging the established power,
the United States, in the role Britain played a century
ago. This is often called the Thucydides Trap,
named for the Ancient Greek historian of the
Peloponnesian War, during which Sparta had
confronted the rising power of Athens.
Washington and Beijing are clearly wary of each other, yet its also clear both want to avoid
conflict. While Chinese economy will continue growing faster and top US GDP in the next
decade or so, the two countries are economically and financially interdependent. China is also
modernizing its military and developing its navy and air force, so it can secure the sea lanes it
now depends on to import the energy and raw materials on which its economy depends, and
this challenges the US dominance of the seas in Asia maintained since the Second World War.
The Obama administration has pursued its rebalance or pivot to Asia for the past three
years. This has involved focusing military as well as economic attention on the region and has
raised suspicions in China where many see it as a Cold Warstyle containment policy.
American officials insist the pivot is not containment and avoid any appearances of the
US calling the Chinese out; instead US officials are urging Beijing to be more transparent about
its military capabilities and to develop crisis management mechanisms so accidental conflict can
be avoided.
For its part, President Xi Jinpings government is calling for a new type of great power relations
with the US, and although its not clear yet exactly what this means in practice, Beijing seems to
want to improve relations with Washington.
Yet tension in East Asia is rising especially between China and Japan.Unlike relations
between Germany and Britain a hundred years ago, the present-day tension between China
and Japan has its roots in past conflicts between the two countries.
Many Chinese do not think the Japanese leadership has fully accepted the countrys
responsibility for the invasion of China in the 1930s and 1940s. Chinese students learn about
the widespread atrocities committed by Japanese forces in gory detail, while Japanese
nationalists play down the details and China says many Japanese textbooks whitewash the
invasion all of which means theres been no real reconciliation. China and Japan also have a
long-running territorial dispute over control of the Senkaku/Diaoyu islands in the East China Sea
arising out of the first Sino-Japanese war of the modern era in the 1890s. The islands were
annexed by Japan after that war in 1895, but 50 years later, after the Second World War, unlike
other territories conquered by the Japanese, they were not returned to China, but instead
occupied by the Americans. By the time the United States decided it didnt need the islands in
the early 1970s, China was ruled by the Communist Party and Japan was a US ally, so
Washington returned the islands to Japanese control.
Growing more powerful in recent years, China has increased pressure on Japan to
acknowledge there is a dispute over the islands. China now regularly sends ships and planes to
patrol near the islands, the Japanese respond with patrols of their own, and the likelihood of an
accidental clash is increasing.
So even if comparisons with 1914 are off the mark, conflict between China and Japan could still
be a possibility.
Abe is a seen as a nationalist who would like Japan to move on from the pacifism imposed on it
by the United States after 1945. He may not go as far as changing the pacifist elements of the
constitution, but he wants to change Japans defense posture, so the armed forces take a more
assertive role up to now, Japan has relied heavily on the United States to defend the areas
around it and he justifies this by pointing at Chinas growing military capabilities and doubts
over Beijings intentions.
In Beijing, Xi is focused on reforming the economy and cleaning up the corruption thats
undermining the Communist Partys legitimacy, which would suggest he does not want a war.
But for his reforms to succeed, maintaining tension with Tokyo and a sense of threat from
abroad is useful as it encourages loyalty to the center. Xi will also need support of the military
and security apparatus for his reforms as he takes on vested interests in the party leadership,
provincial governments and large state enterprises, and this makes compromise with Japan
more difficult. Chinese public opinion is also hostile to Japan, evident in opinion polls, social
media and the ease with which anti-Japanese boycotts occur.
So, domestic politics as well as geopolitics are driving both China and Japan to be more
assertive, and this worries Washington. When Abe visited the controversial Yasukuni shrine for
Japanese war dead at the end of December, it not only stoked tension with China and South
Korea which issued strong protests, the United States publicly stated it was disappointed.
In his comments at Davos, Abe, presumably thinking of the strong trade links between his
country and China, said the economic links between Germany and Britain did not prevent war in
1914. Some listening to the Japanese prime minister came away with the impression he thinks
pecuniary interests may not be strong enough to deter a military clash.
If a conflict between Beijing and Tokyo were to break out, the US could not bank on its other ally
in the region, Seoul, given the tense relations between South Korea and Japan which have their
own territorial and historical disputes. So Washington would choose between honoring its
defense treaty with Japan and avoiding direct conflict with China. As Washington would stand to
lose the trust of many allies in the region and is not noted for eating humble pie, the odds would
suggest support for Japan. So if there is any parallel with 1914, it could turn out to be in how
cascading alliance commitments can cause a wider war.
Alistair Burnett is the editor of The World Tonight, a BBC News program.
Insight Report
Global Risks 2015

10th Edition
Figure 1: The Global Risks Landscape 2015
Spread of
infectious diseases
Weapons of
mass destruction
Fiscal crises
Biodiversity loss and

ecosystem collapse
Failure of financial
mechanism or institution
average
4.74
Interstate
conflict
Failure of
climate-change
adaptation
Energy price
shock
Critical information
infrastructure breakdown
5.0
Water crises
Terrorist
attacks
Food crises
Unemployment
or underemployment
Cyber
attacks
Asset bubble
Profound social instability
State collapse
or crisis
4.5
Unmanageable
inflation
Misuse of
technologies
Large-scale
involuntary migration
Deflation
Failure of
critical infrastructure
Failure of
national governance
Extreme
weather events
Data fraud
or theft
Natural catastrophes
Man-made environmental
catastrophes
4.0
Impact
Failure of urban planning
3.5
4.0
4.5
5.0
4.82
average
Likelihood
Top 10 risks in terms of
Top 10 risks in terms of
Likelihood
Impact
Interstate conflict
Water crises
Extreme weather events
Spread of infectious diseases
Failure of national governance
Weapons of mass destruction
State collapse or crisis
Interstate conflict
Unemployment or underemployment
Failure of climate-change adaptation
Energy price shock
Critical information infrastructure breakdown
Water crises
Fiscal crises
Data fraud or theft
Unemployment or underemployment
10
Cyber attacks
10
Biodiversity loss and ecosystem collapse
5.5
plotted
area
7.0
1.0
7.0
Categories
Economic
Environmental
Geopolitical
Societal
Technological
Source: Global Risks Perception Survey 2014.

Note: Survey respondents were asked to assess the likelihood and impact of the individual risks on a scale of 1 to 7, 1 representing a risk that is not likely to happen or have
impact, and 7 a risk very likely to occur and with massive and devastating impacts. See Appendix B for more details. To ensure legibility, the names of the global risks are
abbreviated. Also see Appendix A for the full name and description.
Table A: Global Risks 2015

Asset bubble in a major economy
Deflation in a major economy
Economic
Energy price shock to the global economy

Failure of a major financial mechanism or institution
Failure/shortfall of critical infrastructure
Fiscal crises in key economies
High structural unemployment or underemployment
Unmanageable inflation
Environmental
Extreme weather events (e.g. floods, storms, etc.)

Major biodiversity loss and ecosystem collapse (land or ocean)
Major natural catastrophes (e.g. earthquake, tsunami, volcanic eruption, geomagnetic storms)
Man-made environmental catastrophes (e.g. oil spill, radioactive contamination, etc.)
Geopolitical
Failure of national governance (e.g. corruption, illicit trade, organized crime, impunity, political deadlock, etc.)
Interstate conflict with regional consequences
Large-scale terrorist attacks
State collapse or crisis (e.g. civil conflict, military coup, failed states, etc.)
Societal
Food crises
Large-scale involuntary migration
Rapid and massive spread of infectious diseases
Technological
Water crises
Breakdown of critical information infrastructure and networks
Large-scale cyber attacks
Massive incident of data fraud/theft
Massive and widespread misuse of technologies (e.g. 3D printing, artificial intelligence, geo-engineering, synthetic biology, etc.)
Table B: Trends 2015

Ageing population
Climate change
Environmental degradation
Growing middle class in emerging economies
Increasing national sentiment
Increasing polarization of societies
Rise of chronic diseases
Rise of hyperconnectivity
Rising geographic mobility
Rising income disparity
Shifts in power
Urbanization
Weakening of international governance
Figure 3: The Risks-Trends 2015 Interconnections Map
Climate change
Environmental degradation
Urbanization
Rising geographic mobility

Rise of chronic diseases

ecosystem collapse
Failure of climatechange adaptation
Food crises
Water crises
Weakening of
international governance
Growing middle class

in emerging economies
Failure of national
governance
Unemployment or
underemployment
Interstate
conflict
Rise of
hyperconnectivity
Fiscal crises
State collapse
or crisis
Asset bubble
Rising income disparity
Data fraud or theft
Ageing population
Increasing national sentiment
Increasing polarization
of societies
Shifts in power
Geopolitical
Risks
Economic
Risks
Environmental
Risks
Technological
Risks
Societal
Risks
Trends
Number and strength

of connections
(weighted degree)

Note: Survey respondents were asked to select between three and six trends and to identify for each the risk they believe is most interconnected. See Appendix B for more
details. To ensure legibility, the names of the global risks are abbreviated. Also see Appendix A for the full name and description.
Figure 2: The Global Risks 2015 Interconnections Map

ecosystem collapse
Failure of climatechange adaptation

Man-made environmental catastrophes
Food crises
Water crises
Large-scale
involuntary migration
Energy price shock
Profound
social instability
Failure of
national governance
Cyber attacks
Failure of critical infrastructure
Unemployment or
underemployment
Interstate conflict
Asset bubble
State collapse
or crisis
Misuse of
technologies
Fiscal crises
Terrorist attacks
Deflation
Data fraud or theft
Geopolitical
Risks
Economic
Risks
Environmental
Risks
Technological
Risks
Societal
Risks
Number and strength

of connections
(weighted degree)

Note: Survey respondents were asked to identify between three and six pairs of global risks they believe to be most interconnected. See Appendix B for more details. To
ensure legibility, the names of the global risks are abbreviated. Also see Appendix A for the full name and description.
Part 1
Part 2
Part 1:
Global Risks 2015
Introduction
Part 3
The Global Risks 2015 report comes

at a time when various manifestations
of global risks brought into sharp
relief that the world is not equipped
to deal with these events or similar
occurrences in the future. For the
past decade, the Global Risks
report has been calling attention to
global risks and providing a base for
multistakeholder action. Over this
period, the evolution in understanding
how global risks are thought about
and assessed has been significant.
This has led the Forum to update the
methodology it has used to assess
global risks for the 10th edition of
the report, based on input from the
members of the newly established
Advisory Board.
Building on this evolution, in this report
a global risk is defined as an uncertain
event or condition that, if it occurs,
can cause significant negative impact
for several countries or industries
within the next 10 years. Based on
this refined definition, 28 global risks
were identified and grouped into the
five customary categories: economic
risks, environmental risks, geopolitical
risks, societal risks and technological
risks. A description of the risks and the
methodology employed can be found
in Appendix A and Appendix B.
A further development in the 2015
report is the delineation of risks and
trends. This distinction allows a better
understanding of the underlying drivers
of global risks. A trend is defined as
a long-term pattern that is currently
taking place and that could contribute
to amplifying global risks and/or altering
the relationship between them. The
focus on trends can contribute to risk
mitigation; for example, better planned
urbanization can help alleviate certain
risks that concentrate in urban areas.
Moreover, the differentiation between
trends and risks emphasizes the fact
that trends, unlike risks, are occurring
with certainty and can have both
positive and negative consequences.
Trends are long-term, ongoing
processes that can alter the future
evolution of risks or the interrelations
among them, without necessarily
becoming risks themselves.
12
Global Risks 2015
Part 1
The Global Risks Landscape, as

defined by the survey, highlights five
global risks that stand out as both
highly likely and highly potentially
impactful (upper right quadrant
of Figure 1). Interstate conflict
has significantly leaped up both
dimensions since 2014, arguably
reflecting recent geopolitical conflicts
that are fuelling geopolitical and social
instability. As last year, concerns about
environmental and economic risks
remain, in particular around failure of
climate-change adaptation, water
crises1 and unemployment and
underemployment reflecting concern
about how little tangible action has
been taken to address them. At the
same time, cyber attacks remain
among the most likely high-impact
risks.
In the geopolitical risks category,

respondents identified weapons of
mass destruction (WMDs), which
include weapons containing nuclear,
chemical, biological and radiological
technologies, as the third most
impactful risk, albeit as the second
least likely risk. If deployed, they would
create an international crisis with
huge human and economic costs. In
the coming decades, technological
advancements, greater access to
scientific knowledge and the increased
vulnerability of classified information
to cyber threats enhance the risk
of WMDs proliferation, particularly in
fragile areas. This highlights the need
for greater international collaboration to
control the proliferation of WMDs.
shown in Figure 1.1. In the short term,

respondents are more concerned
about global risks related to recent
events and human action, including
interstate conflict, state collapse,
failure of national governance and
large-scale terrorist attacks. The
list for the longer term is dominated
by risks related to physical and
environmental trends that have been
less prominent in recent headlines,
such as water crises, failure of climatechange adaptation and food crises.
Interestingly, the risk of social
instability scores high in both the
short and long term. This trend
towards social fragility is one of five
threads that stand out from the 2015
survey along with growing concern
about geopolitics, the possible
overshadowing of economic risks by
other more imminent risks, concern
about unaddressed environmental
risks, and persisting vulnerabilities in
cyberspace which are explored in
more depth below.
Part 3
The results provide a snapshot of

current perceptions on global risks
and highlight priorities for action from
three complementary angles: (1) the
Global Risks Landscape, in which risks
are assessed according to likelihood
and impact, allowing a comparison of
how perceptions have evolved over the
years (Figure 1); (2) the Interconnections
Maps of Risks (Figure 2) and of Risks
and Trends (Figure 3); and (3) the level
of concern in the short and long terms
(Figure 1.1).
Respondents also underscored the

potentially devastating impact of
the rapid and massive spread of
infectious diseases, which reflects the
need for a higher level of preparedness
for major pandemics at both the
country and international levels to
address this important risk (see Box 2.4
in Part 2).
Among the economic risks, fiscal

crises and unemployment are
perceived as close to equally impactful
and likely as in last years report,
yet other risk categories take centre
stage this year (see Figure 1.4). While
the world has made progress in
addressing and preventing financial
crises, and small improvements in fiscal
issues and unemployment have been
achieved, the danger of complacency
compared to other risks exists: experts
remain concerned about significant
residual risks, which may have been
overshadowed by other risks in the
survey.2
The prominence of risks dominating
recent headlines in our assessments
raises questions about the role of
the availability heuristic risks that
have manifested themselves recently
may be uppermost in peoples minds,
even if their recent occurrence does
not necessarily increase their impact
or likelihood over a 10-year time
horizon. To reveal more about the
psychology behind the responses, the
survey this year asked respondents
to nominate risks of highest concern
over two time horizons: 10 years, as
usual, and 18 months. The results are
Global Risks 2015
Part 2
As in previous years, risks are assessed

based on the perception of leaders and
decision-makers obtained through the
Global Risks Perception Survey. The
survey captures the views of the World
Economic Forums multistakeholder
communities across different areas
of expertise, geographies and age
groups. It was conducted between
July and September 2014 and
gathered the perceptions of almost
900 leading decision-makers from
business, academia and the public
sector. A more detailed description
of the sample and the surveys
methodology is presented in Appendix
B. Complementary to the Global
Risks Perception Survey data, the
views of business executives were
also collected on the risks of highest
concern for doing business in their
country, presented in more detail in
Appendix C.
13
Part 1
Box 1.1: The evolution of the risks of highest impact/likelihood
Part 2
As the reports 10th anniversary approaches, the evolution of the perceived top five global risks can be viewed in terms
of impact and likelihood as documented in the Global Risks reports from 2007 to 2015. As Table 1.1.1 shows, economic
risks largely dominated from 2007 to 2014, with the risk of an asset-price collapse heading the list in the run-up to the
financial crisis, giving way to concerns about the more immediate but slow-burning consequences of constrained fiscal
finances, a major systemic financial failure in the immediate post-crisis years, and income disparity. This year features a
radical departure from the past decade; for the first time in the reports history, economic risks feature only marginally in
the top five. In the 25th year after the fall of the Berlin Wall, geopolitical risks are back on the agenda. The dispute over
Crimea in March 2014 serves as a forceful reminder of the consequences of interstate conflicts with regional
consequences that seemed long forgotten and unfathomable, as further explored in this report. Similarly, together with
other events in 2014, such as the prominent rise of the Islamic State, it has brought state collapse and the failure of
national governance back into public consciousness. At the same time, health-related risks, such as pandemics last
considered impactful in 2008 have made it back into the unglamorous top, following the unprecedented spread of
Ebola.
Part 3
On a higher level, Table 1.1.1 also indicates a shift over past years away from economic risks in general to environmental
risks ranging from climate change to water crises. While this highlights a recognition of the importance of these
slow-burning issues, strikingly little progress has been made to address them in light of their far-reaching and
detrimental consequences for this and future generations.
Table
T
Ta
ble 1.1.1: The Evolving Risks Landscape (2007-2015)
Top 5 Global Risks in Terms of Likelihood
2007
2008
2009
2010
1st
Breakdown of
critical information
infrastructure
Asset price collapse
2nd
Chronic disease
in developed
countries
Middle East
instability
Slowing Chinese
economy (<6%)
Slowing Chinese
economy (<6%)
Flooding
Oil price shock
Failed and failing

states
Chronic disease
Chronic disease
China economic
hard landing
Oil and gas price

spike
Global governance
gaps
Chronic disease,
developed world
Retrenchment
from globalization
(emerging)
2014
2015
Income disparity
Interstate conflict
with regional
consequences
Extreme weather
events
Extreme weather
events
Rising greenhouse
gas emissions
Unemployment
and
underemployment
Failure of national
governance
Cyber attacks
Water supply crises
Climate change
State collapse or
crisis
Water supply crises
Mismanagement
of population
ageing
Cyber attacks
High structural
unemployment or
underemployment
2011
Storms and
cyclones
2012
2013
Severe income
disparity
Severe income
disparity
imbalances
imbalances
Corruption
Rising greenhouse
gas emissions
infrastructure
Fiscal crises
Biodiversity loss
Global governance
gaps
Climate change
Breakdown of critical information infrastructure
3rd
4th
5th
Breakdown of
Top 5 Global Risks in Terms of Impact

2007
2008
2009
2010
2nd
Retrenchment
from globalization
Retrenchment
from globalization
(developed)
Retrenchment
from globalization
(developed)
3rd
Interstate and
civil wars
Slowing Chinese
economy (<6%)
Pandemics
Oil price shock
1st
2011
2012
2013
2014
2015
Fiscal crises
Major systemic
Major systemic
Fiscal crises
Water crises
Retrenchment
from globalization
(developed)
Climate change
Water supply
crises
Water supply
crises
Climate change
Rapid and massive

spread of infectious
diseases
Oil and gas

price spike
Oil price spikes
Geopolitical
Food shortage
crises
imbalances
Water crises
Weapons of mass
destruction
Oil and gas

price spike
Chronic disease
infrastructure
Chronic disease
Unemployment
and
underemployment
Interstate conflict
with regional
consequences
Pandemics
Fiscal crises
Fiscal crises
Extreme energy
price volatility
infrastructure
breakdown
Failure of
climate-change
adaptation
Breakdown of critical information infrastructure
4th
5th
Economic
Breakdown of
Environmental
Geopolitical
imbalances
weapons of mass
destruction
Extreme volatility in
energy and
agriculture prices
Failure of climate
change adaptation
Societal
Technological
Source: Global Risks reports 2007-2015, World Economic Forum.

Note: Global risks may not be strictly comparable across years, as definitions and the set of global risks have evolved with new issues emerging on the 10-year horizon.
For example, cyber attacks, income disparity and unemployment entered the set of global risks in 2012. Some global risks were reclassified: water crises and rising
income disparity were recategorized as societal risks and as a trend, respectively, in 2015. The 2006 edition of the Global Risks report did not have a risks landscape.
14
Global Risks 2015
Part 1
Figure 1.1: Global Risks of Highest Concern - for the Next 18 Months and 10 Years
Geopolitical risks
Interstate conflict
18 months
10 years
18 months
Water crises
47.2%
19.2%
10 years
Economic risks
Unemployment or
underemployment
40.3%
Asset bubble
Terrorist attacks
Food crises
Failure of financial mechanism

or institution
Large-scale involuntary
migration
Energy price shock
Deflation
Failure of climate-change
adaptation
10 years
Technological risks
21.5%
33.1%
Cyber attacks
Data fraud or theft

ecosystem collapse
Misuse of technologies
Man-made environmental
catastrophes
18 months
21.0%
Failure of critical infrastructure
10 years
Part 3
18 months
33.5%
10 years
Fiscal crises
23.3%
Failure of national governance
Environmental risks
18 months
Part 2
State collapse or crisis
Societal risks
23.3%
20.2%
Area corresponds to
% of respondents
mentioning the risk
to be of high concern
on an 18-month time frame
Area corresponds to
% of respondents
mentioning the risk
to be of high concern
on a 10-year time frame
Source: Global Risks Perception Survey 2014, World Economic Forum.

Note: Survey respondents were asked to select up to five risks of highest concern for each time frame. The percentage indicates the share of respondents who selected the
specific global risk among the five risks of highest concern for each time frame. In each category, the risks are sorted by the total sum of mentions. See Appendix B for more
details. To ensure legibility, the names of the global risks are abbreviated. See Appendix A for the full name and description.
Fragile Societies under

Pressure
The fragility of societies is of increasing
concern, fuelled by underlying
economic, societal and environmental
developments (Figure 3 and Figure
1.2). A major driver of social fragility is
rising socio-economic inequality
within countries, although it is
diminishing between countries. Among
the members of the Organisation
for Economic Co-operation and
Development (OECD), the average
income of the richest 10% has now
grown to about nine times that of the
poorest 10%. In other countries, the
ratio is even higher: for example, more
than 25 times in Mexico.3
Income inequality is widening quickly
in large emerging markets. The
Peoples Republic of China has seen
its Gini Index rise from about 30 in
the 1980s to over 50 in 2010.4,5 While
extreme poverty (less than $1.25 per
day) was reduced from afflicting over
50% of the worlds population in 1990
to 22% in 2010, the same reduction
did not take place in those earning
under $3 per day.6 The story is of
people escaping extreme poverty,

yet remaining poor. Widening income
inequality is associated with lower and
more fragile economic growth, which
reduces the scope to meet rising social
expectations in emerging markets.7
Rising structural unemployment
drives both inequality and social
pressures. Lower economic growth
and technological change are likely
to keep unemployment high in the
future, also in developing countries.
The spread of connectivity enables
protest movements to mount more
quickly, increasing the risk of unrest
and violence that could easily spill
over from individual countries to affect
the global economy. While inequality
and unemployment contribute to
social instability, social instability in
turn impacts negatively on equality,
employment and wealth creation.
The multidirectional cause-and-effect
relationship makes it harder to address
the related risks.
Underlying social fragility is also the
accelerating pace of change, growing
complexity and the deepening extent
of global interdependence, which
together reduce peoples feeling
of control over their immediate

environment and hence their sense
of stability and security. A common
psychological response to insecurity
and perceived loss of control is the
desire to turn inwards towards smaller
groups that have a stronger sense of
identity. At the same time, increased
global connectivity allows people
to make their voices heard and to
convene with like-minded individuals.
The growing risks of social extremism
and isolationism are brought to
light through the rising influence of
religious groups and in the separatist
movements in Catalonia and Scotland.
The effects associated with climate
change will put further pressure on
societies. Its expected impact on
the ability to grow food and access
water could prompt sudden and
uncontrolled population migrations,
putting additional pressure on
receiving countries.8 Already in 2014,
the number of refugees worldwide
from environmental or conflict-related
causes reached its highest level since
World War II.9
Global Risks 2015
15
Part 1
Figure 1.2: The Changing Global Risks

Landscape 2014-2015, Societal Risks
Societal Risks
2014
Water crises
Part 2
Spread of
infectious diseases
5.0
2015
Profound
Food
crises
social
instability
Profound
Foodinstability
crises
social
Part 3
Impact
4.0
Failure of
urban planning
4.0
5.0
Likelihood
Source: Global Risks Perception Surveys 2013 and

2014, World Economic Forum.
Note: See endnote 25
As societies become less homogenous

and less bound by common values,
and more polarized into the haves and
have-nots, they will become harder to
govern effectively. This in turn increases
the risk of prolonged economic
stagnation, creating the potential for
a self-reinforcing downward spiral
into social chaos. States will need to
mitigate this risk through policies to
make growth more inclusive: providing
public goods and services such as
social protection, hospitals, schools,
transport and telecommunications
infrastructure.
Growing Worries about

Conflict
Having not featured prominently
in previous editions of the report,
interstate conflict is this year
considered the most likely high-impact
risk over the next 10 years, or indeed
perhaps even sooner. As already
discussed, respondents are even more
concerned about geopolitical risks in
the short term than in the long term
(Figure 1.1)
Many observers believe that the world
is entering a new era of strategic
competition among global powers.
Disillusion about globalization is leading
to more self-interested foreign policies
in combination with a rise in national
sentiment (Figure 3) fuelled in part by
the social pressures described above.
Growing nationalism is evident around
the world: in Russia, as seen in the
Crimea crisis; in India, with the rising
popularity of nationalist politicians;
and in Europe, with the rise of far-right,
nationalistic and Eurosceptic parties in
a number of countries.
Growth and employment creation are
currently expected to remain below
pre-crisis levels in both emerging
markets and advanced economies,
suggesting that the drivers of
nationalism will remain strong, and
raising the possibility of more frequent
and impactful conflicts among states.
Importantly, as can be seen in Figure 2,
interstate conflict is no longer physical
but uses economic means and cyber
warfare to attack peoples privacy as
well as intangible assets.
Geopolitical risks can have cascading
impacts on other risks. As state
structures are challenged by conflict,
the risk of the failure of national
governance and state collapse or crisis
can increase in areas where current
state boundaries do not necessarily
reflect popular self-identification. A
recent example is Iraq and Syria,
where ISIS has claimed control of
territory and attracted 20,000 to
30,000 fighters from a near standing
start.10 The rapid rise and brutality of
ISIS as well as the response of the
international community may underlie
the increased likelihood and impact
attributed by respondents to the
risk of the deployment of weapons
16
Global Risks 2015
of mass destruction and the higher

potential impact than in previous years
associated with large-scale terrorist
attacks (Figure 1.3).
Failure of national governance features
strongly this year, as the third most
likely risk across the global risks
landscape. This risk area captures a
number of important elements around
the inability to efficiently govern as
a result of corruption, illicit trade,
organized crime, the presence of
impunity and generally weak rule of
law. Over past years, the links between
many forms of global crime and
corruption and their impact on global
security, extremism, terrorism and
fragile states have only grown stronger,
and it is critical to acknowledge and
address them through more effective
policies that curb illegal financial
flows, foster transparent governance
and build capacity around anti-crime
efforts at the national and local levels.
Absent a stronger response from both
the public and private sectors, the risk
is of undoing hard-earned gains in
economic and political stability, and
further eroding trust in leadership.
In a number of countries, such as
India, Indonesia and Romania, new
leaders have been elected in large
part due to their public commitment to
more transparent and corruption-free
governance models, underscoring an
ongoing shift in public expectations.
The growing interconnectedness of
the global economy increases the
economic effects of any geopolitical
conflict. Supply chains that run
across countries in conflict could be
interrupted, leading to disruptions in
the availability of goods or energy.
Survey respondents considered the
risk of an energy price shock to the
global economy as more impactful
and more likely than in previous years,
despite the increasing availability of
shale gas or alternative energy sources.
The interplay between economic and
geopolitical forces is further explored in
Part 2 of this report.
Part 1
The phenomenon is not without precedent: the Provisional Revolutionary

Government in South Vietnam did much the same in the late 1960s and early
1970s, without the self-glorification of atrocity and terror. And it is not without
parallel today. The Taliban have effective control over parts of Afghanistan and
was effectively the state in the late 1990s, until the US-led offensive overthrew
it in October 2001. Among other examples, for a long time FARC has been in
control of large areas of Colombia, while the Seleka militia is in charge of
northern areas of Central African Republic. Having withdrawn from Bangui in
January 2014 under heavy international pressure, they are recuperating by
systematically taxing gold and diamond mining, livestock and other economic
activities behaving in part like a nascent state. Some groups have not based
themselves outside the territory over which they are fighting, but have waged
warfare that is not territorially limited. In the Al Qaeda mode, they have fought
what they perceive to be a global enemy. Today, perhaps the trend is in the
opposite direction: re-entry into an era of the non-state state.
2014
Weapons of
mass destruction
5.0
2015
Interstate conflict
Terrorist attacks
State collapse
or crisis
4.0
4.0
Part 3
But what really marks ISIS out is that it has claimed statehood and with that
has established some of the machinery of state management. ISIS has not
only proclaimed the new Caliphate, the rule of the successors of the Prophet
Muhammad not that it has any theological credibility to do so but also
administers the area of northern Iraq and eastern Syria where it holds sway. It
handles law and order, some social services on a selective basis, and has an
intelligence service and system of informers set up for it by former officials of
the overthrown Baathist regime of Saddam Hussein. Adding to the lavish
funds it has raised from the Gulf region, it has also taken over and emptied the
central bank in Mosul, making it the richest non-state armed force in the world
and equipping it to be a non-state state.
Geopolitical Risks
Part 2
The group known as ISIS, ISIL or the Islamic State has gained global notoriety
through its taste for video-recorded executions and large-scale atrocity, with a
background of further human rights abuse that includes arbitrary
imprisonment and sexual enslavement. While its thirst for violence, blood and
misery and especially the way it glories in these crimes mark it out from
other non-state armed forces of our age, this is really only a quantitative
distinction. Other groups many of them part of the global Al Qaeda franchise
do the same, only less. Al Nusra in Syria, Al Qaeda in the Islamic Maghreb
and the Nigerian group known in the West as Boko Haram all do some of what
ISIS does on a somewhat smaller scale.
Impact
Box 1.2: The rising threat from non-state actors

Landscape 2014-2015, Geopolitical
Risks
5.0
Likelihood

Rising nationalist sentiment and

declining trust among global players
are contributing to a weakening
of international governance,
undermining the international
communitys ability to act decisively
on issues such as conflict resolution,
Internet governance, climate change
and the management of oceans.
Failure to collaborate and implement
common solutions in these areas could
significantly undermine future global
growth.
Global Risks 2015
17
Part 1
Part 2
The global economy is returning to

growth, albeit sluggishly, and there is
a feeling that significant progress has
been made in reducing the likelihood of
another financial crisis (as explored in
Box 1.4). This may reflect a false sense
of control, as history shows that people
do not always learn from past failures
and are often taken by surprise by the
same risks.
Part 3
The global unemployment rate is

expected to remain at current levels
until 2018, reflecting a growing
problem of structural unemployment
in advanced economies.11 This will
likely keep wages low, maintaining
deflationary pressures; in the Eurozone,
inflation fell as low as 0.66% in 2014.
As past years have seen a build-up
of debt in many major economies
notably China, where the corporate
debt-to-GDP ratio went from 92%
in 2003-2007 to 110% in 2013 the
possible risk is that deflation could
reduce debtors ability to repay,
threatening the future stability of the
financial system.12
Conversely, low interest rates have
also fuelled the risk of asset bubbles.
Since the financial crisis, the use of
expansionary monetary policy such
as quantitative easing and zero interest
rates has not had the expected
impact of significantly increasing credit
availability in the real economy, instead
leading to a reflation of asset prices.
Credit booms and asset bubbles have
historically resulted in bank bailouts
and recession in the real economy (see
Box 1.3).
The risks of a failure of a major
financial mechanism or institution
and fiscal crises are perceived as
equally impactful and likely as in last
years report (Figure 1.4), yet other risks,
such as water crises, interstate conflict
and the failure of climate-change
adaptation, have taken centre stage.
This runs the risk of diverting decisionmakers attention away from continuing
economic reforms. Despite recent
efforts (see Box 1.4), either deflationary
pressures or the bursting of an assetprice bubble could still cause the failure
of a major financial mechanism or
18
Global Risks 2015
institution especially as the shadow

banking sector is less regulated yet
increasingly important.13 Likewise, in
many countries public debt levels are
still worryingly high so that the related
risks are likely to persist over many
years.
Decision-makers focus on other
risks could lead to inaction at a time
when continued progress in structural
reform is most necessary; The Global
Competitiveness Report 2014-2015
outlines some priorities.14 Maintaining
the momentum of both financial and
fiscal reforms will be crucial to avoid
another major economic crisis.

Landscape 2014-2015, Economic Risks
Economic Risks
Energy price
shock
2014
Fiscal crises
2015
Unemployment or
underemployment
5.0
Failure of
critical infrastructure
Fiscal crises
4.0
Impact
Economic Risks: Out of

the Spotlight?
4.0
5.0
Likelihood

Box 1.3: Asset bubbles a new old risk?

The evidence of frothiness is increasing in a number of housing markets in
both advanced and emerging economies including Canada, the United
Kingdom, Switzerland, France, Sweden, Norway, China, Hong Kong SAR and
Singapore as well as in a number of credit and equity markets across the
world.
The traditional goal of central banks has been economic stability: keeping
inflation low while achieving robust growth. The current realization is that
central banks must also seek to preserve financial stability which means,
among other things, avoiding risky bubbles. The current theory is that macroprudential regulation and supervision of the financial system will avoid bubbles
and achieve financial stability. However, bubbles are very hard to identify (price
increases could also reflect market movements), and macro-prudential
regulation has not historically been effective and excludes the unregulated
shadow banking system.
If macro-prudential regulation fails again, central banks will be left with only
one tool monetary policy to pursue both goals of economic and financial
stability. This may prove impossible. Trying to prick bubbles by using monetary
policy risks causing a bond market rout and a hard landing for the real
economy. However, keeping monetary policy loose in a bid to help the real
economy risks inflating asset bubbles that will, inevitably, eventually burst and
also damage the real economy. Loose monetary policy is the mother of all
bubbles. Attempting to walk this tightrope will be a difficult issue for central
banks in both advanced and emerging markets in the years to come.
Part 1
Box 1.4: Recent advances in the global regulation of the financial system
Part 2
The global financial system is undergoing massive structural change as a result not only of the crisis but of the regulatory
changes in its wake. The very fact that the whole post-crisis regulatory overhaul has been spearheaded by the Financial
Stability Board and G20, i.e. with explicit political backing by a global set of policy-makers, is very innovative and has not
been the case in setting international regulatory standards before. The past five years have witnessed a profound change
of international regulatory standards for banks and non-banks alike.
Part 3
Banks regulatory rules have been revised (usually subsumed under the Basel III heading), resulting in stronger capital
requirements, the first-ever globally agreed liquidity standards (for a short-term liquidity and a structural funding
measure), and new standards for constraining large exposures and improving risk management. Also, supervisory
standards are being raised and the international standard setter (Basel Committee) has launched a programme to
assess national implementation, which exerts peer pressure on jurisdictions to implement the reforms in a consistent
manner.
Cross-border resolution difficulties witnessed in the crisis are reflected in the new set of expectations with regard to
effective resolution regimes and a process of recovery and resolution planning for the largest banks, complete with
setting up cross-border crisis management groups composed of authorities from the (most prominent) jurisdictions
where these banks operate.
Regarding non-banks, the international community is finalizing a basic solvency requirement for global insurers who
are systemically important to date there has been no global solvency standard; over-the-counter derivatives
markets are undergoing major overhaul with measures aimed at mandating and/or incentivizing central clearing and
trading on organized platforms with reporting to trade repositories of all contracts. In terms of insurance regulation,
many countries in Europe, Latin America and Asia are adopting variants of the Solvency II regime. New insurance
regulation has a strong emphasis on corporate governance, disclosure and accountability. These measures are
relevant as they aim to change the broader corporate behaviour.
International accounting standards are being changed, in particular to make loss recognition more forward-looking
(newly issued IFRS9).
Some supervisory authority over the financial sector has been relocated to central banks, most notably in Europe,
where the European Central Bank has taken on additional responsibilities.
Still, of course, challenges remain. Addressing the issue of too-big-to-fail remains a key issue. Efforts are needed to: (i)
finalize living wills and identify and remove barriers to firms resolvability; (ii) reach consensus on banks loss-absorbing
capacity to ensure that they can be resolved; (iii) address obstacles to cross-border cooperation and recognition of
resolution measures; (iv) ensure recovery and resolution of non-banks; and (v) promote better regulation of the shadow
banking sector. Cross-border challenges persist also in over-the-counter derivatives reform. As regulatory regimes
developed in parallel in the two largest markets (European Union and United States), they resulted in a framework that
overlaps and is not completely consistent. Regulatory decisions allowing reliance on home regulatory regimes (known as
deference) are urgently needed. Trade reporting requirements have been adopted in key countries but legal barriers
frustrate implementation. Progress on trading standardized contracts on exchanges and electronic trading platforms
continues to slip. Political commitment is needed to advance reforms in all these areas.
Source: This box draws on the latest Global Financial Stability Report and related IMF work.
Note: In addition to the current regulatory reforms described above, some experts believe that profound changes in the corporate culture and incentive systems in the
financial sector are needed to reduce excessive risk-taking.
Global Risks 2015
19
Part 1
Part 2
The world has more to lose than ever before from massive failure of critical
infrastructure. To improve efficiency and lower cost, various systems have
been allowed to become hyperdependent on one another. The failure of one
weak link whether from natural disaster, human error or terrorism can
create ripple effects across multiple systems and over wide geographical
areas.
Part 3
Large-scale power outages might be the most visible illustration. The initiating
event in the August 2003 power failures in the United States occurred in Ohio
but the worst consequences were felt by 55 million people in the north-eastern
part of the United States and Canada. The July 2012 India blackout was the
largest in history, affecting 670 million people, about 10% of the world
population, and was partially triggered by high demand during a heat wave.
In many countries, infrastructure has not been maintained well enough to
withstand the kinds of catastrophes that could spark such cascading effects.
This is often the result of procrastination, the perception that the risk is so
small that it is not worth considering or crowding out by other priorities, and
the fact that investing in preparedness is rarely immediately rewarded in the
electoral process. The challenge is financial, and incentives are misaligned. For
example, in the United States, over 80% of infrastructure is owned or
managed by private sector firms, which are not responsible for the negative
externalities that failure of their part of the infrastructure could have
elsewhere.1 To increase investment in infrastructure, a coordinated, global,
long-term and multistakeholder approach is required. Upgrading infrastructure
is essential, in recognition that resilient infrastructure has become the
backbone of a competitive economy.
Over the past decade, awareness has

grown regarding the threats posed
by environmental change to social,
political and economic security. As the
Global Risks Perception Survey 2014
highlights, three of the top 10 risks in
terms of impact over the next 10 years
are environmental risks: water crises,
at the top of the table, and failure of
climate-change adaptation as well as
biodiversity loss (see Figure 1).15
Landscape 2014-2015, Environmental
Risks
Environmental Risks
2014
2015
Failure of
climate change
adaptation
5.0
Biodiversity loss
and ecosystem collapse
Extreme
weather
events
Man-made
environmental
catastrophes
4.0
Impact
Box 1.5: Black Sky risks to critical infrastructure
Environment High
Concern, Little Progress
4.0
Natural
catastrophes
5.0
Likelihood
Note:
1
Auerswald, Branscomb, LaPorte and Michel-Kerjan, 2006.
Both water crises and failure of

climate-change adaptation are also
perceived as more likely and impactful
than average (upper right quadrant
of Figure 1 and Figure 1.5). Global
water requirements are projected to
be pushed beyond sustainable water
supplies by 40% by 2030.16 Agriculture
already accounts for on average
70% of total water consumption and,
according to the World Bank, food
production will need to increase by
50% by 2030 as the population grows
and dietary habits change.17,18 The
International Energy Agency further
projects water consumption to meet
the needs of energy generation and
production to increase by 85% by
2035.19
20
Global Risks 2015
Part 1
Decision-makers will be forced to

make tough choices about allocations
of water that will impact users across
the economy (Part 3 of this report
highlights an approach developed in
Australias Murray-Darling Basin, for
addressing this issue). The situation
will worsen further if more man-made
environmental catastrophes causing
shocks to the system happen: more
recent examples include the Fukushima
power plant disaster threatening to
contaminate both freshwater and
seawater, or the Deepwater Horizon
oil spill contaminating large sections of
coast along the Gulf of Mexico.
Overfishing, deforestation and the
inadequate management of sensitive
ecosystems such as coral reefs are
increasing the stress on food and water
systems. Major biodiversity loss and
ecosystem collapse was assessed
as high impact by respondents, but
below average in terms of likelihood
(see Figure 1); the latter seems to reflect
a misperception. The World Bank
estimates that 75% of the worlds poor,
or 870 million people, make a living
from ecosystems, including tourism
and the goods they produce, while 350
million are affected by the loss of coral
reefs.22 Increasingly, decision-makers
are realizing that biodiversity loss is not
a second-order issue but is intricately
linked to economic development, food
challenges and water security.
The urgency of coordinated global
action on climate change was
reinforced in April and November
2014 by the Intergovernmental Panel
businesses often remain woefully

underprepared, as illustrated by
respondents perceptions that relatively
little progress has been made on
these risks in the last decade (see
Figure 3.1). At the heart of the problem
is a risk-management approach
based on responsive measures that
assume things go back to normal
after a crisis an approach that falls
short with complex or slowly evolving
environmental risks such as climate
change. Stakeholders have been slow
to address the underlying causes
of environmental risks or to address
their economic, social, political and
humanitarian consequences.
Even though all of these risks are

well known, governments and
Box 1.6: The road to Paris is 2015 make or break for climate
change?
In 2015 the international community has a once-in-a-generation opportunity to
align the climate change and development agenda. A series of global summits on
climate change, disaster risk reduction, financing for development and sustainable
development goals could embed into the post-2015 global governance
architecture a coherent agenda for tackling interlocking environmental risks.
Convergence among governments on these decisions could kick-start the next
generation of sustainable growth and poverty reduction through catalysing
private finance and scaling low-carbon, climate-resilient investment, especially but
not only in developing countries. However, the opportunity will be missed if
governments continue to value narrow short-term concerns above the prospect of
longer-term global prosperity and environmental security. More vulnerable
populations will be consigned to the negative spiral of poverty and environmental
degradation.
Until recently, the expectation was that governments would struggle to finalize a
strong global climate accord in time for the Paris climate conference in December
2015. But is the tide beginning to turn? At the United Nations Secretary-Generals
Climate Summit in September 2014, over 1,000 businesses and investors signalled
their support for global carbon pricing. So did some 73 countries, covering 52% of
global GDP and 54% of global emissions.
Major consumer companies and financial institutions see the need to reduce global
climate risks and have mobilized action along their supply chains, for example
through the New York Declaration on Forests and the move towards climatefriendly coolants. The Oil & Gas Climate Initiative signalled refreshed engagement
from major energy producers.
The hope is that these coalitions of committed businesses could both inject
concrete solutions and create a more positive global atmosphere for governments
to collectively make decisions in 2015. A positive signal is the agreement between
China and the United States in November 2014. A strong set of clear policy signals
to the wider business community is needed from the worlds governments on their
ambition to tackle environmental risks. The year 2015 is not an opportunity the
world can afford to miss.
Global Risks 2015
21
Part 3
The nexus of food, water, energy and

climate change has been identified by
the US National Intelligence Council as
one of four overarching mega trends
that will shape the world in 2030.21 The
risks interconnections map (see Figure
2) shows how survey respondents
perceived this nexus to be related also
to other risks, including large-scale
involuntary migration.
on Climate Changes release of its

Fifth Assessment Report and the
associated update. It reconfirms that
warming is unequivocally happening
and it is extremely likely that human
influence has been the dominant
cause. Atmospheric concentrations
of three major greenhouse gases
(carbon dioxide, methane and nitrous
oxide) are at their highest level in
800,000 years. Strong evidence of the
effects of climate change is already
apparent, in terms of sea level rise,
shrinking glaciers, warmer oceans and
the increasing frequency of weather
extremes.
Part 2
The Intergovernmental Panel on

Climate Change notes that weather
extremes in food-producing regions
are already causing price increases
and suggests that the impact of climate
change on weather patterns and rainfall
causing either floods or droughts
could cut crop yields by up to 25%.20
Part 1
Technological Risks: Back

to the Future
Part 3

Landscape 2014-2015, Technological
Risks
Technological Risks
2014
Cyber attacks
Data fraud
or theft
4.0
4.0
5.0
Likelihood

While the Internet of Things (IoT) will

deliver innovations, it will also entail new
risks. Analytics on large and disparate
data sources can drive breakthrough
insights but also raise questions about
expectations of privacy and the fair
and appropriate use of data about
individuals. Security risks are also
intensified. There are more devices to
secure against hackers, and bigger
downsides from failure: hacking the
location data on a car is merely an
invasion of privacy, whereas hacking
the control system of a car would be
a threat to life. The current Internet
infrastructure was not developed with
such security concerns in mind.
22
Global Risks 2015
An important characteristic of global

risks, which transpires across the
cases included in this report, is their
interconnectedness, shown in the

Interconnections Map in Figure 2. It is
important to stress that risks cannot
be seen in isolation. The feedback
loops between risks and the fact that
they are also driven by underlying
trends (Figure 3) raise their complexity
and make it more difficult to control
individual risks. Over past years, the
speed of transmission and the strength
of interconnections have increased.
The complexity of addressing risks,
their likelihood and their potential
consequences raise the question of
preparedness, on the global, regional,
national and local levels.
Box 1.7: Governing the Internet the need for mechanisms to

maintain a unified and resilient network
2015
5.0
Impact
Part 2
The risk of large-scale cyber attacks

continues to be considered above
average on both dimensions of impact
and likelihood (see Figures 1 and
1.6) This reflects both the growing
sophistication of cyber attacks and
the rise of hyperconnectivity, with
a growing number of physical objects
connected to the Internet and more
and more sensitive personal data
including about health and finances
being stored by companies in the
cloud. In the United States alone, cyber
crime already costs an estimated $100
billion each year.23
The IoT is likely to disrupt business

models and ecosystems across a
range of industries. While this will
deliver innovation, the prospect of
many large players across multiple
industries being forced to change
so radically at the same time raises
potential systemic risks such as largescale disruption in labour markets
and volatility in financial markets. A
major public security failure could also
prevent the IoT from becoming truly
widespread.
The pace of innovation and the highly distributed nature of the Internet require a
new approach to global Internet governance and cooperation. As more people
rely on the Internet, the question of Internet governance becomes increasingly
important. Two kinds of issues exist: technical matters, to make sure all the
infrastructure and devices that constitute the Internet can talk to each other; and
overarching matters, to address cyber crime, Net neutrality, privacy and freedom
of expression.
Responsibility for the technical infrastructure of the Internet is dispersed among
several organizations, including the Internet Engineering Task Force (IETF) and the
World Wide Web Consortium (W3C), the Regional Internet Registries (RIRs), the
root servers operators, and the Internet Corporation for Assigned Names and
Numbers (ICANN). The solutions they propose policy models, standards,
specifications or best practices spread through voluntary adoption or ad hoc
conventions, regulations, directives, contracts or other agreements.
No such systems exist for developing and implementing solutions to the
overarching issues. Consequently, governments are feeling pressure to enact
national measures to deal with their citizens data and privacy concerns. While
laws that force the localization of infrastructure may be easier short-term
solutions than collaborating to define global mechanisms for addressing the
issues, the risk is that data nationalism could endanger the network effects that
underlie the Internets ability to drive innovation and create social and economic
value.
To advance the conversation, identify possible solutions and contribute to open,
resilient and inclusive Internet governance, the World Economic Forum is
embarking on a multiyear strategic initiative to bring together leaders from the
public and private sectors with civil society leaders and the technical community
to address these issues in an impartial, high-level dialogue. This effort will
complement the expert-level discussions taking place at the Internet Governance
Forum and various other grassroots and government-led initiatives.
Part 1
Preparedness at the
Regional Level Is Different
High structural unemployment

or underemployment is seen
as the risk for which Europe is
least prepared, followed by largescale involuntary migration and
North America identifies failure/

shortfall of critical infrastructure,
large-scale cyber attacks and failure
of climate-change adaptation as
the three risks for which it is least
prepared. Major breakdowns
of infrastructure in the wake of
Superstorm Sandy and the sheer
number of cyber attacks illustrate
the low level of preparedness.
East Asia and the Pacific is

perceived as least prepared for
interstate conflict and failure of
urban planning. It is also the
only region that reported being
least prepared for man-made
environmental catastrophes
following the 2011 Fukushima
incidence.
Failure of urban planning is among
the first three risks in East Asia and
the Pacific, Latin America and
the Caribbean, and South Asia.
In such regions, urbanization is
especially rapid and the failure of
urban planning can lead to a wide
range of catastrophic scenarios
from social unrest to pandemic
outbreak (Part 2).
Sub-Saharan Africa is considered

least prepared for infectious
diseases and unemployment. Both
are of key importance given recent
events and the fact that strong
population growth is expected to
exacerbate unemployment in the
coming years, despite expected
economic growth.
Figure 1.7: For Which Global Risks Is Your Region Least Prepared?
3rd
1
Europe
Failure of
climate change
adaptation
Central Asia
including Russia
Unemployment
or underemployment
Energy
price
shock
Cyber attacks
Terrorist
attacks
Interstate
conflict
Profound
social
instability
Failure
of critical
infrastructure
North America
Failure
of urban
planning
Interstate
conflict
Middle East
and North Africa
Ranking position
in each region
2nd
Profound
social
instability
Large scale
involuntary
migration
st
Interstate conflict
Water crises
Man-made
environmental
catastrophes
East Asia
and the Pacific
Profound
social instability
Failure of
national
governance
Latin America
and the Caribbean
Failure
of urban
planning
Failure of
urban planning
Unemployment
or under
employment
Food
crises
Sub-Saharan
Africa
Terrorist
attacks
South Asia
Risk category
Water
crises
Economic
Environmental
Spread of
infectious
diseases
Geopolitical
Societal
Technological
Source: Global Risks Perception Survey 2014, World Economic Forum.

Note: Respondents were asked to select three global risks that they believe their region is least prepared for. For legibility reasons, the names of the global risks are
abbreviated. Please see Appendix A for the full name and description. Oceania is not displayed because of the low number of respondents.
Global Risks 2015
23
Part 3
It is striking that every region presents a

wholly different set of issues for which it
is least prepared. For example:
Many regions, including Europe,

Latin America and the Caribbean,
and the Middle East and North
Africa, also include profound social
instability among the risks they are
least prepared for.
Part 2
As most efforts to address global risks

are undertaken at the national and
regional levels, it is important to look
at preparedness from a disaggregated
perspective. Figure 1.7 illustrates
for each world region those risks for
which survey respondents indicated
their region is the least prepared.
Preparedness reflects a combination
of exposure to a risk and the measures
that have already been taken to
mitigate or prepare for it.
profound social instability. Both

unemployment and migration flows
into Europe are expected to remain
high on the agenda going forward
and are driving factors of social
instability.24
Part 1
Part 2
Part 3
Conclusion
Endnotes
Drawing on the perceptions of almost

900 survey respondents, this chapter
focuses on the threats of social fragility
and short-term worries about conflict.
Rising socio-economic inequality, weak
economic growth, food price volatility
and food insecurity, unemployment,
large-scale migration and the growing
heterogeneity and interdependence
of societies are among the key
drivers of social fragility. Growing
social polarization, isolationism and
nationalism in turn have the potential to
trigger geopolitical conflicts.
The section highlights the

interconnections between global risks
and trends. A better understanding of
global risks and the interconnections
between them is key to prompting
discussion about how to prepare,
mitigate and prevent them. Part 2 of
this report analyses in detail selected
clusters of interconnected risks and
how they could evolve the interplay
between geopolitical and economic
risks, challenges related to urbanization
in developing countries and emerging
technologies.
The risk of water crises is classified as a societal risk for the purpose of this report. However, it has an important
environmental dimension.
IMF, 2014a.
OECD, 2011.
Standardized World Income Inequality Database. See http://myweb.uiowa.edu/fsolt/swiid/swiid.html.
The Gini index measures the extent to which the distribution of income among individuals or households within an
economy deviates from a perfectly equal distribution on a scale from 0 (perfect equality) to 100 (perfect inequality).
UN, 2014.
Berg and Ostry, 2011. And Ostry, Berg and Tsangarides, 2014.
IPCC, 2014, pp. 1-32.
UNHCR, 2014.
10
Islamic State fighter estimate triples CIA, BBC, 12 September 2014; http://www.bbc.com/news/world-middleeast-29169914.
11
ILO, 2014.
12
IMF, 2014b.
13
IMF, 2014c.
14
World Economic Forum, 2014.
15
As mentioned above, the risk of water crises is classified as a societal risk for the purpose of this report. However, it
has an important environmental dimension.
16
2030 Water Resources Group, 2009.
17
Food and Agriculture Organization of the United Nations, aquastat; http://www.fao.org/nr/water/aquastat/water_

use/index.stm.
18
World Bank, Food Security; http://www.worldbank.org/en/topic/foodsecurity/overview#1.
19
IEA, 2012.
20
Porter et al., 2014.
21
NIC, 2012.
22
World Bank, Biodiversity; http://www.worldbank.org/en/topic/biodiversity/overview.
23
See The Wall Street Journal, Annual U.S. Cybercrime Costs Estimated at $100 Billion, 22 July 2013; http://online.
wsj.com/articles/SB10001424127887324328904578621880966242990.
24
In the first nine months of 2014, the number of migrants crossing the Mediterranean Sea into Europe reached
160,000, twice the previous record from 2011. Integrating such a large number of migrants is a big challenge, which
has the potential to destabilize societies if not properly addressed.
25
Global risks may not be strictly comparable across years, as the names and description of the risks were revised
between 2014 and 2015. The risks introduced in 2015 are not displayed in the figures and only the risks for which the
name or the description were slightly revised between 2014 and 2015 are presented. Water crises was categorized
as an environmental risk in 2014 but as a societal risk in 2015. To ensure legibility, the names of the global risks are
abbreviated. Please see Appendix A for the full name and description.
24
Global Risks 2015
Part 1
References
Auerswald, P., L. Branscomb, T. La Porte and E. Michel-Kerjan (eds). 2006. Seeds of Disaster, Roots of Response:
How Private Action Can Reduce Public Vulnerability. Cambridge University Press, New York, NY, USA.
Berg, A. G. and J. D. Ostry. 2011. Equality and Efficiency. Finance and Development. 48(3); http://www.imf.org/
external/pubs/ft/fandd/2011/09/Berg.htm.
Part 2
International Energy Agency (IEA). 2012. World Energy Outlook 2012: Executive Summary. Paris: IEA; http://www.iea.
org/publications/freepublications/publication/english.pdf.
International Labour Organization (ILO). 2014. Global Employment Trends. Geneva: ILO; http://www.ilo.org/wcmsp5/
groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_233953.pdf.
International Monetary Fund (IMF). 2014a. World Economic Outlook: Legacies, Clouds, Uncertainties. Washington
DC: IMF; http://www.imf.org/external/pubs/ft/weo/2014/02/
International Monetary Fund (IMF). 2014b. Peoples Republic of China, 2014 Article IV ConsultationStaff Report;
Press Release; and Statement by the Executive Director for the Peoples Republic of China. IMF Country Report No.
14/235. Washington DC: IMF; http://www.imf.org/external/pubs/ft/scr/2014/cr14235.pdf.
International Monetary Fund (IMF). 2014c. Global Financial Stability Report: Risk Taking, Liquidity, and Shadow
Banking: Curbing Excess While Promoting Growth. Washington DC: IMF; https://www.imf.org/external/pubs/ft/
gfsr/2014/02/index.htm.
Part 3
National Intelligence Council (NIC). 2012. Global Trends 2030: Alternative Worlds. Washington DC: NIC; http://www.
dni.gov/files/documents/GlobalTrends_2030.pdf.
Organisation for Economic Co-Operation and Development (OECD). 2011. Divided We Stand: Why Inequality Keeps
Rising. Paris: OECD.
Ostry, J. D., A. Berg and C. G. Tsangarides. 2014. Redistribution, Inequality, and Growth, IMF Staff Discussion Note.
Washington DC; http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf.
Porter, J.R., L. Xie, A.J. Challinor, K. Cochrane, S.M. Howden, M.M. Iqbal, D.B. Lobell, and M.I. Travasso. 2014.
Food security and food production systems. Climate Change 2014: Impacts, Adaptation, and Vulnerability.
Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea,
T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R.
Mastrandrea, and L.L.White (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY,
USA, pp. 485-533.
The 2030 Water Resources Group. 2009. Charting Our Water Future: Economic frameworks to inform decisionmaking. Washington DC; http://www.2030wrg.org/wp-content/uploads/2014/07/Charting-Our-Water-Future-Final.
pdf.
United Nations. 2014. The Millennium Development Goals Report 2014. New York; http://www.un.org/
millenniumgoals/2014%20MDG%20report/MDG%202014%20English%20web.pdf.
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html.
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http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf.
Global Risks 2015
25
The end of capitalism has begun | Books | The Guardian

http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalismbegun
Friday 17 July 2015
The red flags and marching songs of Syriza during the Greek crisis, plus the
expectation that the banks would be nationalised, revived briefly a 20th-century
dream: the forced destruction of the market from above. For much of the 20th
century this was how the left conceived the first stage of an economy beyond
capitalism. The force would be applied by the working class, either at the ballot
box or on the barricades. The lever would be the state. The opportunity would
come through frequent episodes of economic collapse.
Instead over the past 25 years it has been the lefts project that has collapsed.
The market destroyed the plan; individualism replaced collectivism and solidarity;
the hugely expanded workforce of the world looks like a proletariat, but no
longer thinks or behaves as it once did.
If you lived through all this, and disliked capitalism, it was traumatic. But in the
process technology has created a new route out, which the remnants of the old
left and all other forces influenced by it have either to embrace or die.
Capitalism, it turns out, will not be abolished by forced-march techniques. It will
be abolished by creating something more dynamic that exists, at first, almost
unseen within the old system, but which will break through, reshaping the
economy around new values and behaviours. I call this postcapitalism.
As with the end of feudalism 500 years ago, capitalisms replacement by
postcapitalism will be accelerated by external shocks and shaped by the
emergence of a new kind of human being. And it has started.
Postcapitalism is possible because of three major changes information
technology has brought about in the past 25 years. First, it has reduced the need
for work, blurred the edges between work and free time and loosened the
relationship between work and wages. The coming wave of automation, currently
stalled because our social infrastructure cannot bear the consequences, will
hugely diminish the amount of work needed not just to subsist but to provide a
decent life for all.
Second, information is corroding the markets ability to form prices correctly. That
is because markets are based on scarcity while information is abundant. The
systems defence mechanism is to form monopolies the giant tech companies
on a scale not seen in the past 200 years, yet they cannot last. By building
business models and share valuations based on the capture and privatisation of
all socially produced information, such firms are constructing a fragile corporate
edifice at odds with the most basic need of humanity, which is to use ideas freely.
Third, were seeing the spontaneous rise of collaborative production: goods,

services and organisations are appearing that no longer respond to the dictates
of the market and the managerial hierarchy. The biggest information product in
the world Wikipedia is made by volunteers for free, abolishing the
encyclopedia business and depriving the advertising industry of an estimated
$3bn a year in revenue.
Almost unnoticed, in the niches and hollows of the market system, whole swaths
of economic life are beginning to move to a different rhythm. Parallel currencies,
time banks, cooperatives and self-managed spaces have proliferated, barely
noticed by the economics profession, and often as a direct result of the shattering
of the old structures in the post-2008 crisis.
You only find this new economy if you look hard for it. In Greece, when a
grassroots NGO mapped the countrys food co-ops, alternative producers,
parallel currencies and local exchange systems they found more than 70
substantive projects and hundreds of smaller initiatives ranging from squats to
carpools to free kindergartens. To mainstream economics such things seem
barely to qualify as economic activity but thats the point. They exist because
they trade, however haltingly and inefficiently, in the currency of postcapitalism:
free time, networked activity and free stuff. It seems a meagre and unofficial and
even dangerous thing from which to craft an entire alternative to a global system,
but so did money and credit in the age of Edward III.
Sharing the fruits of our labour. Illustration by Joe Magee

New forms of ownership, new forms of lending, new legal contracts: a whole
business subculture has emerged over the past 10 years, which the media has
dubbed the sharing economy. Buzzwords such as the commons and peerproduction are thrown around, but few have bothered to ask what this
development means for capitalism itself.
I believe it offers an escape route but only if these micro-level projects are
nurtured, promoted and protected by a fundamental change in what governments
do. And this must be driven by a change in our thinking about technology,
ownership and work. So that, when we create the elements of the new system,
we can say to ourselves, and to others: This is no longer simply my survival
mechanism, my bolt hole from the neoliberal world; this is a new way of living in
the process of formation.
...
The 2008 crash wiped 13% off global production and 20% off global trade. Global
growth became negative on a scale where anything below +3% is counted as a
recession. It produced, in the west, a depression phase longer than in 1929-33,
and even now, amid a pallid recovery, has left mainstream economists terrified
about the prospect of long-term stagnation. The aftershocks in Europe are
tearing the continent apart.
The solutions have been austerity plus monetary excess. But they are not
working. In the worst-hit countries, the pension system has been destroyed, the
retirement age is being hiked to 70, and education is being privatised so that
graduates now face a lifetime of high debt. Services are being dismantled and
infrastructure projects put on hold.
Even now many people fail to grasp the true meaning of the word austerity.
Austerity is not eight years of spending cuts, as in the UK, or even the social
catastrophe inflicted on Greece. It means driving the wages, social wages and
living standards in the west down for decades until they meet those of the middle
class in China and India on the way up.
Meanwhile in the absence of any alternative model, the conditions for another
crisis are being assembled. Real wages have fallen or remained stagnant in
Japan, the southern Eurozone, the US and UK. The shadow banking system has
been reassembled, and is now bigger than it was in 2008. New rules demanding
banks hold more reserves have been watered down or delayed. Meanwhile,
flushed with free money, the 1% has got richer.
Neoliberalism, then, has morphed into a system programmed to inflict recurrent
catastrophic failures. Worse than that, it has broken the 200-year pattern of
industrial capitalism wherein an economic crisis spurs new forms of technological
innovation that benefit everybody.
That is because neoliberalism was the first economic model in 200 years the
upswing of which was premised on the suppression of wages and smashing the
social power and resilience of the working class. If we review the take-off periods
studied by long-cycle theorists the 1850s in Europe, the 1900s and 1950s
across the globe it was the strength of organised labour that forced
entrepreneurs and corporations to stop trying to revive outdated business models

through wage cuts, and to innovate their way to a new form of capitalism.
The result is that, in each upswing, we find a synthesis of automation, higher
wages and higher-value consumption. Today there is no pressure from the
workforce, and the technology at the centre of this innovation wave does not
demand the creation of higher-consumer spending, or the re employment of the
old workforce in new jobs. Information is a machine for grinding the price of
things lower and slashing the work time needed to support life on the planet.
As a result, large parts of the business class have become neo-luddites. Faced
with the possibility of creating gene-sequencing labs, they instead start coffee
shops, nail bars and contract cleaning firms: the banking system, the planning
system and late neoliberal culture reward above all the creator of low-value, longhours jobs.
Innovation is happening but it has not, so far, triggered the fifth long upswing for
capitalism that long-cycle theory would expect. The reasons lie in the specific
nature of information technology.
...
Were surrounded not just by intelligent machines but by a new layer of reality
centred on information. Consider an airliner: a computer flies it; it has been
designed, stress-tested and virtually manufactured millions of times; it is firing
back real-time information to its manufacturers. On board are people squinting at
screens connected, in some lucky countries, to the internet.
Seen from the ground it is the same white metal bird as in the James Bond era.
But it is now both an intelligent machine and a node on a network. It has an
information content and is adding information value as well as physical value to
the world. On a packed business flight, when everyones peering at Excel or
Powerpoint, the passenger cabin is best understood as an information factory.
Is it utopian to believe were on the verge of an evolution beyond capitalism?

Illustration by Joe Magee
But what is all this information worth? You wont find an answer in the accounts:
intellectual property is valued in modern accounting standards by guesswork. A
study for the SAS Institute in 2013 found that, in order to put a value on data,
neither the cost of gathering it, nor the market value or the future income from it
could be adequately calculated. Only through a form of accounting that included
non-economic benefits, and risks, could companies actually explain to their
shareholders what their data was really worth. Something is broken in the logic
we use to value the most important thing in the modern world.
The great technological advance of the early 21st century consists not only of
new objects and processes, but of old ones made intelligent. The knowledge
content of products is becoming more valuable than the physical things that are
used to produce them. But it is a value measured as usefulness, not exchange or
asset value. In the 1990s economists and technologists began to have the same
thought at once: that this new role for information was creating a new, third kind
of capitalism as different from industrial capitalism as industrial capitalism was
to the merchant and slave capitalism of the 17th and 18th centuries. But they
have struggled to describe the dynamics of the new cognitive capitalism. And
for a reason. Its dynamics are profoundly non-capitalist.
During and right after the second world war, economists viewed information
simply as a public good. The US government even decreed that no profit should
be made out of patents, only from the production process itself. Then we began
to understand intellectual property. In 1962, Kenneth Arrow, the guru of
mainstream economics, said that in a free market economy the purpose of
inventing things is to create intellectual property rights. He noted: precisely to
the extent that it is successful there is an underutilisation of information.
You can observe the truth of this in every e-business model ever constructed:
monopolise and protect data, capture the free social data generated by user
interaction, push commercial forces into areas of data production that were noncommercial before, mine the existing data for predictive value always and
everywhere ensuring nobody but the corporation can utilise the results.
If we restate Arrows principle in reverse, its revolutionary implications are
obvious: if a free market economy plus intellectual property leads to the
underutilisation of information, then an economy based on the full utilisation of
information cannot tolerate the free market or absolute intellectual property
rights. The business models of all our modern digital giants are designed to
prevent the abundance of information.
Yet information is abundant. Information goods are freely replicable. Once a thing
is made, it can be copied/pasted infinitely. A music track or the giant database
you use to build an airliner has a production cost; but its cost of reproduction falls
towards zero. Therefore, if the normal price mechanism of capitalism prevails
over time, its price will fall towards zero, too.
For the past 25 years economics has been wrestling with this problem: all
mainstream economics proceeds from a condition of scarcity, yet the most
dynamic force in our modern world is abundant and, as hippy genius Stewart
Brand once put it, wants to be free.
There is, alongside the world of monopolised information and surveillance
created by corporations and governments, a different dynamic growing up
around information: information as a social good, free at the point of use,
incapable of being owned or exploited or priced. Ive surveyed the attempts by
economists and business gurus to build a framework to understand the dynamics
of an economy based on abundant, socially-held information. But it was actually
imagined by one 19th-century economist in the era of the telegraph and the
steam engine. His name? Karl Marx.
...
The scene is Kentish Town, London, February 1858, sometime around 4am.
Marx is a wanted man in Germany and is hard at work scribbling thoughtexperiments and notes-to-self. When they finally get to see what Marx is writing
on this night, the left intellectuals of the 1960s will admit that it challenges every
serious interpretation of Marx yet conceived. It is called The Fragment on
Machines.
In the Fragment Marx imagines an economy in which the main role of machines
is to produce, and the main role of people is to supervise them. He was clear
that, in such an economy, the main productive force would be information. The
productive power of such machines as the automated cotton-spinning machine,
the telegraph and the steam locomotive did not depend on the amount of labour
it took to produce them but on the state of social knowledge. Organisation and
knowledge, in other words, made a bigger contribution to productive power than
the work of making and running the machines.
Given what Marxism was to become a theory of exploitation based on the theft
of labour time this is a revolutionary statement. It suggests that, once
knowledge becomes a productive force in its own right, outweighing the actual
labour spent creating a machine, the big question becomes not one of wages
versus profits but who controls what Marx called the power of knowledge.
In an economy where machines do most of the work, the nature of the
knowledge locked inside the machines must, he writes, be social. In a final latenight thought experiment Marx imagined the end point of this trajectory: the
creation of an ideal machine, which lasts forever and costs nothing. A machine
that could be built for nothing would, he said, add no value at all to the production
process and rapidly, over several accounting periods, reduce the price, profit and
labour costs of everything else it touched.
Once you understand that information is physical, and that software is a
machine, and that storage, bandwidth and processing power are collapsing in
price at exponential rates, the value of Marxs thinking becomes clear. We are
surrounded by machines that cost nothing and could, if we wanted them to, last
forever.
In these musings, not published until the mid-20th century, Marx imagined
information coming to be stored and shared in something called a general
intellect which was the mind of everybody on Earth connected by social
knowledge, in which every upgrade benefits everybody. In short, he had
imagined something close to the information economy in which we live. And, he
wrote, its existence would blow capitalism sky high.
Marx imagined something close to our information economy. He wrote its
existence would blow capitalism sky high
...
With the terrain changed, the old path beyond capitalism imagined by the left of
the 20th century is lost.
But a different path has opened up. Collaborative production, using network
technology to produce goods and services that only work when they are free, or
shared, defines the route beyond the market system. It will need the state to
create the framework just as it created the framework for factory labour, sound
currencies and free trade in the early 19th century. The postcapitalist sector is
likely to coexist with the market sector for decades, but major change is
happening.
Networks restore granularity to the postcapitalist project. That is, they can be
the basis of a non-market system that replicates itself, which does not need to be
created afresh every morning on the computer screen of a commissar.
The transition will involve the state, the market and collaborative production
beyond the market. But to make it happen, the entire project of the left, from
protest groups to the mainstream social democratic and liberal parties, will have
to be reconfigured. In fact, once people understand the logic of the postcapitalist
transition, such ideas will no longer be the property of the left but of a much
wider movement, for which we will need new labels.
Who can make this happen? In the old left project it was the industrial working
class. More than 200 years ago, the radical journalist John Thelwall warned the
men who built the English factories that they had created a new and dangerous
form of democracy: Every large workshop and manufactory is a sort of political

society, which no act of parliament can silence, and no magistrate disperse.
Today the whole of society is a factory. We all participate in the creation and
recreation of the brands, norms and institutions that surround us. At the same
time the communication grids vital for everyday work and profit are buzzing with
shared knowledge and discontent. Today it is the network like the workshop
200 years ago that they cannot silence or disperse.
True, states can shut down Facebook, Twitter, even the entire internet and
mobile network in times of crisis, paralysing the economy in the process. And
they can store and monitor every kilobyte of information we produce. But they
cannot reimpose the hierarchical, propaganda-driven and ignorant society of 50
years ago, except as in China, North Korea or Iran by opting out of key parts
of modern life. It would be, as sociologist Manuel Castells put it, like trying to deelectrify a country.
By creating millions of networked people, financially exploited but with the whole
of human intelligence one thumb-swipe away, info-capitalism has created a new
agent of change in history: the educated and connected human being.
...
This will be more than just an economic transition. There are, of course, the
parallel and urgent tasks of decarbonising the world and dealing with
demographic and fiscal timebombs. But Im concentrating on the economic
transition triggered by information because, up to now, it has been sidelined.
Peer-to-peer has become pigeonholed as a niche obsession for visionaries, while
the big boys of leftwing economics get on with critiquing austerity.
Information wants to be free. Illustration by Joe Magee

In fact, on the ground in places such as Greece, resistance to austerity and the
creation of networks you cant default on as one activist put it to me go hand
in hand. Above all, postcapitalism as a concept is about new forms of human
behaviour that conventional economics would hardly recognise as relevant.
So how do we visualise the transition ahead? The only coherent parallel we have
is the replacement of feudalism by capitalism and thanks to the work of
epidemiologists, geneticists and data analysts, we know a lot more about that
transition than we did 50 years ago when it was owned by social science. The
first thing we have to recognise is: different modes of production are structured
around different things. Feudalism was an economic system structured by
customs and laws about obligation. Capitalism was structured by something
purely economic: the market. We can predict, from this, that postcapitalism
whose precondition is abundance will not simply be a modified form of a
complex market society. But we can only begin to grasp at a positive vision of
what it will be like.
I dont mean this as a way to avoid the question: the general economic
parameters of a postcapitalist society by, for example, the year 2075, can be
outlined. But if such a society is structured around human liberation, not
economics, unpredictable things will begin to shape it.
For example, the most obvious thing to Shakespeare, writing in 1600, was that
the market had called forth new kinds of behaviour and morality. By analogy, the
most obvious economic thing to the Shakespeare of 2075 will be the total
upheaval in gender relationships, or sexuality, or health. Perhaps there will not
even be any playwrights: perhaps the very nature of the media we use to tell
stories will change just as it changed in Elizabethan London when the first
public theatres were built.
Think of the difference between, say, Horatio in Hamlet and a character such as
Daniel Doyce in Dickenss Little Dorrit. Both carry around with them a
characteristic obsession of their age Horatio is obsessed with humanist
philosophy; Doyce is obsessed with patenting his invention. There can be no
character like Doyce in Shakespeare; he would, at best, get a bit part as a
working-class comic figure. Yet, by the time Dickens described Doyce, most of
his readers knew somebody like him. Just as Shakespeare could not have
imagined Doyce, so we too cannot imagine the kind of human beings society will
produce once economics is no longer central to life. But we can see their
prefigurative forms in the lives of young people all over the world breaking down
20th-century barriers around sexuality, work, creativity and the self.
The feudal model of agriculture collided, first, with environmental limits and then
with a massive external shock the Black Death. After that, there was a
demographic shock: too few workers for the land, which raised their wages and
made the old feudal obligation system impossible to enforce. The labour
shortage also forced technological innovation. The new technologies that
underpinned the rise of merchant capitalism were the ones that stimulated
commerce (printing and accountancy), the creation of tradeable wealth (mining,
the compass and fast ships) and productivity (mathematics and the scientific
method).
Present throughout the whole process was something that looks incidental to the
old system money and credit but which was actually destined to become the
basis of the new system. In feudalism, many laws and customs were actually
shaped around ignoring money; credit was, in high feudalism, seen as sinful. So
when money and credit burst through the boundaries to create a market system,
it felt like a revolution. Then, what gave the new system its energy was the
discovery of a virtually unlimited source of free wealth in the Americas.
A combination of all these factors took a set of people who had been
marginalised under feudalism humanists, scientists, craftsmen, lawyers, radical
preachers and bohemian playwrights such as Shakespeare and put them at the
head of a social transformation. At key moments, though tentatively at first, the
state switched from hindering the change to promoting it.
Today, the thing that is corroding capitalism, barely rationalised by mainstream
economics, is information. Most laws concerning information define the right of
corporations to hoard it and the right of states to access it, irrespective of the
human rights of citizens. The equivalent of the printing press and the scientific
method is information technology and its spillover into all other technologies,
from genetics to healthcare to agriculture to the movies, where it is quickly
reducing costs.
The modern equivalent of the long stagnation of late feudalism is the stalled takeoff of the third industrial revolution, where instead of rapidly automating work out
of existence, we are reduced to creating what David Graeber calls bullshit jobs
on low pay. And many economies are stagnating.
The equivalent of the new source of free wealth? Its not exactly wealth: its the
externalities the free stuff and wellbeing generated by networked interaction.
It is the rise of non-market production, of unownable information, of peer
networks and unmanaged enterprises. The internet, French economist Yann
Moulier-Boutang says, is both the ship and the ocean when it comes to the
modern equivalent of the discovery of the new world. In fact, it is the ship, the
compass, the ocean and the gold.
The modern day external shocks are clear: energy depletion, climate change,
ageing populations and migration. They are altering the dynamics of capitalism
and making it unworkable in the long term. They have not yet had the same
impact as the Black Death but as we saw in New Orleans in 2005, it does not
take the bubonic plague to destroy social order and functional infrastructure in a
financially complex and impoverished society.
Once you understand the transition in this way, the need is not for a
supercomputed Five Year Plan but a project, the aim of which should be to
expand those technologies, business models and behaviours that dissolve
market forces, socialise knowledge, eradicate the need for work and push the
economy towards abundance. I call it Project Zero because its aims are a zerocarbon-energy system; the production of machines, products and services with
zero marginal costs; and the reduction of necessary work time as close as
possible to zero.
Most 20th-century leftists believed that they did not have the luxury of a managed
transition: it was an article of faith for them that nothing of the coming system
could exist within the old one though the working class always attempted to
create an alternative life within and despite capitalism. As a result, once the
possibility of a Soviet-style transition disappeared, the modern left became
preoccupied simply with opposing things: the privatisation of healthcare, antiunion laws, fracking the list goes on.
If I am right, the logical focus for supporters of postcapitalism is to build

alternatives within the system; to use governmental power in a radical and
disruptive way; and to direct all actions towards the transition not the defence
of random elements of the old system. We have to learn whats urgent, and
whats important, and that sometimes they do not coincide.
...
The power of imagination will become critical. In an information society, no
thought, debate or dream is wasted whether conceived in a tent camp, prison
cell or the table football space of a startup company.
As with virtual manufacturing, in the transition to postcapitalism the work done at
the design stage can reduce mistakes in the implementation stage. And the
design of the postcapitalist world, as with software, can be modular. Different
people can work on it in different places, at different speeds, with relative
autonomy from each other. If I could summon one thing into existence for free it
would be a global institution that modelled capitalism correctly: an open source
model of the whole economy; official, grey and black. Every experiment run
through it would enrich it; it would be open source and with as many datapoints
as the most complex climate models.
The main contradiction today is between the possibility of free, abundant goods
and information; and a system of monopolies, banks and governments trying to
keep things private, scarce and commercial. Everything comes down to the
struggle between the network and the hierarchy: between old forms of society
moulded around capitalism and new forms of society that prefigure what comes
next.
...
Is it utopian to believe were on the verge of an evolution beyond capitalism? We
live in a world in which gay men and women can marry, and in which
contraception has, within the space of 50 years, made the average working-class
woman freer than the craziest libertine of the Bloomsbury era. Why do we, then,
find it so hard to imagine economic freedom?
It is the elites cut off in their dark-limo world whose project looks as forlorn as
that of the millennial sects of the 19th century. The democracy of riot squads,
corrupt politicians, magnate-controlled newspapers and the surveillance state
looks as phoney and fragile as East Germany did 30 years ago.
All readings of human history have to allow for the possibility of a negative
outcome. It haunts us in the zombie movie, the disaster movie, in the postapocalytic wasteland of films such as The Road or Elysium. But why should we
not form a picture of the ideal life, built out of abundant information, nonhierarchical work and the dissociation of work from wages?
Millions of people are beginning to realise they have been sold a dream at odds
with what reality can deliver. Their response is anger and retreat towards
national forms of capitalism that can only tear the world apart. Watching these
emerge, from the pro-Grexit left factions in Syriza to the Front National and the
isolationism of the American right has been like watching the nightmares we had
during the Lehman Brothers crisis come true.
We need more than just a bunch of utopian dreams and small-scale horizontal
projects. We need a project based on reason, evidence and testable designs,
that cuts with the grain of history and is sustainable by the planet. And we need
to get on with it.
Back to the Future: World Politics Edition | Foreign Policy
https://foreignpolicy.com/2015/07/08/back-to-the-future-world-politics-edition-russia-isis-europe-china/
Back to the Future: World Politics Edition

Russia is a throwback to the 19th century. The Islamic State wants to turn the clock back by 1,000 years. And Japan is stuck in the post-WWII order. How much
of today's geopolitics are actually from bygone eras?
BY STEPHEN M. WALT
JULY 8, 2015
In 2014, U.S. Secretary of State John Kerry criticized Russias seizure of Crimea by saying, You just dont in the 21st century behave in 19th-century fashion by invading another country
on completely trumped-up pretext. Never mind that Kerrys comment applied with equal force to the invasion of Iraq by George W. Bushs administration. The comment captured the
familiar idea that the world has supposedly moved beyond the cynical calculus of pure power politics, as Bill Clinton once put it. The problem, at least in Kerrys view, is that leaders like
Russian President Vladimir Putin havent gotten the memo about proper 21st-century behavior either Putin hasnt bothered to read it or doesnt agree with its message.
I was reminded of Kerrys comment during my recent trip to Europe, where I attended conferences in Greece and France and talked with a wide array of academics and policy experts
from Europe and Asia. In particular, I was struck by how many people embrace Kerrys view at least rhetorically and are deeply worried that the world is making a U-turn away from
post-Cold War progress and heading back to the more competitive environment of past eras.
This observation got me thinking, Which century are dierent countries living in? Were all part of the 21st century, of course, but the worldviews that dierent states embrace often
seem to come from dierent eras. Some countries appear comfortably committed to a 21st-century view of the world, while other states remain ensconced in worldviews that date back
centuries.
So, which countries best exemplify 21st-century thinking today?
First and foremost is the European Union, whose members have, for the most part, adopted the complete liberal prescription for the conduct of international politics full stop. With
some minor dierences, European elites now recoil from the grim realities of power politics and believe that democracy, the rule of law, and powerful transnational institutions can
dampen or eliminate rivalries between states and thereby guarantee stability and tranquility. Despite the eurozone crisis, Euroskepticism in the United Kingdom, and resurgent
right-wing nationalism throughout Europe, many elites on the continent still believe economic, political, and social integration within Europe has weakened atavistic national loyalties
and has fostered the development of a post-modern, post-national, pan-European unity.
These convictions (plus continued U.S. protection) have encouraged the EU member states to let their own military capabilities atrophy into insignificance. If everyone operates according
to 21st-century principles, serious military power wont be necessary and spending serious money on it is wasteful. Powerful national armies would also make neighboring states insecure
and reopen the door to the militarist pathologies that helped produce past European wars. The EU should emphasize diplomacy and other forms of soft power instead, and it should
eschew military force and the defense of traditional geopolitical interests.
It follows that Europes 21st-century elites blame contemporary political problems on illiberal troublemakers such as the late Slobodan Milosevic or Putin. The problem, however, is that
illiberal leaders like them are unlikely to be swayed by normative arguments or by economic sanctions, which leaves the EU with little capacity to shape the behavior of those states that
are still operating with a more traditional view of world politics.
Whom do I have in mind? The most obvious examples are Putins Russia and contemporary China, whose foreign policies reflect traditional concerns for national sovereignty, territorial
integrity, state capacity, and the balance of power. Russia is defending its sphere of influence in its near abroad vigorously and is challenging the liberal individualism that underpins
core Western institutions, and it is all too willing to use proxy forces and other violent tools to protect what it sees as its core interests. If this goal requires seizing territory or promoting
civil wars elsewhere both venerable practices in the annals of statecraft so be it. Western leaders can talk themselves hoarse declaring that their actions pose no threat to Russia; the
point is that Moscow doesnt believe them (and not without reason).
Similarly, a rapidly rising China may have embraced globalization as an economic meal ticket, but its not adopting a 21st-century view of world politics. On the contrary, after two
centuries of humiliation, China wants to be rich enough and strong enough to thwart foreign pressure both now and well into the future. That goal requires continued economic growth,
increased military power, and patient eorts to regain control over territories or regions it regards as legitimately part of China (such as Taiwan). China also wants to establish itself as a
regional hegemon in Asia, largely by pushing the United States out of the region and encouraging its neighbors to accommodate themselves to Chinese power. After all, this is pretty much
what the United States did during its own rise to world power (see under: Monroe Doctrine).
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Russia and China arent the only states living with a 19th-century vision of foreign policy. Israels high-tech economy (and rising inequality) exemplify a 21st-century outlook, but as the
now-deceased historian Tony Judt pointed out more than a decade ago, its political DNA Zionism is at its core just 19th-century European ethnocentric nationalism. Moreover, the
long campaign to create a Greater Israel on the West Bank is just a lingering manifestation of 19th-century settler colonialism. One wonders whether part of the alleged chemistry
between Israeli Prime Minister Benjamin Netanyahu and Putin is a 19th-century outlook that places territorial expansion ahead of peace on the list of national priorities.
China, Russia, and Israel may be stuck with a certain 19th-century outlook at least in terms of foreign policy but some other states seemed trapped in the amber of the 20th century.
North and South Korea are divided by a frozen conflict dating back to 1950, and South Korea and Japan have been unable to get past the toxic legacy of Japans colonialism and its World
War II atrocities. Furthermore, Japans political and economic systems seem unable to break free from the institutional arrangements that fueled its post-World War II economic miracle
but have crippled its economy ever since the bubble burst in 1990 (and thats 25 years, folks!).
But lets not stop here. Some states and political movements have worldviews that date not from the 19th century but from far earlier periods. Al Qaeda, the Islamic State, the Taliban, and
Wahhabi Saudi Arabia use modern technologies to varying degrees, but their political models are based on precepts dating back to the seventh century. When somebody says he wants to
restore a medieval caliphate, its a pretty clear rejection of the democracy+human rights+markets+rule of law, etc. formula that optimists once believed was the only way to organize an
advanced 21st-century society.
And what of the United States? Americans like to think of themselves as forward-looking, progressive, and fully committed to the same liberal values as their Western European allies;
indeed, they sometimes think they invented those values. In short, Americans think they are also the embodiment of the 21st-century worldview. Theres some truth in that, insofar as
the United States does spend a lot of time invoking liberal ideals and patting itself on the back for defending them. But in reality, the United States today is something of an amalgam of
21st-century idealism and 19th-century power politics. Its rhetoric extols democracy, human rights, gender equality, open markets, and other prominent features of the 21th-century
formula, and it is quick to chide rivals like Russia or China for their shortcomings on these dimensions.
But the United States also retains a 19th-century view of power politics. Washington wants to preserve U.S. hegemony in the Western Hemisphere and is still willing to defend an array of
undemocratic allies around the world. Like past great powers, it has a decidedly flexible attitude toward international law and institutions: It embraces them when they are in the U.S.
interest, and it ignores them when they get in the way of what it wants to do. The United States is far from bashful about using its military power to attack other countries, either in large
doses (Iraq, Afghanistan) or in small ones (Libya, Somalia, Yemen, Pakistan, Serbia, Panama, etc.). One might even say that Washington talks like a good 21st-century idealist, but its
actions are more old-fashioned than it wants to admit.

Does any of this matter? I think it does in at least two ways. First, states whose respective operating softwares reflect dierent eras will have trouble understanding each other, and each
will tend to regard the other sides actions as incomprehensible or illegitimate or both. This problem is precisely what bedevils relations between East and West over Ukraine: The West
thinks the East is being reactionary, and the East thinks the West is being domineering and insensitive.
Second, a countrys worldview will also aect the capabilities it acquires and thus its ability to influence the behavior of others. When countries with dierent worldviews interact, one or
both may find themselves unable to speak or act in a language that the other understands. Europes vaunted civilian power is of little value in dealing with Moscow, for example, and it
doesnt give Europe much capacity to shape events in violent regions such as Syria or Libya. But by the same token, Russias unwillingness to fully modernize and its reliance on energy
exports in a falling market prevent it from wielding the economic clout that would allow it to shape global politics outside its immediate region.
Back when I was in graduate school, a perennial question on Berkeleys Ph.D. qualifying exam was the following: Has the fundamental nature of international politics changed in the past
400 years? The faculty members at the time didnt agree on this topic, so crafting an answer the grading committee would accept was a bit tricky. The same problem now confronts
political leaders around the world: How much of 21st-century world politics is new and dierent, and how much is the same old story? You can probably guess how I answered the
question back then; Id oer pretty much the same answer now.
Photoillustration by FP
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Banyan
The shadow of the caliphate

Islamic State prompts alarm and soul-searching across Asia
Jun 20th 2015
WHEN Abu Bakr al-Baghdadi proclaimed the restoration of the

Muslim caliphate a year ago this month, the call for Muslims to come
to fight for, and build, his Islamic State (IS), was heard not just in the
collapsing Arab heartland, but also in Muslim communities as
disparate as China, the Philippines and Australia. More than half the
worlds Muslims live in Asia, so the rise of a violent and swaggeringly
self-confident strain of global jihadism is bound to disrupt the region.
Pre-existing groups of jihadists have been emboldened by the
success of IS in establishing and defending its domain in large parts
of Iraq and Syria. Asian governments worry that young people are
being radicalised by IS propaganda, encouraged to travel to the
caliphate or inspired to make bloody mischief at home. Of the
thousands of Asians who have fought with IS, many will return home,
bringing with them the ideology, networks and know-how of
murderous terrorism.
The danger is perhaps most acute in Afghanistan and Pakistan,
countries already torn by terrorism and insurgency. But there is also

cause for alarm in the volatile post-Soviet republics of Central Asia,
where political Islam is an alternative to nasty authoritarian regimes,
and an estimated 2,000-4,000 people are among the 20,000
foreigners who have joined IS. China has strived in the past few
years to root out extremism among members of the mainly Muslim
Uighur minority in the vast western region of Xinjiang, and to blame
global jihadism. It has estimated that 300 Uighurs have travelled to
Iraq and Syria. But Chinas countermeasures seem only to have
sharpened resentment at what Uighurs see as colonial oppression by
the Chinese state and its ethnic-Han majority.
Even in South-East Asia, where the numbers of IS recruits seem
quite modest (some 500 Indonesians, 100 Filipinos, 50 Malaysians
and a handful of Singaporeans), the question of how to respond to IS
has political repercussions. In the Philippines, for example, peace
between the government and Muslim rebels on the island of
Mindanao is threatened by extremist groups that have pledged fealty
to IS. Even in democratic Malaysia the introduction in April of new
anti-terrorism legislation, including provisions for detention without
trial, has angered not just Islamists but also a range of opposition
politicians. Many see it as a pretext to restore powers granted by the
colonial-era Internal Security Act, which was at times abused for
political ends and was lifted only in 2012. Governments everywhere
grapple with an impossible calculation: if they underestimate the
threat, they expose their people to terrorist attacks; if they exaggerate
it, their heavy-handed reactions may further strengthen the terrorists
cause.
Concerns about the influence of IS have grown even in peaceful
countries far from the main battlefronts. At a regional conference on
countering violent extremism in Sydney this month, Australias
prime minister, Tony Abbott, denounced its brazen claim to universal
dominion. He lamented that the tentacles of the death cult have
extended even here, recalling a bloody siege at a caf in Sydney last
December by an apparently deranged gunman with IS sympathies.
Several dozen Australians are reported to have joined IS or Jabhat
Al-Nusra, a Syrian rival affiliated to al-Qaeda. Controversially,
Australia plans to strip citizens with dual nationality who are known
terrorists of their Australian passports.
A few days before Mr Abbott spoke, Lee Hsien Loong, Singapores

prime minister, had devoted part of his keynote speech at the
Shangri-La Dialogue, an annual security forum, to the problem of IS.
The public talk focused on Chinas expansion in the South China
Sea, but much of the backroom talk was about the gathering jihadist
threat. Most striking was Mr Lees sobering assessment that this was
a struggle that would last for generations. Looking forward 50 years,
he suggested that jihadist ideology would surely have been seen to
fail, or at least to have weakened its hold on the imagination of
troubled souls. But he noted that Soviet Communism, another
historical dead end, survived for 70 years before it collapsed. And
that, for all its pretensions to absolute truth, was not a creed rooted in
religion.
In comfortable, well-off Singapore, Malay Muslims are a largely wellintegrated minority. But it was nonetheless a target for Jemaah
Islamiah, a regional jihadist group whose spiritual leader, Abu Bakar
Basyir, once linked to al-Qaeda, has pledged allegiance to IS.
Jemaah Islamiah, guilty of terrorist atrocities in Indonesia, also
planned bombings in Singapore shortly after the September 11th
attacks in America. And even in Singapore, the internet is producing
fanatics. Recently the authorities arrested a 17-year-old, radicalised
online, and detained a 19-year-old student who was planning to join
IS or, failing that, to assassinate government leaders at home.
Singapore knows that it is both a rich country full of attractive targets
for terrorists and a little red dot surrounded by largely Muslim
Indonesia and Malaysia. IS has said it wants to establish a wilayat, a
province of the caliphate, in South-East Asia. Pie in the sky, scoffed
Mr Lee. But he worried that IS could establish a base in some
ungoverned space in the region.
What do they see in IS?
The difficulty is global: everywhere, efforts to fight extremism make
the governments behind them even more of a target. Both Australia
and Singapore are contributing to the coalition fighting IS in the
Middle East. And, as all over the world, governments are becoming
more vigilant at home and stepping up deradicalisation measures by
working with moderate Muslims to counter jihadist propaganda. That
is not easy, however. Propagandaespecially the astute use of the
internet and social mediais ISs forte. As both Mr Lee and Mr

Abbott suggested, the appeal IS holds for troubled souls is
incomprehensible to the leaders of prosperous modern states. And it
is hard to marshal good arguments against a point of view you do not
begin to understand.
Sinking States: Climate Change and the Pacific

Pacific Island states are some of the most vulnerable in the world to the devastating effects of
climate change.
By Gemima Harvey
May 22, 2014
http://thediplomat.com/2014/05/sinking-states-climate-change-and-the-pacific/
Looking to the canary in the climate change coal mine low-lying island states that are slowly
being swallowed by the sea offers a clear warning of the perils associated with a warming
planet.
With sea levels steadily rising, spurred by melting glaciers and ice sheets and thermal
expansion of the ocean as the water warms, small island developing states (SIDS) are
increasingly besieged, their shores nibbled away by a swollen tideline. Latest reports by the UN
Intergovernmental Panel on Climate Change (IPCC) project a sea level rise in the range of 26 to
82 cm by 2100. The rate of rise is dependent on whether the temperature increase is kept to a
minimum forecast of 1.5 degrees Celsius above pre-industrial levels, or whether it reaches
worst-case projections of 4.8 degrees Celsius by the end of the century.
Climate change has been declared unequivocal by the IPCC, the leading international
advisory body, with more than 800 scientists from all over the world saying with 95 percent
certainty that climate change is anthropogenic (caused by human activity). Climate change is
happening because heightened amounts of heat-trapping gases are working like a blanket and
warming the globe. The main culprit in the group of man-made greenhouse gases (GHG)
fuelling global warming is carbon dioxide (CO2), released into the atmosphere primarily by
burning fossil fuels such as coal, oil and natural gas for energy. Deforestation also plays a
key role because with fewer trees to absorb GHG, more heat-trapping gases freely pollute the
air.
If we continue contaminating the atmosphere at the current rate, according to the IPCC, the
world will continue its trajectory toward the most catastrophic temperature scenario. Put simply
business-as-usual cannot continue without disastrous consequences. One of those
consequences will be the death of small island states.
The Maldives is the worlds lowest-lying country, with more than 80 percent of its scattered
islands less than one meter above sea level. It will be one of the first nations submerged. In
2009, then-President Mohamed Nasheed (the subject of a documentary called The Island
President that deals with the subject of climate change) staged a cabinet meeting underwater
to raise awareness about the future of the country if anthropogenic global warming was left
unchecked. This archipelago in the Indian Ocean is not alone in gradually drowning: as many as
1,500 of Indonesias islands could be underwater by 2050. United States Secretary of State
John Kerry, told students in Jakarta that climate change poses a threat to their entire way of
life and that it was perhaps the worlds most fearsome weapon of mass destruction.
Pacific Island states such as Kiribati, Tuvalu and the Marshall Islands are also suffering the
effects of climate change and while eventually being engulfed by the sea is a slow-evolving
peril, immediate threats include more intense storm cycles and seawater intrusion of ground
water and crop soil. Kiribati President, Anote Tong told Bloomberg Businessweek that his
country, a necklace of coral islands, has fewer than 20 years to live. If nothing is done, Kiribati
will go down into the ocean. By about 2030 we start disappearing. Our existence will come to an
end in stages. First, the freshwater lens will be destroyed. The breadfruit trees, the taro, the
saltwater is going to kill them.
SIDS in the Pacific region contribute just 0.3 percent of global GHG emissions yet these island
communities are on the frontlines of climate change. The United Nations has dubbed 2014 as
the International Year of SIDS. With a critical climate treaty to be negotiated in Paris next year
which is supposed to agree on binding measures to reduce emissions and limit warming to 2
degrees Celsius the designated year of SIDS is central in raising the profile of those nations
particularly vulnerable to a warming world. At the UN launch of the International Year of SIDS,
the president of Nauru, Baron Waqa said: No people or country has faced the risk of total
inundation from rising seas before. Yet, that is exactly what we must contend with losing
entire languages, cultures, histories, and all the progress that came at such a high cost for those
who came before us. We celebrate this special year with the sombre knowledge that unless
action is taken soon some islands wont make it to the end of the century.
While SIDS face unique challenges, no country or region is untouched by climate change
global warming knows no boundaries. All over the world, extreme weather events such as
floods and droughts are expected to become more frequent and severe, with wide-reaching
effects on food and water security. Meanwhile, the Earths oceans, which act as a carbon sink,
are becoming more acidic as they absorb increased amounts of CO2 from the air. This has
significant impacts on biodiversity, such as corroding the shells of sea creatures and causing
alarming behavioral changes in some fish.
Earlier this year the IPCC released two major draft reports. One, Impacts, Adaption and
Vulnerability paints a grim picture of how societies will be afflicted by climate change and states
that, Responding to climate-related risks involves decision-making in a changing world, with
continuing uncertainty about the severity and timing of climate-change impacts and with limits to
the effectiveness of adaptation.
Climate Change Versus Capitalism
The other IPCC draft report, Mitigation of Climate Change, was launched in Berlin last month.
It detailed a range of climate change mitigation tactics with emphasis on a transition to
renewable energy. It notes that the world needs to at least triple clean energy sources (zero and
low carbon) by 2050 in order to have a chance of limiting global warming to 2 degrees C above
preindustrial levels.
Moving toward clean energy sources may seem an obvious path toward cutting C02 emissions,
but this transition requires taking on some large and powerful interests on the well-established
energy stage. Investment in fossil fuels must start falling by tens of billions of dollars a year;
limiting the severity of warming means leaving these resources, and the profit they represent, in
the ground an unattractive prospect for the conventional energy sector.
Last month Archbishop Desmond Tutu, in an article for The Guardian, appealed for the
abandonment of fossil fuel investment and called for focus on finding sustainable solutions to
save the planet. We live in a world dominated by greed. We have allowed the interests of
capital to outweigh the interests of human beings and our Earth. It is clear [the companies] are
not simply going to give up; they stand to make too much money.
A transition toward renewable energy sources, namely wind, water and solar power, requires
political will and ethical prioritizing. In 2011, global investment in renewable energy overtook
investment in fossil fuels for the first time, and hit $228 billion in 2012; the market is expected to
account for 25 percent of all energy generation by 2018. Still, in 2012, global fossil fuel
subsidies totaled $544 billion, while renewable energy sources got just $101 billion in
government support. Last month, CO2 levels in the atmosphere exceeded 400 parts per million
for the first time in human history. This means we are fast approaching our acceptable
threshold; its not too late to put a cap on climate change but concrete action is needed now.
Author and journalist, Naomi Klein, articulated the underlying challenges of concrete action
perceptively in a recent article. She wrote that climate change entered mainstream
consciousness in the midst of an ideological war being waged on the very idea of the collective
sphere. Klein points out that this mistiming deeply affects our ability to decisively act.
Addressing climate change requires collective, prudent action, action that goes against the grain
of shortsighted, self-serving capitalism. It has meant that corporate power was ascendant at the
very moment when we needed to exert unprecedented controls over corporate behaviour in
order to protect life on earth. It has meant that we are ruled by a class of politicians who know
only how to dismantle and starve public institutions, just when they most need to be fortified and
reimagined.
Australia: Sleepwalking Toward Catastrophe
Australia is one country that has been busily dismantling its climate change institutions. Elected
last September, the conservative coalition government swiftly axed the Climate Commission
Australias independent authority on climate change. Environmentalist, David Suzuki, labeled
this wilful blindness or a tactic to deliberately suppress or ignore information that is vital to the
decisions theyre making. (With financial support from the public it has since been reestablished as the Climate Council). The government, led by Prime Minister Tony Abbott, then
moved to dismantle the Climate Change Authority, which advises on emission reduction targets,
and the Clean Energy Finance Corporation, which supports private investment in renewable
energy. These efforts have, so far, been blocked in the Senate. Also, notably, for the first time
since 1931, when the science portfolio was created, Australia does not have a designated
Science Minister. Leading social scientist, Bruno Latour, describes this approach of wilful
ignorance championed by the Abbott government as the: Australian strategy of voluntary
sleepwalking toward catastrophe.
Abbott said his country should be the affordable energy capital of the world given its vast coal
and gas assets; it has the fourth-largest share of proven coal reserves in the world. Australia is
open for business, goes the governments mantra. After the election, coalition finance
spokesman, Andrew Robb, told The Australian that the government would reboot the mining
boom. We can get Australia open for business, we will restore an appetite for risk and
investment. The first item of business in being open for business was taking steps to repeal
the carbon tax, which puts a price on carbon by taxing the biggest polluters (the move has been
blocked for now). Axing the carbon tax was one of the coalition governments key campaign
pledges. Abbott blames this tax, along with the Renewable Energy Target (RET) which seeks
to source 20 percent of the countrys energy from renewables by 2020 for a massive surge in
electricity prices. Chairman of the governments Business Advisory Council, Maurice Newman,
has echoed these sentiments, in addition to calling climate change a scientific delusion and a
gigantic money tree.
Australian electricity prices have reportedly doubled over the last several years. However, an
investigative report by Jess Hill at Radio National cuts through the spin, finding that the lions
share of the price spike is linked to network costs associated with updating the energy grid. In
reality, more renewable energy entering the mix will mean more supply and more competition,
lowering wholesale energy prices. But in an already oversupplied energy market, introducing
more clean energy will require displacing conventional providers. And while this should be seen
as a good thing for the planet and its inhabitants given that dirty coal is currently used to
generate 76 percent of Australias energy needs (natural gas and renewables account for 12
percent each) unsurprisingly, conventional energy providers are lobbying for the RET to be
rolled back. Earlier this year, the government appointed Dick Warburton, who has openly
expressed doubts that global warming is caused by human activity, to head a review of the
renewables scheme.
Foreign Minister of the Marshall Islands, Tony de Brum recently expressed concern that
Australia risks going backwards on climate change under the new government. We are having
difficulty understanding Australias climate change policies and their new environmental regime.
We dont understand what they are thinking It is as if our big brother doesnt understand us.
The same message is going to Australia from other countries in the Pacific forum. Little brother
is saying, Big brother should get up and smell the flowers.
Will Australia also turn its back if islands drown and newly stateless Pacific islanders come
knocking?
Climate Refugees
Climate refugee is a term that grabs headlines, although it has no legal meaning. Last year, a
man from Kiribati, living in New Zealand with his family on an expired visa, applied for asylum
based on the threats climate change posed to his shrinking, former island home. His claim was
rejected because environmental hazard is not a legally valid reason to be considered for
refugee status the 1951 UN Refugee Convention is restricted to those fleeing persecution, for
instance, on the basis of race or religion.
And yet, as the sea overwhelms islands, people with no option but to retreat to higher ground in
their home countries will need refuge.
Migration is a measure of last resort. Adaptation is the priority and while the government of
Kiribati is taking steps like building seawalls and improving freshwater management, it has also
begun preparing for the harsh prospect that its islands will be completely uninhabitable by the
end of the century. It has purchased 6000 acres (24.3 square kilometers) of land in nearby Fiji
as an insurance policy, to ensure future food security and possibly even to use as a
resettlement site. The governments website notes that some villagers have already been forced
to move inland because of flooding and with land in short supply, We are in danger of falling off
if we keep moving back. There is also focus on the concept of migration with dignity, which
aims to create opportunities for people to migrate now, before they are forced to, and to ensure
young people are given a high standard of education and are equipped with sought-after skills
so they can get jobs in neighboring countries such as Australia and New Zealand.
Noteworthy is that each of Kiribatis atolls (ring-shaped coral islands) has a unique underlying
geology and while some are rising, others are subsiding as a result of tectonic shifts beneath
them. A swollen sea will more swiftly swallow those that are already sinking. Climate change
APLP G1 Starter Pack Page 8
acts as a threat accelerator, exacerbating existing issues. Kiribati already has problems
associated with overcrowding. Half of its population of 100,000 people is packed into the capital
of South Tarawa, which covers an area of about 16 square kilometers, just 950 meters at its
widest point.
Because of the multi-causal nature of migration, the difficulty in differentiating natural disasters
from climate disasters and the lack of an international legal framework, forecasts of future
climate refugees vary markedly. The International Organization for Migration (IOM) puts the
range of environmental migrants, those moving both within their countries and across borders,
between 25 million and 1 billion people by 2050, with 200 million being the most widely cited
figure. IOM author of Migration and Climate Change, Oli Brown, commented: There has been
a collective, and rather successful, attempt to ignore the scope of the problem so far there is
no home for forced climate migrants in the international community, both literally and
figuratively.
Climate change migration is a subject that will capture growing attention. The governments of
Switzerland and Norway are leading the way forward with the Nansen Initiative, a process
intended to build consensus on a protection agenda for people displaced across borders in the
context of climate change.
And while solutions are sought, the president of Fiji has assured the people of Kiribati that: Fiji
will not turn its back on our neighbours in their hour of need In a worst case scenario and if all
else fails, you will not be refugees.
World Environment Day, on June 5, follows the small island developing states theme, featuring
the slogan Raise your voice, not the sea level. This World Environment Day brings into focus
the fact that, while island states may be on the frontlines of climate change Planet Earth is
our shared island.
Will Climate Change Spark Conflict in Bangladesh?
A changing climate appears likely to wreak havoc on one of the worlds poorest countries in the
coming decades.
By M. Sophia Newman
June 27, 2014
http://thediplomat.com/2014/06/will-climate-change-spark-conflict-in-bangladesh/
As the news on climate change takes a sharp turn for the worse, questions are being asked
about the global impact. In May, scientists announced that a large portion of Antarctica had
begun to collapse. It is the largest and most catastrophic Antarctic cleaving to date taken as a
sign that extreme changes to the global environment are imminent and inevitable. The nation
facing the greatest calamity is literally half a world away from western Antarctica: Bangladesh.
Predictions of looming environmental catastrophe have lingered over Bangladesh for decades.
Many predictions of the small, densely populated, impoverished nations fate have involved
Malthus famous theory, which posits that exponential population growth will outstrip linear
increases in crop yields, provoking mass hunger and social breakdown. So far, Bangladesh has
proven neo-Malthusian doomsayers wrong. Poverty and malnutrition are in decline, and the
nation of 160 million is self-sufficient in the production of rice and wheat, its staple foods.
Climate change predictions are a different matter entirely. The risk is not overpopulation, but
rather myriad adverse changes induced by rising temperatures and global changes. The
combined risk of rising sea levels, droughts, and chaotic storms lands the country at number
one on the global Climate Change Vulnerability Index. The impact may soon provoke the violent
social breakdown long feared.
The countrys geography makes environmental vulnerability inescapable. Bangladesh is a flat
country surrounded on three sides by India and on the fourth by the Bay of Bengal. Its a delta, a
massive drain for three mighty rivers that flow through the Indian subcontinent (the Ganges,
Brahmaputra, and Meghna), for the Himalayan glacial melt, and for the areas annual monsoon
rains. Indeed, annual flooding helps to restore the nutrient-rich soil on which the countrys
agricultural self-sufficiency depends. But the waterlogged land loses 18-75 percent of its area to
temporary flooding each year which kills some 5,000 Bangladeshis annually, causes
homelessness for many more, and disrupts the lives of the rural-dwelling majority. Rising waters
will mean losing habitable land.
And the water will rise. The announcement of Antarctic continental fracturing included a
prediction of a three-meter sea level rise within the next century. Just one meter of sea level rise
a rise now forecast as inevitable within current lifetimes will displace millions of
Bangladeshis from their land. It would be sufficient to reduce Bangladeshs land mass by 17.5
percent, according to a 2007 academic paper by Golam Mahabub Sarwar and Manunul H.
Khan.
The loss of the Sundarbans will remove a natural barrier to storm surges just as the world
begins to experience increases in chaotic weather. Already the most cyclone-vulnerable country
in the world, Bangladesh faces a near-certainty of catastrophic storms. Sea level rise will also
force seawater inland, contaminating Bangladeshs water table and leaving some coastal areas
without potable water. Changes in weather are also likely to exacerbate droughts in the
northeast. Overall, climate change is set to test communal resilience and force Bangladeshs
people off a significant portion of rural land and into cities.
But while researchers are certain that environmental migration will occur, few can quantify the
human tide. Sarwar and Khan have suggested, in a number echoed elsewhere, that 40 million
Bangladeshis will be displaced by one meter of sea level rise in the coming decades.
That is a quarter of the current Bangladeshi population, and it is likely that large-scale migration
is already beginning. Environmental migrants are not often recognized as such in Bangladesh,
but researcher Thomas Homer-Dixon suggests this is common. The term environmental
refugee is often misleading [because] it suggests that people will move out of their homelands in
vast and sudden waves. This ignores the many whose migration is impacted by a complex
combination of environment and economics, and those environmental migrants who move due
to slow, permanent changes such as saline intrusion.
Nonetheless, migration is unmistakable. Dhaka, the countrys capital, has experienced a
population explosion. Migrants arrive from other areas of Bangladesh at a rate of 400,000 per
year one of the fastest growth rates of any city in Asia. The capital has swollen from four
million to fifteen million people within a few short years. Already ranked the second least livable
city in the world for its severe overcrowding, Dhaka will hold an additional 25 million people by
2050. Migrants far outstrip the citys ability to accommodate them.
Their impoverishment can be intractable, too. Having lost the opportunity to use their agricultural
skills, new arrivals often fill the areas garment factories and tanneries, where work conditions
can be deadly.
The result is a kind of pressure cooker, primed for intensive upheaval. Thomas Homer-Dixons
book Environment, Scarcity, and Violence describes the relationship between climate and
conflict: a pattern of agricultural loss that drives migration and economic marginalization
followed by an explosion of violence. Amidst resource challenges, it would be unsurprising if
Bangladeshs fault lines undergo dangerous shifts.
In rural areas, where environmental tensions can be most clearly felt, they arguably already are.
For example, Bangladeshi Hindus were the targets of a two-month long spate of attacks in
December 2013 to February 2014. The proximate causes were Islamic fundamentalists anger
over a contested election and war crimes tribunal; the violence was widely decried by moderate
Muslims. But the violence is part of a long-running persecution of Hindus, and victims noted that
some attackers appeared mostly interested in grabbing Hindu land and property. While political
losses were the spark, poverty and resource scarcity were the dry tinder for the attacks.
The attacks looked much like the circumstances that preceded the Rwandan genocide of 1994
a conflict caused in part by resource scarcity, per scientist Jared Diamonds seminal book
Collapse. Ongoing climate change threatens to increase the potential for Muslim attacks on
Hindus inside Bangladesh. As Nazmul Hussain, a Bangladesh Army staff officer deployed with a
peacekeeping force to Rwanda during the 1994 genocide, says, I can see a similarity about
potential threats in Bangladesh like Rwanda . there is an ominous sign of potential outbursts
anytime.
If the threat is from Muslims to Hindus inside the country, though, the dynamic is reversed
across the border. To speak of emigration to India is anathema to Bangladeshi tastes, despite
ample evidence of long-standing Bengali Muslim migration into Indias West Bengali, Tripura
and Assam states, motivated by a quest for arable farmland. Mass immigration sparked
interethnic conflict in Assam in the early 1980s, and in 1983, Assamese militants massacred
several thousand Bengalis in a single day. While that struggle narrowly predates a quartercentury of climate change warnings, more bloodshed has occurred as recently as 2012. The
cross-border tension over migration has never truly abated.
In fact, pressures are increasing. Although Khatun insists that no data are available of whether
climate change will induce Bangladeshis to move abroad, its logical that some of the displaced
millions will cross borders. Meanwhile, Indias newly elected prime minister, Narendra Modi, has
publicly voiced his acceptance of migrants from Bangladesh but only if they are Hindu. An
outcry for inclusion from Indias leftist politicians notwithstanding, the stipulation reflects longstanding Indian discrimination against Muslims. It may, in the end, cause international difficulties
impacting millions.
While problems loom, they remain open to mitigation. Modis administration is too new for clear
answers on international diplomacy, and Bangladeshs governance is often poorly managed (as
Nazmul Hussain puts it: Corruption is rampant, so this is an ominous sign.)
Nonetheless, the Bangladeshi government created a climate change action strategy in 2009.
While it does not directly refer to violence, it could reduce the overall likelihood of conflicts by
addressing climate change-induced instability in country.
Judging by current behavior, though, human concerns are taking a back seat to myopic
preoccupations with money. The country hasnt received promised financial support from
wealthy nations to enact the plan. But at the edge of the countrys delicate delta, foreigners are
funding a new, ultra-polluting coal plant.
M. Sophia Newman, MPH, was a 2012-2013 Fulbright grantee to Bangladesh who lives in
Dhaka and works as a freelance writer.
Great Recession was good for the environment

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By Sid Perkins
21 July 2015 11:15 am
4 Comments
Climate-warming carbon emissions in the United States fell about 11% between 2007 and 2013. Some media
reports have attributed much of that decline to an ongoing shift from coal toward natural gas for generating
electrical power, but a new study suggests that the largest influence by far is the slump in the U.S. economy.
Researchers looked at how six different factorsincluding population growth, shifts in consumer habits, and
changes in the mix of fossil fuels used to generate electrical power, among othersaffected carbon emissions
trends in the United States from 1997 through 2013. Prior to 2007, rising emissions were driven by economic
Sid is a freelance
growth, with 71% of the rise due to increased consumption of goods and services and the remainder pinned on
science journalist.
the nations population growth, the researchers say. But from 2007 to 2009, only 17% of the steep decline in
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emissions resulted from decreased use of coal and an increased use of natural gas and renewable sources of
energy such as solar and wind power, the team reports online today in Nature Communications. The remainder
stemmed from a decreased consumption of goods and services, the researchers note. From 2009 through 2013, even as the economy
recovered and the U.S. population grew, carbon emissions fell slightly thanks to high gasoline prices (which stifled consumption), a mild
winter in 2012 (which trimmed the demand for home heating), and more energy-efficient manufacturing. The researchers propose,
however, that that transient combination of factors likely wont prevent carbon emissions from rising substantially once the U.S.
economy kicks into a higher gear.
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DOI: 10.1126/science.aac8883
Demography, growth and inequality

Age invaders
A generation of old people is about to change the global economy. They will not all do so in the
same way
Apr 26th 2014 | The Economist
http://www.economist.com/news/briefing/21601248-generation-old-people-about-change-globaleconomy-they-will-not-all-do-so
IN THE 20th century the planets population
doubled twice. It will not double even once in
the current century, because birth rates in
much of the world have declined steeply. But
the number of people over 65 is set to double
within just 25 years. This shift in the structure
of the population is not as momentous as the
expansion that came before. But it is more
than enough to reshape the world economy.
According to the UNs population projections,
the standard source for demographic
estimates, there are around 600m people
aged 65 or older alive today. That is in itself
remarkable; the author Fred Pearce claims it
is possible that half of all the humans who
have ever been over 65 are alive today. But
as a share of the total population, at 8%, it is
not that different to what it was a few
decades ago.
By 2035, however, more than 1.1 billion
people13% of the populationwill be
above the age of 65. This is a natural
corollary of the dropping birth rates that are
slowing overall population growth; they mean there are proportionally fewer young people
around. The old-age dependency ratiothe ratio of old people to those of working agewill
grow even faster. In 2010 the world had 16 people aged 65 and over for every 100 adults
between the ages of 25 and 64, almost the same ratio it had in 1980. By 2035 the UN expects
that number to have risen to 26.
In rich countries it will be much higher (see chart 1). Japan will have 69 old people for every 100
of working age by 2035 (up from 43 in 2010), Germany 66 (from 38). Even America, which has
a relatively high fertility rate, will see its old-age dependency rate rise by more than 70%, to 44.
Developing countries, where todays ratio is much lower, will not see absolute levels rise that
high; but the proportional growth will be higher. Over the same time period the old-age
dependency rate in China will more than double from 15 to 36. Latin America will see a shift
from 14 to 27.
Three ways forward
The big exceptions to this general greying are south Asia and Africa, where fertility is still high.
Since these places are home to almost 3 billion people, rising to 5 billion by mid-century, their
youth could be a powerful counter to the greying elsewhere. But they will slow the change, not
reverse it. The emerging world as a whole will see its collective old-age dependency rate almost
double, to 22 per 100, by 2035.
The received wisdom is that a larger proportion of old people means slower growth and,
because the old need to draw down their wealth to live, less saving; that leads to higher interest
rates and falling asset prices. Some economists are more sanguine, arguing that people will
adapt and work longer, rendering moot measures of dependency which assume no one works
after the age of 65. A third group harks back to the work of Alvin Hansen, known as the
American Keynes, who argued in 1938 that a shrinking population in America would bring with
it diminished incentives for companies to investa smaller workforce needs less investment
and hence persistent stagnation.
The unexpected baby boom of 1946-64 messed up Hansens predictions, and unforeseen
events could undermine todays demographic projections, toothough bearing in mind that the
baby boom required a world war to set the stage, that should not be seen as a source of hope.
But if older people work longer and thus save longer, while slowing population growth means
firms have less incentive to invest, something close to what Hansen envisaged could come
about even without the sort of overall population decline he foresaw. A few months ago Larry
Summers, a Harvard professor and former treasury secretary, argued that Americas economy
appeared already to be suffering this sort of secular stagnationa phrase taken directly from
Hansen.
Who is right? The answer depends on examining the three main channels through which
demography influences the economy: changes in the size of the workforce; changes in the rate
of productivity growth; and changes in the pattern of savings. The result of such examination is
not conclusive. But, for the next few years at least, Hansens worries seem most relevant, not
least because of a previously unexpected effect: the tendency of those with higher skills to work
for longer, and more productively, than they have done to date.
The first obvious implication of a population that is getting a lot older without growing much is
that, unless the retirement age changes, there will be fewer workers. That means less output,
unless productivity rises to compensate. Under the UNs standard assumption that a working life
ends at 65, and with no increases in productivity, ageing populations could cut growth rates in
parts of the rich world by between one-third and one-half over the coming years.
Have skills, will work
Amlan Roy, an economist at Credit Suisse, has calculated that the shrinking working-age
population dragged down Japans GDP growth by an average of just over 0.6 percentage points
a year between 2000 and 2013, and that over the next four years that will increase to 1
percentage point a year. Germanys shrinking workforce could reduce GDP growth by almost
half a point. In America, under the same assumptions, the retirement of the baby-boomers
would be expected to reduce the economys potential growth rate by 0.7 percentage points.
The real size of the workforce, though, depends on more than the age structure of the
population; it depends on who else works (women who currently do not, perhaps, or immigrants)
and how long people work. In the late 20th century that last factor changed little. An analysis of
43 mostly rich countries by David Bloom, David Canning and Gnther Fink, all of Harvard
University, found that between 1965 and 2005 the average legal retirement age rose by less
than six months. During that time male life expectancy rose by nine years.
Since the turn of the century that trend has reversed. Almost 20% of Americans aged over 65
are now in the labour force, compared with 13% in 2000. Nearly half of all Germans in their
early 60s are employed today, compared with a quarter a decade ago.
This is in part due to policy. Debt-laden governments in Europe have cut back their pension
promises and raised the retirement age. Half a dozen European countries, including Italy, Spain
and the Netherlands, have linked the statutory retirement age to life expectancy. Personal
financial circumstances have played a part, too. In most countries the shift was strongest in the
wake of the 2008 financial crisis, which hit the savings of many near-retirees. The move away
from corporate pension plans that provided a fraction of the recipients final salary in perpetuity
will also have kept some people working longer.
But an even more important factor is
education. Better-educated older people
are far more likely to work for longer.
Gary Burtless of the Brookings Institution
has calculated that, in America, only
32% of male high-school graduates with
no further formal education are in the
workforce between the ages of 62 and
74. For men with a professional degree
the figure is 65% (though the overall
number of such men is obviously
smaller). For women the ratios are onequarter versus one-half, with the share
of highly educated women working into
their 60s soaring (see chart 2). In
Europe, where workers of all sorts are
soldiering on into their 60s more than
they used to, the effect is not quite as
marked, but still striking. Only a quarter
of the least-educated Europeans aged
60-64 still work; half of those with a
degree do.
It is not a hard pattern to explain. Lessskilled workers often have manual jobs
that get harder as you get older. The
relative pay of the less-skilled has fallen,
making retirement on a public pension more attractive; for the unemployed, who are also likely
to be less skilled, retirement is a terrific option. Research by Clemens Hetschko, Andreas Knabe
and Ronnie Schb shows that people who go straight from unemployment to retirement
experience a startling increase in their sense of well-being.
Higher-skilled workers, on the other hand, tend to be paid more, which gives them an incentive
to keep working. They are also on average healthier and longer-lived, so they can work and
earn past 65 and still expect to enjoy the fruits of that extra labour later on.
This does not mean the workforce will grow. Overall work rates among the over-60s will still be
lower than they were for the same cohort when it was younger. And even as more educated old
folk are working, fewer less-skilled young people are. In Europe, jobless rates are highest
among the least-educated young. In America, where the labour participation rate (at 63%) is
close to a three-decade low, employment has dropped most sharply for less-skilled men. With
no surge in employment among women, and little appetite for mass immigration, in most of the
rich world the workforce looks likely to shrink even if skilled oldies stay employed.
Legacy of the void
A smaller workforce need not dampen growth, though, if productivity surges. This is not
something most would expect to come about as a result of an ageing population. Plenty of
studies and bitter experience show that most physical and many cognitive capacities decline
with age. A new analysis by a trio of Canadian academics based on the video game StarCraft
II, for instance, suggests that raw brainpower peaks at 24. And ageing societies may ossify.
Alfred Sauvy, the French thinker who coined the term third world, was prone to worry that the
first world would become a society of old people, living in old houses, ruminating about old
ideas. Japans productivity growth slowed sharply in the 1990s when its working-age population
began to shrink; Germanys productivity performance has become lacklustre as its population
ages.
But Japans slowed productivity growth can also be ascribed to its burst asset bubble, and
Germanys to reforms meant to reduce unemployment; both countries, ageing as they are,
score better in the World Economic Forums ranking for innovation than America. A dearth of
workers might prompt the invention of labour-saving capital-intensive technology, just as
Japanese firms are pioneering the use of robots to look after old people. And a wealth of job
experience can counter slower cognitive speed. In an age of ever-smarter machines, the
attributes that enhance productivity may have less to do with pure cognitive oomph than
motivation, people skills and managerial experience.
Perhaps most important, better education leads to higher productivity at any age. For all these
reasons, a growing group of highly educated older folk could increase productivity, offsetting
much of the effect of a smaller workforce.
Evidence on both sides of the Atlantic bears this out. A clutch of recent studies suggests that
older workers are disproportionately more productiveas you would expect if they are
disproportionately better educated. Laura Romeu Gordo of the German Centre of Gerontology
and Vegard Skirbekk, of the International Institute for Applied Systems Analysis in Austria, have
shown that in Germany older workers who stayed in the labour force have tended to move into
jobs which demanded more cognitive skill. Perhaps because of such effects, the earnings of
those over 50 have risen relative to younger workers.
This could be good news for countries with well-educated people currently entering old age
but less so in places that are less developed. Nearly half of Chinas workers aged between 50
and 64 have not completed primary school. As these unskilled people age, their productivity is
likely to fall. Working with his IIASA colleagues Elke Loichinger and Daniela Weber, Mr Skirbekk
tried to gauge this effect by creating a cognition-adjusted dependency ratio. They compared
the cognitive ability of people aged 50 and over across rich and emerging economies by means
of an experiment which tested their ability to recall words, and used the results to weight
dependency ratios. This cognition-adjusted ratio is lower in northern Europe than it is in China,
even though the age-based ratio is far higher in Europe, because the elderly in Europe score
much more strongly on the cognitive-skill test. Similarly adjusted, Americas dependency ratio is
better than Indias.
If skill and education determine how long and how well older people work, they also have big
implications for saving, the third channel through which ageing affects growth. A larger group of
well-educated older people will earn a larger share of overall income. In America the share of
male earnings going to those aged 60-74 has risen from 7.3% to 12.7% since 2000 as welleducated baby-boomers have moved into their 60s. Some of these earnings will finance
retirement, when those concerned finally decide to take it; more savings by people in their 60s
will be matched by more spending when they reach their 80s. But many of the educated elderly
are likely to accumulate far more than they will draw down towards the end of life.
Circumstantial evidence supports this argument. Thomas Piketty, a French economist,
calculates that the average wealth of French 80-year-olds is 134% that of 50- to 59-year-olds,
the highest gap since the 1930s. For the next few years at least, skill-skewed ageing is likely to
mean both more inequality and more private saving.
At the same time governments across the rich world (and particularly in Europe) are trimming
their pension promises and cutting their budget deficits, both of which add to national saving.
Reforms designed to trim future pensions mean that, regardless of their skill level, those close
to retirement are likely to save more and that governments will spend less per old person. The
European Commissions latest forecasts suggest overall pension spending in the EU will fall by
0.1% of GDP between 2010 and 2020, before rising by 0.6% in the subsequent decade. That is
not insignificant, but it is far less than some of the breathless commentary about the burden of
ageing implies.
Taken together, the net effect of high saving by educated older workers and less-generous
pensions is likely to be an unexpected degree of thrift in the rich world, at least for the next few
years. If the money saved finds productive investment opportunities it has the potential to boost
long-run growth. But where will these opportunities be? In principle, two possibilities stand out.
One is rapid innovation in advanced economies. The second is fast growth in emerging
economiesespecially younger, poorer ones.
Unfortunately, more capital currently flows out of emerging economies into the rich world than
the other way. The most successful emerging economies have built up huge stashes of foreign
currency; many are leery of depending too much on foreign borrowing. Even if that were to
change, the youthful economies of south Asia and Africa are too small to absorb huge flows of
capital from those countries that are ageing fast.
And in the rich world, despite lots of obvious innovation, particularly in computer technology,
both productivity growth and investment have been tepid of late. That may be a hangover from
the financial crisis. But it could also be a structural change. The price of capital goods, notably
anything to do with computers, has fallen sharply; it may be that todays innovation is simply
less investment-intensive than it was in the manufacturing age. And the ageing population itself
may deter investment. Fewer workers, other things being equal, means the economy needs a
smaller capital stock, even if some of those workers are clever old sticks. And an ageing
population spends differently. Old people buy fewer things that require heavy investment
notably housesand more services, whether in health care or tourism.
Not destiny, but not nothing
Demographic trends will shape the future, but they do not render particular outcomes inevitable.
The evolution of the economy will depend on the way policymakers respond to the new
situation. But those policy reactions will themselves be shaped by the priorities of older people
to a greater extent than has previously been the case; they will be a bigger share of the
population and in democracies they tend to vote more than younger people do.
On both sides of the Atlantic, recent budget decisions appear to reflect the priorities of the
ageing and affluent. Annuities reform in Britain increased peoples freedom to spend their
pension pots; the disappearance of property-tax reform spared homeowning older Italians a new
burden; Americas budget slashed spending on the young and poor while failing to make
government health and pension spending any less generous to the well-off. Few rich-country
governments have shown any appetite for large-scale investment, despite low interest rates.
A set of forces pushing investment down and pushing saving up, with no countervailing policy
response, makes the impact of ageing over the next few years look like the world that Hansen
described: one of slower growth (albeit not as slow as it would have been if older folk were not
working more), a surfeit of saving and very low interest rates. It will be a world in which ageing
reinforces the changes in income distribution that new technology has brought with it: the skilled
old earn more, the less-skilled of all ages are squeezed. The less-educated and jobless young
will be particularly poorly served, never building up the skills to enable them to become
productive older workers.
Compared with the dire warnings about the bankrupting consequences of a grey tsunami, this
is good news. But not as good as all that.
Democracy is in retreat. And there's a surprising culprit.

One Step Forward, Two Steps Back
BY Joshua Kurlantzick
MARCH 4, 2013
http://www.foreignpolicy.com/articles/2013/03/04/one_step_forward_two_steps_back?w
p_login_redirect=0
Over the past two years, the world's

attention has been captured by
previously unimaginable -- even
rapturous -- changes throughout parts
of the Arab world, Africa, and Asia,
where political openings have been
born in some of the most repressive
and unlikely societies on Earth. In
Burma, where only six years ago a
thuggish junta ordered the shooting of
red-robed monks in the streets, the
past two years have seen a formal,
and seemingly real, transition to a
civilian democratic government. In
Tunisia, Egypt, and Libya, longtime autocrats were toppled by popular revolutions, and citizens
in these states seemed at last to be enjoying the trappings of freedom.
"The Arab Spring is the triumph of democracy," Tunisian President Moncef Marzouki, a former
human rights activist, told the Guardian in 2012. The Arab peoples "have come up with their
own answer to violent extremism and the abusive regimes we've been propping up. It's called
democracy," wrote New York Times columnist Thomas Friedman.
Don't believe the hype. In reality, democracy is going into reverse. While some countries in
Africa, the Arab world, and Asia have opened slightly in the past two years, in other countries
once held up as examples of political change democratic meltdowns have become depressingly
common. In fact, Freedom House found that global freedom dropped in 2012 for the seventh
year in a row, a record number of years of consistent decline.
The Arab Spring has not only led to dictators like Syria's Bashar al-Assad and Bahrain's ruling
Al Khalifa family digging in across the region, but it has also pushed autocrats around the world
to take a harder line with their populations -- whether it's China censoring even vague code
words for protest or Russia passing broad new treason laws and harassing human rights NGOs.
As Arch Puddington, Freedom House's vice president for research, put it, "Our findings point to
the growing sophistication of modern authoritarians. Especially since the Arab Spring, they
are nervous, which accounts for their intensified persecution of popular movements for change."
But it's not the Arab Spring alone that's to blame. According to Freedom House, democracy's
"forward march" actually peaked around the beginning of the 2000s. A mountain of evidence
supports that gloomy conclusion. One of the most comprehensive studies of global democracy,
the Bertelsmann Foundation's Transformation Index, has declared that "the overall quality of
democracy has deteriorated" throughout the developing world. The index found that the number
of "defective" and "highly defective democracies" -- those with institutions, elections, and
political culture so flawed that they hardly resemble real democracies -- was up to 52 in 2012.
In another major survey, by the Economist Intelligence Unit, democracy deteriorated in 48 of
167 countries surveyed in 2011. "The dominant pattern globally over the past five years has
been backsliding," the report says. We're not just talking about the likes of Pakistan and
Zimbabwe here. Thirteen countries on the Transformation Index qualified as "highly defective
democracies," countries with such a lack of opportunity for opposition voices, such problems
with the rule of law, and such unrepresentative political structures that they are now little better
than autocracies.
Even countries often held up as new democratic models have regressed over the past decade.
When they entered the European Union in 2004, the Czech Republic, Hungary, Poland, and
Slovakia were considered success stories. After nearly a decade as EU members, however, all
of these bright lights have dimmed. Populist and far-right parties with little commitment to
democratic norms gained steady popularity; public distaste for democracy increased; and
governments showed more willingness to crack down on activists. Hungary has deteriorated so
badly that its press freedoms rate barely better than they were under the communists.
Meanwhile, as European democracy falters, old-fashioned coups are returning elsewhere. In
Africa, Asia, and Latin America, coups had become rare by the late 1990s. But between 2006
and 2012, militaries grabbed power in Bangladesh, Fiji, Guinea, Guinea-Bissau, Honduras,
Madagascar, Mauritania, Mali, Niger, and Thailand, among others. In places like Ecuador,
Mexico, Pakistan, and the Philippines, where the military did not launch an outright coup, it still
managed to restore its power as a central actor in political life.
This is also true across the Middle East, where the Arab uprisings appear to be entrenching the
power of militaries, sparking massive unrest, scaring middle-class liberals into exodus, and
empowering Islamist majorities. Protesters may have bravely challenged leaders from Yemen to
Egypt, but it's the loyalty of the military that has determined whether these rulers stay in power.
SO WHAT WENT wrong? Let's start by blaming an unlikely culprit: the middle class. Contrary to
the modernization theories of Samuel Huntington, Seymour Martin Lipset, and most Western
world leaders, who have long argued that the growth of the middle class in developing countries
is a boon to democratization, it hasn't worked out that way.
In theory, as the middle class expands, men and women should become more educated and
more demanding of greater economic, social, and ultimately political freedoms. And once a
country reaches the per capita GDP of a middle-income country, it should rarely if ever return to
authoritarian rule. "In virtually every country [that has democratized] the most active supporters
of democratization came from the urban middle class," Huntington wrote. Or consider the words
of Russian economist Sergei Guriev, who declared just this past January that his country's
booming middle class has become "too well-educated and too determined to enjoy increases in
their quality of life" not to force an end to President Vladimir Putin's creeping authoritarianism.
"They will demand that the Russian government is less corrupt and more accessible," Guriev
said.
But they're not succeeding. Sure, it's

true that the middle class globally is
exploding; the World Bank estimates
that between 1990 and 2005, the
middle class tripled in size in
developing countries in Asia, and in
Africa it grew by a third over the past
decade, according to the African
Development Bank Group. Today,
roughly 70 million people worldwide
each year begin to earn enough to
join the middle class.
It seems, however, that this new
global middle is choosing stability
over all else. From Algeria to
Zimbabwe, the rising middle class
has often supported the military as a
bulwark against popular democracy,
fearing that it might empower the
poor, the religious, and the lesseducated. In research for my book, I
studied every coup attempt in the
past 10 years in the developing
world and then analyzed a
comprehensive range of local polls
and media. I found that in 50 percent
of cases, middle-class men and
women either agitated in advance for
coups or subsequently expressed
their wholehearted support for the
army takeover. This is a shockingly
high percentage, given that in many
of these countries, such as Pakistan
and Thailand, the middle class had
originally been at the forefront of trying to get the army out of politics.
And in many countries, middle classes have increasingly come to disdain norms of democratic
culture such as using elections, not violent demonstrations, to change leaders. From Bolivia to
Venezuela to the Philippines, middle classes have turned to street protests or appeals to the
judiciary to try to remove elected leaders.
And the trend is only growing stronger. Opinion polling from many developing countries shows
that not only is the quality of democracy declining, but public views of democracy are
deteriorating. The respected Globalbarometer series uses extensive questionnaires to ask
people about their views on democracy. It has found declining levels of support for democracy
throughout much of sub-Saharan Africa. In Central Asia and the former Soviet Union, the story
is the same. In Kyrgyzstan, which despite its flaws remains the most democratic state in Central
Asia, a majority of the population did not think that a political opposition is very or somewhat
important. And recent polls show that only 16 percent of Russians surveyed said that it was
"very important" that their country be governed democratically. Likewise, in Colombia, Ecuador,
Honduras, Guatemala, Nicaragua, Paraguay, and Peru, either a minority or only a tiny majority
of people thinks democracy is preferable to any other type of government.
Global economic stagnation since the 2008 crash has only weakened public support for
democracy. New middle classes have been hit hard by the malaise, particularly in Eastern
Europe. A comprehensive study of Central and Eastern Europe by the European Bank for
Reconstruction and Development released in 2011 found that the crisis severely lowered
support for democracy in all 10 of the new EU countries. "Those who enjoyed more freedoms
wanted less democracy and markets when they were hurt by the crisis," the report noted.
Even in Asia, one of the world's most economically vibrant and globalized regions, polls show
rising dissatisfaction with democracy -- what some researchers have termed "authoritarian
nostalgia." Indonesia, for example, is considered by many to be the democratic success story of
the 2000s. Yet vote-buying and corruption among elected politicians have begun to wear. In a
2011 study, only 13 percent of respondents thought that the current group of democratic
politicians was doing a better job than leaders during the era of Suharto's authoritarianism.
Even where democracy has deeper roots, disillusionment with the political process has
exploded in recent years. From hundreds of thousands of Indians demonstrating against
corruption to Israelis camping in the streets of Tel Aviv to protest their leaders' lack of interest in
basic economic issues to the French pushing back against government austerity measures,
middle classes are increasingly turning to street protests to make their points. "Our parents are
grateful because they're voting," one young woman told a reporter in Spain, where
unemployment now tops 50 percent for young people. "We're the first generation to say that
voting is worthless."
In his second inaugural address, U.S. President Barack Obama, like every U.S. president for
decades, spoke of America's role in helping promote democracy around the globe. "We will
support democracy from Asia to Africa, from the Americas to the Middle East, because our
interests and our conscience compel us to act on behalf of those who long for freedom," he
declared. Obama may have the best of intentions, but in reality there is little he can do. The sad,
troubling regression of democracy in developing countries isn't something that America can fix -because it has to be fixed at home too.
Employment, Skills and Human Capital

Global Challenge Insight Report
The Human
Capital Report
2015
In collaboration with Mercer
The Human Capital Index
INTRODUCTION
A nations human capital endowmentthe skills and
capacities that reside in people and that are put to
productive usecan be a more important determinant of
its long term economic success than virtually any other
resource. This resource must be invested in and leveraged
efficiently in order for it to generate returnsfor the
individuals involved as well as an economy as a whole.
The first edition of the World Economic Forums
Human Capital Report explored the factors contributing
to the development of a healthy, educated and productive
labour force. This second, revised edition attempts to
deepen the analysis by focusing on a number of key
issues that the first edition brought to the fore and that can
support better design of education policy and improved
workforce planning.
Currently, more than 200 million people globally are
out of a job, with youth hit particularly hard.1 Yet, a focus
on unemployment rates alone provides an incomplete
outlook on a nations success in utilizing its human capital
endowment. A more inclusive metric of human capital
outcomes would need to take stock of all thoseincluding
youth, women and older workerswho have the desire
and potential to contribute their capabilities, skills and
experience for their own well-being as well as that of
economy and society as a whole. Such a metric would also
need to assess the education and skills of both the active
and inactive population. Above all, as todays economies
become ever more knowledge-based, technology-driven
and globalized, and because we simply dont know what
the jobs of tomorrow will look like, there is a growing
recognition that we have to prepare the next generation
with the capacity for lifelong learning.2
The Human Capital Index seeks to serve as a tool
for capturing the complexity of education and workforce
dynamics so that various stakeholders are able to take
better-informed decisions. Because human capital is
critical not only to the productivity of society but also the
functioning of its political, social and civic institutions,
understanding its current state and capacity is valuable to
a wide variety of stakeholders.
The Human Capital Index provides country rankings
that allow for effective comparisons across regions and
income groups. The methodology behind the rankings is
intended to serve as a basis for time-series analysis that
allows countries to track progress, relative to their own

performance as well as that of others. As a vital support
to the Index, the Country Profiles included in this Report
provide a visual representation of countries demographic
and labour force structurecalling attention to population
dynamics such as youth bulges, ageing populations and
shrinking workforcesas well as a wealth of information
on countries human capital composition and contextual
variables pointing to critical areas for urgent and longerterm investments.
In pointing to the education and employment outcome
gaps, demographic trends and untapped talent pools,
it is our hope that this Report can help governments,
businesses, education providers and civil society
institutions identify key areas for focus and investment.
All of these entities have a stake in human capital
development, whether their primary goal is to power their
businesses, strengthen their communities, or create a
population that is better able to contribute to and share in
the rewards of growth and prosperity. We thus hope that
this Report will also help foster public-private collaboration
between sectors, ultimately reframing the debate around
employment, skills and human capital from todays focus
on problems and challenges towards the opportunities
for collaboration that fully leveraging the human capital
potential residing in peoples skills and capacities can
bring.
MEASURING HUMAN CAPITAL
This section provides an overview of the methodology
used in the construction of the Human Capital Index.
Key Concepts
There are three guiding concepts underlying the second
edition of the Human Capital Index. The first is a focus
on learning and employment outcomes, rather than on
inputs or enabling environment variables. The goal is to
provide a snapshot of where countries stand today with
regard to their success or otherwise in developing and
deploying their peoples human capital potential across all
backgrounds and ages.
The second is a focus on demographics. Whenever
possible, the Index takes a generational view and
disaggregates indicators according to five distinct age
groups, highlighting issues that are unique or particularly

The Human Capital Report 2015 | 3
Part 1: Measuring Human Capital
Table 1: Structure of the Human Capital Index, 2015
LEARNING
Under 15 Age Group
1524 Age Group
2554 Age Group
5564 Age Group
65 and Over Age Group
Enrolment in education
Educational attainment
Primary enrolment rate
Tertiary enrolment rate
Primary education
attainment rate
Primary education
attainment rate
Primary education
attainment rate
Secondary enrolment rate
Vocational enrolment rate
Secondary education
attainment rate
Secondary education
attainment rate
Secondary education
attainment rate
Basic education
survival rate
Tertiary education
attainment rate
Tertiary education
attainment rate
Tertiary education
attainment rate
Secondary enrolment gender

gap, female-over-male ratio
Primary education
attainment rate
Secondary education
attainment rate
Quality of education
Quality of primary schools
Under 15 Age Group
Workplace learning
Quality of education system
Staff training services
Youth literacy rate
Economic complexity
2554 Age Group
5564 Age Group
Vulnerability
Economic participation
Incidence of child labour
Labour force participation

rate

rate

rate

rate
Unemployment rate
Unemployment rate
Unemployment rate
Unemployment rate
Underemployment rate
Not in employment, education

or training rate
Employment gender gap,

female-over-male ratio
Healthy life expectancy

at birth
Healthy life years

beyond age 65
EMPLOYMENT
1524 Age Group
Long-term unemployment rate
Skills
Skills
Incidence of overeducation
High-skilled employment share
Incidence of undereducation
Medium-skilled employment
share
Skill diversity
Ease of finding skilled

employees
crucial for the human capital development of each cohort.

The resulting snapshot of where countries stand at each
stage of the human capital development life cycle allows
for more targeted policy intervention and human resource
planning.3
The third is that the Human Capital Index holds all
countries to the same standard, measuring countries
distance to the ideal state. By establishing an absolute
measure of countries performance, the revised edition
of the Human Capital Index allows for both intra- and
4 | The Human Capital Report 2015
inter-country comparisons year-to-year. Future annual

editions of the Report will thus allow countries to track
progress and changes in the level of their human capital
investment and deployment gaps over time.
Index Structure
Human capital is not a one-dimensional concept and
can mean different things to different stakeholders. In
the business world, human capital is the economic value
of an employees set of skills. To a policymaker, human
capital is the capacity of the population to drive economic

growth. To others it may include tacit knowledge acquired
informally through experience, non-cognitive skills, such as
inter-personal skills and the physical, emotional and mental
health of individuals. The Human Capital Index aims to
accommodate this conceptual diversity and takes a holistic
approach, while keeping an overall focus on maximizing a
nations human potential.
The Human Capital Index contains two horizontal
themesLearning and Employmentrunning across five
vertical age group pillars of the Index (Under 15; 1524;
2554; 5564; and 65 and Over). These two cross-cutting
themes assess countries success in developing peoples
skills and competences through learning and in deploying
this acquired knowledge through productive employment.
Or, expressed negatively, the Index assesses the size of a
countrys human capital investment gap and deployment
gap.
In total, the Human Capital Index covers 46 indicators.
Exactly half of these are the result of disaggregating
by age education indicators (primary, secondary
and tertiary attainment) and labour market indicators
(labour force participation rate, unemployment rate and
underemployment rate). These 29 unique concepts are
further grouped into seven sub-themes across the two
horizontal themes, as illustrated in Table1.
Values for each of the indicators come from publicly
available data originally compiled by international
organizations such as the International Labour Organization
(ILO); the United Nations Educational, Scientific and
Cultural Organization (UNESCO); and the World Health
Organization (WHO). In addition to hard data, the Index
uses qualitative survey data from the World Economic
Forums Executive Opinion Survey. While an overview
of the Index indicators is provided in Table1, detailed
descriptions, technical definitions and sources are included
in the section Users Guide: How to Read the Country
Profiles.
Learning
The first horizontal theme, Learning, contains several subthemes related to education: Enrolment in education and
Quality of education, which impact the future labour force;
the Educational attainment of those already in the labour
force; and Workplace learningthe level of opportunity in
a country to acquire new skills both through formal onthe-job training as well as through learning-by-doing, tacit
knowledge and learning from colleagues. These subthemes are distributed across the five age group pillars.
Social and economic marginalization still denies education
to many.4 Access to education for todays children and
youththe future workforceis captured using net
adjusted enrolment rates for primary school and net
enrolment rates for secondary school, as well as through
gross tertiary enrolment ratios and a measure of the

education gender gap at the secondary enrolment level,
for the under 15 and 1524 age groups. The net enrolment
ratios capture all children and youth who are enrolling at
the appropriate age for that school level. As young adults
in the 1524 age group with completed basic education
face a choice between tertiary studies, acquiring further
specialized vocational skills or entering the labour market,
the Index includes a measure of enrolment in vocational
training programmes, without making a value judgement
between these three options in terms of index scoring. Also
included is the basic education survival rate, providing a
measure of school dropout before the full acquisition of
foundational skills.
Although enrolment and attainment measures show
exposure to learning, they dont capture the quality of
these learning environments and may be incomplete on
their own.5 However, internationally standardized outcome
measures of education qualitysuch as the OECDs PISA
test or the TIMMS and PIRLS testsare available for a
limited number of countries only. In the interest of broader
country coverage, the Index measures the literacy rate
of the 1524 age group as a simple quality indicator of
whether a countrys young people graduating from basic
education are functionally literate in reading and writing.
It also includes two qualitative indicators from the World
Economic Forums Executive Opinion Survey on the quality
of primary education (Under 15 Age Group pillar) and
on how well the education system as a whole meets the
needs of a competitive economy (1524 Age Group pillar),
as assessed by a countrys business community.
Included in the Indexacross all pillars except the Under
15 Age Group pillarare three common measures of formal
educational attainment. These capture the percentage
of the population that has achieved at least primary,
(lower) secondary or tertiary education, respectively. A
workforce that is highly educated or at least has a solid
foundation level of learning is much better prepared to
adapt to new technologies, innovate and compete on a
global level. Countries that have predominantly a primary
level of education only are more likely to be constrained
by low levels of income and fewer opportunities for future
development for individuals. Noticeably, many lower
income countries have made remarkable strides in the past
decades, with the result that the educational attainment of
their younger age groups is frequently significantly higher
than that of their older age groups, nearly drawing level
with higher income countries in some cases.
Workplace learning
The final sub-theme of the learning dimension concerns
the extent of human capital acquisition in the workplace
through learning-by-doing, tacit knowledge, exchange with

colleagues as well as through formal on-the-job learning,
continued education and staff training. The aspect of
formal staff training is covered via survey response data
from the World Economic Forums Executive Opinion
Survey, whichas for the case of the education quality
questionsshould be treated as an indirect outcome
measure of the extent and quality of such training received.
The second indicator, Economic complexity, is a measure
of the degree of sophistication of a countrys productive
knowledge as can be empirically observed in the quality
of its export products.6 Given that age-disaggregated
measures of this concept were not available, the decision
was made to place the corresponding indicators within
the 2554 Age Group pillara 30-year age band that also
encompasses the bulk of the working-age population
and does not imply that these processes are not similarly
important for the other age groups.
Employment
The second horizontal theme, Employment, captures
several dimensions of activity in the workforce: the
Economic participation sub-theme measures the extent
to which people of all ages and backgrounds are taking
part in a countrys labour market; the Skills dimension
assesses whether peoples knowledge and education are
well-matched to the economic profile of the country as
well as the quality of the employment in which people find
themselves; while the Vulnerability sub-theme measures
the incidence of exploitative employment relations stifling
individuals long-term potential.
This sub-theme measures how many people are able
to participate actively in the workforce as well as how
successfully particular sectors of the population are able
to contributewomen, youth and older peoplethose
who tend to be particularly inefficiently engaged in labour
markets. Included in the Indexacross all age group pillars
except the Under 15 Age Group pillarare the respective
age groups labour force participation rate, unemployment
rate and underemployment rate. Including both those
currently employed as well as people actively looking for
work, a countrys labour force participation rate is the
broadest measure of the share of its people participating in
the labour market. Unemployment rates capture the subset
of this group that is currently out of a job but would like
to work. The underemployment rate is the share of those
currently employed who would be willing and available
to work more, thereby contributing their knowledge
and experience more fully, and predominantly concerns
people in involuntary part-time or fixed-term employment
arrangements.
In addition to these three base measures, the
Economic participation sub-theme captures a number of
key concepts that are particularly common or critical for
a specific age group, or a sector of the population within

that group. For the 2554 age group, the Index includes a
measure of the gender gap in economic participation, as
this remains a critical weakness in most labour markets
around the world.7 There is now widespread recognition
of the individual and societal returns of increasing female
labour force participation and employment rates for
a strong and balanced economy. For countries with
a shrinking working-age population, accelerating the
integration of this well-educated and capable segment
of the population is becoming ever more urgent.8 For
the 1524 age group, the Index measures the rate of
inactive young people not in employment, education or
training (NEET) as well as the incidence of long-term
unemployment among youth, as measures of current
waste that also have deleterious multiplier effects for the
future.
For both the 5564 and 65 and over age groups,
the Index includes measures of years of life expected
to be lived in full health, providing a sense of the quality
of life and an individuals potential to remain active and
productive into older age.9 For both these age groups,
the Index includes labour force participation as a positive
dimension. From a human capital perspective, given their
rich knowledge and experience, economies have much to
gain from better leveraging the accumulated human capital
of this silver workforce.10 Thanks to recent improvements
in health and social welfare systems this increasingly
holds true, too, for many parts of the developing world.
Unintended disincentives and age-discrimination mean
that an increasing number of those who reach retirement
age and thus exit the workforce, do so despite having
the energy and motivation to stay active and continue
to contribute their skills.11 However, ill health begins to
negatively affect the human capital potential and labour
force participation rate of the 5564 age group in no less
than 47% of countries covered by the Index.12 The inclusion
of the Healthy life years beyond age 65 indicator thus
acts as a counter-balance to the participation indicators
for situations in which older people remain part of the
labour force predominantly due to the absence of a mature
pension and social welfare system.
Skills
The Skills sub-theme relies on a number of proxy variables
to assess the quality of jobs in a country and how well
the country is able to translate the educational attainment
and learning of its people into productive employment
at the appropriate skill level across occupations. For the
2554 age group, the bulk of those in the workforce,
the Index measures the share of the population that is
employed in high-skilled as well as at least medium-skilled
occupations in addition to the perceived ease of finding
skilled employees as indicated by responses to the World
Economic Forums Executive Opinion Survey. Here the
Index makes a choice to reward high- and medium-skilled
work that enhances a countrys ability to build, deploy

and retain a diversified pool of talent that is among the
key driving forces of growth while improving the income
outlook for individuals.
For the 1524 age group that is about to enter the
workforce or has recently done so, the Index measures
countries shortcomings in leveraging young peoples skills
in the jobs theyve been trained for (overeducation) as well
as countries shortcomings in equipping young people
with the skills needed for the roles they are performing
(undereducation). In assessing this degree of skills
mismatch, or the quality of skills utilization, it is important
to understand that it is more than a discrepancy between
labour market needs and particular skill levels as measured
by formal qualifications. Skills mismatches can also arise
when, irrespective of the level of qualifications individuals
hold, fields of study do not match those demanded by
employers. For example, employers in many countries
point to shortages linked to too few young people studying
science, technology, engineering or mathematics, and thus
report skill shortages in specific professions. A broad base
of skills is particularly important in ensuring a countrys
resilience and adaptability in the face of the exponential
technological and economic changes underway.13 The
Index thus includes an assessment of the skill diversity of
its recent graduates as a proxy for the range of expertise
available to a country.
Vulnerability
The final dimension of the Employment theme concerns
the vulnerability of a countrys young population to
exploitation, as measured by the incidence of child
labour. In addition to its immediate impact, child labour
stifles the health, education and long-term human capital
development potential of the children involved. While
other forms of exploitative employment relationsoften
referred to as modern slavery14are equally relevant, little
reliable data exists on these and they frequently occur in
combination with child labour.
Standardizing data
A reference point scale has been used to convert the
values of the raw data into a common metric. Each
indicator is assigned a logical minimum and maximum
value and all raw data points are then expressed as the
gap towards attainment of the ideal value, on a scale
from 0 to 100. As many of the concepts measured by
the Human Capital Index are expressed as percentage
rates for the corresponding age group, their distance to
the ideal can be clearly defined and takes on intuitive
minimum and maximum values. For example, the Primary
enrolment rate indicator has a logical maximum value
of 100% and a higher score reflects a more desirable
situation.
A number of indicators, such as those derived from
the World Economic Forums Executive Opinion Survey, are
originally measured on a different scale. These data points

are converted to their standardized score based on the
following formula:
Score 1 =
Country Indicator Value Logical Minimum Value

Logical Maximum Value Logical Minimum Value
On the other hand, for a number of indicators, such

as Unemployment rate or Incidence of child labour, the
logical ideal value corresponds to 0%. All rankings on
the Human Capital Index have been directionally oriented
towards a score of 100 as the best possible outcome and
performance, meaning that indicators for which a lower
value reflects a more desirable situation are converted
to their distance to the ideal score using the following
alternative formula:
Score 2 =
Country Indicator Value Logical Maximum Value

Logical Minimum Value Logical Maximum Value
The only measure used in the Index that does not have
a logical maximum value is the Healthy life expectancy
indicator, which appears in both the 5564 and 65 and
Over Age Group pillars. The reasoning behind this indicator
is twofold. For the 5564 age group, it is a measure of
whether individuals in this age group can expect to live
through these years in continued good health. Accordingly,
every country passing the threshold of achieving 65
years of healthy life expectancy at birth is deemed to
have reached the ideal. For the 65 and over age group,
the highest-ranked country in the sample is allocated the
maximum score of 100, with other countries scored on the
distance to this frontier.
The final scores can be roughly interpreted as a
percentage, reflecting the degree to which human capital
has been optimized in a given country.15 There are a
number of limitations to this approach to standardization.
The logical minimum and maximum values assigned to
each indicator are independent of the spread of the range
of indicator values, so an indicator that has a higher value
range will have a greater impact on the countrys overall
Index score relative to an indicator that has a lower value
range. For example, the primary education attainment
rate in the 1524 Age Group pillar ranges from 41% to
100% compared to the labour force participation rate,
which ranges from 18% to 80%. Given that a countrys
Age Group pillar score is calculated based on the simple
unweighted average of these indicators (see next section),
the Primary education attainment rate indicator score will
have a larger overall influence on the Age Group pillar
score.16 This is exacerbated if a countrys labour force
participation rate data are missing. While recognizing
this limitation, the approach of standardizing against a
reference was found to be the most technically sound
given the Indexs choice of indicators and overall purpose,
particularly as it enables countries progress to be tracked
year on year, independently as well as relative to the
performance of other countries.17
Table 2: Weighting scheme, 2015
Under 15 Age Group
Weights (percent)
26
1524 Age Group
16
41
Weighting
Once all underlying data is converted to a standardized
score, a countrys score on a given Age Group pillar is
determined by the simple unweighted average of all available
scores within that pillar. As a second step, a countrys score
on the overall Human Capital Index is a weighted average
of the five Age Group pillar scores. The weights assigned
to each Age Group pillar correspond to the percentage
share of the respective age group in the global population
distribution in 2015, based on the population-weighted world
average of all countries. The resulting weights for each Age
Group pillar are shown in Table2.
The intuition behind the applied weighting scheme is
that the benefits for an economy as a whole are maximized
when all of the countrys people are equally enabled to reach
their full potential at the present time. We aim to provide a
comparative assessment of the overall state of countries
human capital investment and deployment performance
calibrated so as to represent each individual within a country
as equally as possible. We thus chose a weighting scheme
that is proportional to the global average demographic
structure across the five age group categories.18
Moreover, by focusing on the situation today the
Index consciously avoids introducing a dimension of
value-judgements around the possible impacts of future
population dynamics.19 While the population diagrams
included in the Reports Country Profiles aim to familiarize
the reader and call visual attention to the critical
importance of such demographic dynamics, the Index
does not take a prescriptive stance about them in its
scoring method.
Missing data
To be included in the Index indicators must have available
data for at least half (50%) of the sample countries and
countries must have data for at least two thirds (65%) of
each of the Age Group pillars indicators. This means a
country must have data for at least:
2554 Age Group
4 out of 6 indicators in the Under 15 Age Group pillar

8 out of 14 indicators in the 1524 Age Group pillar20
8 out of 12 indicators in the 2554 Age Group pillar
5 out of 7 indicators in the 5564 Age Group pillar
5 out of 7 indicators in the 65 and Over Age Group pillar
Data older than 10 years was considered to be of

insufficient relevance for the Index. In general, the Human
Capital Index does not impute missing data, with the
exception of the Incidence of child labour and Youth
literacy rate indicators for the following countries: Australia,
Austria, Belgium, Canada, Czech Republic, Denmark,

Estonia, Finland, France, Germany, Iceland, Ireland, Italy,
Japan, Korea, Rep., Latvia, Lithuania, Luxembourg,
Malta, Netherlands, New Zealand, Norway, Poland,
Slovak Republic, Slovenia, Singapore, Spain, Sweden,
Switzerland, United Kingdom and the United States. Most
developed countries no longer report literacy rates or
collect data on child labour and, as a result, are missing
regular data for these indicators. The Index applies a 1%
and 100% value, respectively, for these indicators, in line
with available data for comparable high-income, developed
countries in the sample. In addition, gross primary and/or
secondary school enrolment rates (capped at a value of
99% where applicable), instead of unavailable net rates,
were used for the following countries: Austria, Canada,
China, Czech Republic, Nigeria and the Slovak Republic.
In each case, this was undertaken in order to enable the
country to meet the minimum coverage criteria for inclusion
in the Index.
Comparison to the first edition
Since the release of the first edition of the Index in 2013,
much thoughtful feedback has been received.21 To build
on the insights of the first edition and further deepen the
analysis, the underlying model of the Index has been
thoroughly revised and a number of methodological
refinements have been made as outlined above. The main
changes from the first edition are as follows.
The first editions four original pillars of Education,
Employment, Health and Enabling Environment have
been replaced by five vertical age bands, selected
to capture the major phases in an individuals
human capital development lifecycle and countries
demographic structure: Under 15; 1524; 2554;
5564; and 65 and Over. The population diagrams
shown in the Country Profiles have been fundamentally
re-designed to align with these age bands and provide
additional visual information on the core index.
Countries are assessed on a concise set of outcome
indicators related to the horizontal themes of Learning
and Employment. To avoid a conflation of input and
outcome variables, measures that were previously
included on an Enabling Environment dimension are
no longer included in the Index and have in part been
moved to the additional information section from the
core index. The Health dimension has been collapsed
into the single, analytically powerful concept of
Health-adjusted life expectancy (HALE).22

5564 Age Group
To standardize the data, a z-score transformation was

used in the first edition. While this enabled the relative
distribution of the data to be preserved, measuring
countrys performance in relation to the mean of
the dataset, it resulted in countrys scores not being
comparable from year to year. Additionally, z-scores are
unfamiliar to many. In an attempt to address a number of
these issues, data in the revised edition is standardized
using ideal reference points as outlined above.
To arrive at a countrys overall score and rank, the first
edition assigned an equal weight of 25% to each of its
four thematic pillars. In line with the second editions
refined demographic approachand in order to count
each individuals contribution to a countrys overall
human capital performance equallya countrys
overall score and rank on the Index is now arrived at by
weighting the countrys average performance in each
age group by the percentage share of the respective
age group in the worlds global population distribution.
Country coverage
The Index covers 124 countries. The terms country,
economy and nation as used in this report do not in
all cases refer to a territorial entity that is a state as
understood by international law and practice. The term
covers well-defined, geographically self-contained
economic areas that may not be states but for which
statistical data are maintained on a separate and
independent basis.
RESULTS AND ANALYSIS
Results for all 124 countries ranked by the Index are shown
in Tables 3 (pages 10 and 11) and 4 (pages 12, 13 and 14)
as well as Figure1 (page 15). Tables 5 (pages 16 and17)
and 6 (page 18) allow for comparisons within regional
groupings and income groupings. Table A1 and Table A2 in
Appendix A contain the complete list of countries by region
and income group, respectively.
Top Ten
This years edition of the Human Capital Index is dominated
by European countries, particularly the Nordics and
Benelux states, with two countries from the Asia and the
Pacific region and one country from the North America
region also making it into the top 10. The leaders of
the Index are high-income economies that have placed
importance on high educational attainment and a
correspondingly large share of high-skilled employment.
Finland (1) is the best-performing country in the
world when it comes to building and leveraging its human
capital potential, taking the top spot on the Under 15 and
2554 Age Group pillars and scoring in the top 10 for the
remaining age groups. Norway (2) and Switzerland (3)
follow closely behind with a strong performance across all
age groups, although they do not make it to the top 10 in

the Under 15 Age Group pillar.
Canada (4) is the only North American country in the
top 10, being the overall leader for the 1524 Age Group
pillar. Japan (5) performs strongly in the 5564 and 65
and Over Age Group pillars, boosted by the longevity and
education of its older population, but held back by relatively
low labour force participation in the prime working age
group, in particular due to the gender gap.
Sweden (6) slightly outperforms Denmark (7) although
both have strong results across all age groups. New
Zealand (9), the only other country from the Asia and the
Pacific region, places in the top 10 for all age group pillars
except for the 2554 Age Group pillar, due in particular to
a comparatively lower economic complexity and labour
force participation rate. The Netherlands (8) and Belgium
(10) have strong scores in the younger age group pillars
but are penalized by relatively low labour force participation
and a relatively high unemployment rate among the 5564
and 65 and over age groups, despite strong health and
education results.
RESULTS BY REGION
Figures 2 through 7 (page 19) display the range of regional
scores overall and by Age Group pillar.
Asia and the Pacific
Asia and the Pacific, the worlds most populous region,
scores towards the middle of the range of the Human
Capital Index results, with an overall average score of
67.83. The gap between the best and worst performers
in the Asia and the Pacific region is the second largest
of any region, reflecting in part the different stages of
development of the 22 countries from the region covered
in the Index, but also the varying degrees of human capital
outcomes even between countries with similar income.
Scores for the regions Under 15 Age Group pillar are
much higher relative to other pillars, reflecting the regions
remarkable progress between generations.
The best performing countries in the region are
Japan(5), New Zealand (9), and Australia (13), while
Nepal (106), Myanmar (112), and Pakistan (113) rank the
lowest. China (64) and Indonesia (69) score in the middle
range of the Index while India (100) falls into the lower half
of the region.
Over half of the countries in the region have achieved
near-universal primary school enrolment rates yet, on
average, over 20% of the regions under 15 age group is
not enrolled in secondary education. Among its 2554 age
group core working population, the average labour force
participation rate is 81%. Lao PDR (105) has the highest
rate, at 94%, while the Islamic Republic of Iran (80) has
the lowest rate, at 56%. Singapore (24) has the highest
proportion of high-skilled employment, at 54% of its
workforce (2nd overall), with a regional average of 19%.
Table 3: Human Capital Index 2015 detailed rankings
1524 Age Group
2554 Age Group
5564 Age Group
Country
Score
Overall index
Rank
Under 15 Age Group

Score
Rank
Score
Rank
Score
Rank
Score
Rank

Score
Rank
Finland
Norway
85.78
83.84
1
2
97.67
93.16
1
12
85.04
83.87
2
3
81.49
79.48
1
4
83.72
85.14
6
3
73.06
74.59
7
2
Switzerland
83.58
92.78
16
83.08
80.03
83.45
73.28
Canada
82.88
93.00
15
88.70
75.84
14
84.15
72.97
Japan
82.74
94.76
76.26
21
78.61
85.24
75.39
Sweden
82.73
91.88
21
81.23
11
79.62
84.40
70.42
17
Denmark
82.47
91.61
25
82.31
78.15
83.66
74.12
Netherlands
82.30
93.41
83.81
77.55
80.63
14
69.53
18
New Zealand
81.84
95.07
81.83
10
74.15
21
85.72
74.19
Belgium
81.12
10
93.86
78.62
16
77.24
77.87
25
68.39
22
Austria
81.02
11
92.24
18
82.70
75.42
15
79.01
21
72.09
10
Ireland
80.59
12
96.05
75.68
27
75.94
13
77.65
28
67.58
26
Australia
80.22
13
89.98
29
82.87
74.26
19
82.64
10
71.23
14
France
80.15
14
93.05
14
75.89
23
76.98
10
77.24
30
66.53
29
Slovenia
79.95
15
93.20
11
78.66
15
74.43
18
76.75
32
71.40
13
Estonia
79.88
16
93.20
10
77.09
18
73.59
23
82.59
11
71.69
11
United States
79.64
17
88.09
40
82.86
74.64
17
80.61
15
70.44
16
Lithuania
79.33
18
92.58
17
75.65
28
74.24
20
80.89
13
68.34
25
United Kingdom
79.07
19
91.70
23
74.77
31
76.42
12
78.73
22
61.12
47
Iceland
78.86
20
92.23
19
78.97
14
75.06
16
74.15
45
60.07
50
Luxembourg
78.79
21
90.83
26
72.68
42
76.69
11
75.36
37
66.85
27
Germany
78.55
22
79.56
75
79.87
12
77.55
82.67
73.47
Latvia
78.39
23
89.39
31
75.89
24
73.30
24
80.52
16
71.56
12
Singapore
78.15
24
95.47
75.96
22
74.12
22
71.35
53
54.76
66
Czech Republic
77.60
25
88.52
36
76.69
19
72.85
26
77.69
27
68.35
24
Russian Federation
77.54
26
86.81
44
79.13
13
71.77
29
80.45
17
70.69
15
Cyprus
77.33
27
93.57
70.59
53
72.92
25
74.86
39
63.78
36
Poland
77.06
28
90.10
28
74.57
32
72.38
27
75.46
35
65.65
32
Israel
77.03
29
89.16
32
75.88
25
71.40
31
79.10
20
66.78
28
Korea, Rep.
76.84
30
91.91
20
75.81
26
70.36
34
78.42
24
61.73
43
Ukraine
76.21
31
90.48
27
77.51
17
66.75
41
79.19
19
72.40
Hungary
75.82
32
85.24
50
73.38
38
71.86
28
77.13
31
69.14
20
Malta
75.77
33
88.59
35
73.52
36
71.65
30
72.88
49
63.13
39
Slovak Republic
75.48
34
87.81
41
71.89
48
70.86
33
76.26
34
65.66
31
Italy
75.44
35
91.68
24
72.07
47
68.99
39
75.23
38
62.93
40
Croatia
75.37
36
91.87
22
71.80
49
69.18
37
72.95
47
63.49
37
Kazakhstan
74.56
37
88.80
33
74.27
34
66.23
43
81.21
12
64.57
34
Portugal
74.50
38
88.17
39
72.17
46
71.12
32
67.96
65
59.41
52
Romania
73.94
39
82.98
64
72.28
45
69.26
36
77.31
29
68.37
23
Greece
73.70
40
89.81
30
70.40
54
67.79
40
71.73
52
60.65
48
Spain
73.30
41
87.76
42
69.70
56
69.11
38
70.95
54
57.99
57
Bulgaria
72.81
42
76.15
85
72.57
43
70.09
35
79.43
18
69.40
19
Armenia
72.50
43
86.75
46
68.74
61
64.40
50
78.54
23
68.76
21
Kyrgyz Republic
71.82
44
83.83
57
73.46
37
63.72
52
76.72
33
65.79
30
Chile
71.80
45
84.74
53
72.74
39
64.72
47
74.22
43
61.69
44
Philippines
71.24
46
79.66
73
76.48
20
64.27
51
74.50
40
65.47
33
Uruguay
71.18
47
81.18
70
74.27
33
64.49
49
74.48
41
63.29
38
Argentina
71.01
48
83.75
58
70.63
52
64.51
48
72.88
50
61.83
42
Panama
71.01
49
78.73
79
72.73
40
65.94
44
75.39
36
63.85
35
Serbia
70.97
50
88.19
38
65.20
72
65.61
45
70.37
57
55.13
62
Mongolia
70.75
51
85.54
49
68.76
60
63.48
54
74.21
44
60.44
49
Malaysia
70.24
52
84.71
54
74.85
30
66.33
42
63.80
75
41.46
99
Costa Rica
69.75
53
78.49
80
71.61
51
65.49
46
70.87
55
58.39
54
United Arab Emirates
69.39
54
88.41
37
66.53
68
63.70
53
65.34
72
47.40
83
Macedonia, FYR
69.31
55
84.09
56
66.98
67
62.23
60
70.38
56
61.30
46
Qatar
69.04
56
93.12
13
65.97
71
59.07
75
66.94
66
50.65
75
Thailand
68.78
57
81.91
68
72.70
41
62.91
57
65.71
71
51.80
73
Mexico
68.50
58
79.93
72
68.61
63
63.12
55
69.24
61
58.11
56
Vietnam
68.48
59
78.98
78
74.99
29
60.63
68
70.32
58
59.42
51
Sri Lanka
68.19
60
87.32
43
69.63
57
59.21
73
68.26
64
49.34
78
Peru
68.13
61
75.62
87
Colombia
67.63
62
73.92
93
73.90
72.35
35
44
61.21
62.96
65
56
72.94
72.70
48
51
62.39
56.32
41
59
(Contd.)
Table 3: Human Capital Index 2015 detailed rankings (contd.)
1524 Age Group
2554 Age Group
5564 Age Group
Country
Score
Overall index
Rank
Under 15 Age Group

Score
Rank
Score
Rank
Score
Rank
Score
Rank

Score
Rank
Azerbaijan
China
67.58
67.47
63
64
83.22
84.44
62
55
61.54
69.60
85
58
60.47
61.85
69
61
77.73
61.74
26
83
54.82
43.43
65
93
Tajikistan
67.24
65
83.05
63
63.52
77
59.85
71
74.40
42
53.87
69
Albania
67.20
66
83.56
59
61.62
83
61.03
67
68.27
63
56.05
60
Trinidad and Tobago
67.10
67
86.03
48
58.38
96
62.84
58
63.25
79
49.61
76
Turkey
67.09
68
83.26
61
71.75
50
58.37
77
63.41
78
53.86
70
Indonesia
66.99
69
86.04
47
67.35
65
60.00
70
63.87
74
43.95
92
El Salvador
66.89
70
77.97
81
70.35
55
61.28
64
65.94
69
53.88
68
Moldova
66.81
71
81.79
69
68.54
64
56.72
80
73.88
46
58.81
53
Mauritius
66.66
72
86.77
45
63.43
78
59.57
72
63.50
77
48.00
81
Bolivia
66.46
73
76.06
86
63.87
76
62.79
59
69.22
62
56.60
58
Jamaica
65.95
74
82.71
65
62.08
81
59.16
74
64.42
73
55.94
61
Paraguay
65.68
75
70.25
98
68.73
62
61.47
62
70.15
59
61.42
45
Jordan
65.59
76
88.65
34
66.36
69
55.91
85
57.21
93
47.92
82
Barbados
65.09
77
93.88
57.25
99
56.47
82
56.76
94
41.02
100
Brazil
64.60
78
71.86
95
67.01
66
61.17
66
65.72
70
52.77
72
Guyana
64.17
79
83.41
60
61.04
87
56.59
81
62.51
80
48.90
80
Iran, Islamic Rep.
63.20
80
84.82
52
65.17
73
53.73
95
56.72
96
44.79
90
Dominican Republic
62.79
81
74.64
91
62.72
80
56.01
84
66.63
67
55.08
63
Ghana
62.63
82
69.49
99
58.64
95
61.41
63
66.05
68
51.27
74
Zambia
62.50
83
72.10
94
63.40
79
57.76
79
63.51
76
52.80
71
Egypt
61.38
84
77.73
82
61.66
82
55.66
87
56.12
98
42.96
95
Saudi Arabia
61.38
85
82.38
66
66.10
70
53.69
97
52.23
107
33.34
115
Guatemala
61.34
86
67.73
105
69.32
59
55.17
91
62.42
81
54.89
64
Bhutan
61.11
87
79.59
74
56.54
100
55.90
86
53.44
104
45.55
88
Botswana
60.81
88
79.47
76
56.20
102
56.09
83
53.65
103
41.85
97
Cameroon
60.75
89
69.23
102
60.36
88
58.40
76
60.72
86
46.43
86
Nicaragua
60.65
90
69.26
101
56.22
101
55.60
88
69.27
60
58.20
55
Venezuela
60.51
91
79.13
77
65.05
74
53.04
100
53.95
102
36.58
108
South Africa
60.50
92
75.32
88
54.44
108
58.24
78
61.96
82
35.24
111
Kuwait
59.31
93
85.20
51
47.83
116
51.15
105
57.40
91
42.62
96
Namibia
59.09
94
70.99
97
52.81
109
54.55
93
61.19
84
54.22
67
Morocco
59.04
95
76.37
84
56.07
103
52.97
101
58.56
89
40.69
102
Honduras
58.93
96
68.39
103
61.22
86
53.55
98
60.68
87
49.35
77
Cambodia
58.55
97
67.21
106
56.02
104
55.48
89
60.78
85
49.00
79
Tunisia
58.21
98
81.05
71
59.05
93
49.81
107
48.72
113
35.97
110
Bangladesh
57.62
99
74.98
89
59.28
91
48.35
111
57.22
92
45.87
87
India
57.62
100
82.03
67
57.50
98
49.34
109
46.42
115
33.47
114
Kenya
57.54
101
71.58
96
51.54
111
54.55
92
56.76
95
40.71
101
Uganda
57.34
102
63.84
109
60.36
89
55.17
90
59.65
88
39.16
104
Tanzania
56.56
103
61.44
114
60.05
90
53.72
96
57.74
90
47.10
84
Madagascar
56.25
104
62.89
111
55.69
105
54.51
94
56.65
97
44.59
91
Lao PDR
56.16
105
74.47
92
59.06
92
49.78
108
49.02
111
31.64
117
Nepal
55.77
106
76.56
83
61.62
84
47.55
114
44.62
119
30.93
118
Lesotho
54.74
107
67.82
104
51.31
112
53.07
99
49.67
109
33.74
112
Rwanda
54.17
108
69.48
100
58.66
94
48.15
112
47.71
114
33.55
113
Mozambique
54.04
109
61.70
113
52.21
110
52.08
102
52.48
106
44.81
89
Malawi
53.49
110
59.24
117
54.72
106
51.33
104
55.41
100
41.59
98
Senegal
53.04
111
63.78
110
47.32
118
49.82
106
52.87
105
46.54
85
Myanmar
52.97
112
59.12
118
63.91
75
47.00
116
54.74
101
39.76
103
Pakistan
52.63
113
60.52
115
50.85
113
51.37
103
50.96
108
39.15
105
Algeria
52.14
114
74.64
90
54.67
107
44.93
119
43.93
120
20.29
123
Ethiopia
50.25
115
52.37
123
58.37
97
47.37
115
48.90
112
43.19
94
Burkina Faso
49.22
116
57.05
120
46.34
120
48.54
110
45.93
116
36.94
107
Cte d'Ivoire
49.02
117
65.05
107
47.43
117
45.18
118
41.37
121
28.54
119
Mali
48.51
118
59.27
116
49.50
115
44.52
120
44.80
118
36.20
109
Guinea
48.25
119
56.86
121
41.00
123
47.59
113
49.07
110
37.74
106
Nigeria
47.43
120
53.01
122
50.16
114
46.25
117
45.43
117
32.42
116
Burundi
46.76
121
64.10
108
47.28
119
37.54
122
56.07
99
26.93
121
Mauritania
42.29
122
57.85
119
42.57
121
37.46
123
34.73
123
24.43
122
Chad
41.10
123
50.50
124
Yemen
40.72
124
62.70
112
40.41
42.00
124
122
38.83
34.06
121
124
37.31
25.54
122
124
27.93
17.54
120
124
Table 4: Human Capital Index 2015 rankings by Age Group pillar
Under 15 Age Group

Rank Country
Score
1524 Age Group
Rank Country
Score
Rank Country
Score
Rank Country
Score
1 Finland
2 Ireland
97.67
96.05
63 Tajikistan
64 Romania
83.05
82.98
1 Canada
2 Finland
88.70
85.04
63 Mexico
64 Moldova
68.61
68.54
3 Singapore
95.47
65 Jamaica
82.71
3 Norway
83.87
65 Indonesia
67.35
4 New Zealand
95.07
66 Saudi Arabia
82.38
4 Netherlands
83.81
66 Brazil
67.01
5 Japan
94.76
67 India
82.03
5 Switzerland
83.08
67 Macedonia, FYR
66.98
6 Barbados
93.88
68 Thailand
81.91
6 Australia
82.87
68 United Arab Emirates
66.53
7 Belgium
93.86
69 Moldova
81.79
7 United States
82.86
69 Jordan
66.36
8 Cyprus
93.57
70 Uruguay
81.18
8 Austria
82.70
70 Saudi Arabia
66.10
9 Netherlands
93.41
71 Tunisia
81.05
9 Denmark
82.31
71 Qatar
65.97
10 Estonia
93.20
72 Mexico
79.93
10 New Zealand
81.83
72 Serbia
65.20
11 Slovenia
93.20
73 Philippines
79.66
11 Sweden
81.23
73 Iran, Islamic Rep.
65.17
12 Norway
93.16
74 Bhutan
79.59
12 Germany
79.87
74 Venezuela
65.05
13 Qatar
93.12
75 Germany
79.56
13 Russian Federation
79.13
75 Myanmar
63.91
14 France
93.05
76 Botswana
79.47
14 Iceland
78.97
76 Bolivia
63.87
15 Canada
93.00
77 Venezuela
79.13
15 Slovenia
78.66
77 Tajikistan
63.52
16 Switzerland
92.78
78 Vietnam
78.98
16 Belgium
78.62
78 Mauritius
63.43
17 Lithuania
92.58
79 Panama
78.73
17 Ukraine
77.51
79 Zambia
63.40
18 Austria
92.24
80 Costa Rica
78.49
18 Estonia
77.09
80 Dominican Republic
62.72
19 Iceland
92.23
81 El Salvador
77.97
19 Czech Republic
76.69
81 Jamaica
62.08
20 Korea, Rep.
91.91
82 Egypt
77.73
20 Philippines
76.48
82 Egypt
61.66
21 Sweden
91.88
83 Nepal
76.56
21 Japan
76.26
83 Albania
61.62
22 Croatia
91.87
84 Morocco
76.37
22 Singapore
75.96
84 Nepal
61.62
23 United Kingdom
91.70
85 Bulgaria
76.15
23 France
75.89
85 Azerbaijan
61.54
24 Italy
91.68
86 Bolivia
76.06
24 Latvia
75.89
86 Honduras
61.22
25 Denmark
91.61
87 Peru
75.62
25 Israel
75.88
87 Guyana
61.04
26 Luxembourg
90.83
88 South Africa
75.32
26 Korea, Rep.
75.81
88 Cameroon
60.36
27 Ukraine
90.48
89 Bangladesh
74.98
27 Ireland
75.68
89 Uganda
60.36
28 Poland
90.10
90 Algeria
74.64
28 Lithuania
75.65
90 Tanzania
60.05
29 Australia
89.98
74.64
29 Vietnam
74.99
91 Bangladesh
59.28
30 Greece
89.81
92 Lao PDR
74.47
30 Malaysia
74.85
92 Lao PDR
59.06
31 Latvia
89.39
93 Colombia
73.92
31 United Kingdom
74.77
93 Tunisia
59.05
32 Israel
89.16
94 Zambia
72.10
32 Poland
74.57
94 Rwanda
58.66
33 Kazakhstan
88.80
95 Brazil
71.86
33 Uruguay
74.27
95 Ghana
58.64
34 Jordan
88.65
96 Kenya
71.58
34 Kazakhstan
74.27
96 Trinidad and Tobago
58.38
35 Malta
88.59
97 Namibia
70.99
35 Peru
73.90
97 Ethiopia
58.37
36 Czech Republic
88.52
98 Paraguay
70.25
36 Malta
73.52
98 India
57.50
88.41
99 Ghana
69.49
37 Kyrgyz Republic
73.46
99 Barbados
57.25
38 Serbia
88.19
100 Rwanda
69.48
38 Hungary
73.38
100 Bhutan
56.54
39 Portugal
88.17
101 Nicaragua
69.26
39 Chile
72.74
101 Nicaragua
56.22
40 United States
88.09
102 Cameroon
69.23
40 Panama
72.73
102 Botswana
56.20
41 Slovak Republic
87.81
103 Honduras
68.39
41 Thailand
72.70
103 Morocco
56.07
42 Spain
87.76
104 Lesotho
67.82
42 Luxembourg
72.68
104 Cambodia
56.02
43 Sri Lanka
87.32
105 Guatemala
67.73
43 Bulgaria
72.57
105 Madagascar
55.69
86.81
106 Cambodia
67.21
44 Colombia
72.35
106 Malawi
54.72
45 Mauritius
86.77
107 Cte d'Ivoire
65.05
45 Romania
72.28
107 Algeria
54.67
46 Armenia
86.75
108 Burundi
64.10
46 Portugal
72.17
108 South Africa
54.44
47 Indonesia
86.04
109 Uganda
63.84
47 Italy
72.07
109 Namibia
52.81
86.03
110 Senegal
63.78
48 Slovak Republic
71.89
110 Mozambique
52.21
49 Mongolia
85.54
111 Madagascar
62.89
49 Croatia
71.80
111 Kenya
51.54
50 Hungary
85.24
112 Yemen
62.70
50 Turkey
71.75
112 Lesotho
51.31
51 Kuwait
85.20
113 Mozambique
61.70
51 Costa Rica
71.61
113 Pakistan
50.85
84.82
114 Tanzania
61.44
52 Argentina
70.63
114 Nigeria
50.16
53 Chile
84.74
115 Pakistan
60.52
53 Cyprus
70.59
115 Mali
49.50
54 Malaysia
84.71
116 Mali
59.27
54 Greece
70.40
116 Kuwait
47.83
55 China
84.44
117 Malawi
59.24
55 El Salvador
70.35
117 Cte d'Ivoire
47.43
56 Macedonia, FYR
84.09
118 Myanmar
59.12
56 Spain
69.70
118 Senegal
47.32
57 Kyrgyz Republic
83.83
119 Mauritania
57.85
57 Sri Lanka
69.63
119 Burundi
47.28
58 Argentina
83.75
120 Burkina Faso
57.05
58 China
69.60
120 Burkina Faso
46.34
59 Albania
83.56
121 Guinea
56.86
59 Guatemala
69.32
121 Mauritania
42.57
60 Guyana
83.41
122 Nigeria
53.01
60 Mongolia
68.76
122 Yemen
42.00
61 Turkey
62 Azerbaijan
83.26
83.22
123 Ethiopia
124 Chad
52.37
50.50
61 Armenia
62 Paraguay
68.74
68.73
123 Guinea
124 Chad
41.00
40.41
(Contd)
Table 4: Rankings by pillar (contd.)
2554 Age Group

Rank Country
Score
5564 Age Group
Rank Country
Score
Rank Country
Score
Rank Country
Score
1 Finland
2 Switzerland
81.49
80.03
63 Ghana
64 El Salvador
61.41
61.28
1 New Zealand
2 Japan
85.72
85.24
63 Albania
64 Sri Lanka
68.27
68.26
3 Sweden
79.62
65 Peru
61.21
3 Norway
85.14
65 Portugal
67.96
4 Norway
79.48
66 Brazil
61.17
4 Sweden
84.40
66 Qatar
66.94
5 Japan
78.61
67 Albania
61.03
5 Canada
84.15
66.63
6 Denmark
78.15
68 Vietnam
60.63
6 Finland
83.72
68 Ghana
66.05
7 Netherlands
77.55
69 Azerbaijan
60.47
7 Denmark
83.66
69 El Salvador
65.94
8 Germany
77.55
70 Indonesia
60.00
8 Switzerland
83.45
70 Brazil
65.72
9 Belgium
77.24
71 Tajikistan
59.85
9 Germany
82.67
71 Thailand
65.71
10 France
76.98
72 Mauritius
59.57
10 Australia
82.64
65.34
11 Luxembourg
76.69
73 Sri Lanka
59.21
11 Estonia
82.59
73 Jamaica
64.42
12 United Kingdom
76.42
74 Jamaica
59.16
12 Kazakhstan
81.21
74 Indonesia
63.87
13 Ireland
75.94
75 Qatar
59.07
13 Lithuania
80.89
75 Malaysia
63.80
14 Canada
75.84
76 Cameroon
58.40
14 Netherlands
80.63
76 Zambia
63.51
15 Austria
75.42
77 Turkey
58.37
15 United States
80.61
77 Mauritius
63.50
16 Iceland
75.06
78 South Africa
58.24
16 Latvia
80.52
78 Turkey
63.41
17 United States
74.64
79 Zambia
57.76
80.45
63.25
18 Slovenia
74.43
80 Moldova
56.72
18 Bulgaria
79.43
80 Guyana
62.51
19 Australia
74.26
81 Guyana
56.59
19 Ukraine
79.19
81 Guatemala
62.42
20 Lithuania
74.24
82 Barbados
56.47
20 Israel
79.10
82 South Africa
61.96
21 New Zealand
74.15
83 Botswana
56.09
21 Austria
79.01
83 China
61.74
22 Singapore
74.12
56.01
22 United Kingdom
78.73
84 Namibia
61.19
23 Estonia
73.59
85 Jordan
55.91
23 Armenia
78.54
85 Cambodia
60.78
24 Latvia
73.30
86 Bhutan
55.90
24 Korea, Rep.
78.42
86 Cameroon
60.72
25 Cyprus
72.92
87 Egypt
55.66
25 Belgium
77.87
87 Honduras
60.68
26 Czech Republic
72.85
88 Nicaragua
55.60
26 Azerbaijan
77.73
88 Uganda
59.65
27 Poland
72.38
89 Cambodia
55.48
27 Czech Republic
77.69
89 Morocco
58.56
28 Hungary
71.86
90 Uganda
55.17
28 Ireland
77.65
90 Tanzania
57.74
71.77
91 Guatemala
55.17
29 Romania
77.31
91 Kuwait
57.40
30 Malta
71.65
92 Kenya
54.55
30 France
77.24
92 Bangladesh
57.22
31 Israel
71.40
93 Namibia
54.55
31 Hungary
77.13
93 Jordan
57.21
32 Portugal
71.12
94 Madagascar
54.51
32 Slovenia
76.75
94 Barbados
56.76
33 Slovak Republic
70.86
53.73
33 Kyrgyz Republic
76.72
95 Kenya
56.76
34 Korea, Rep.
70.36
96 Tanzania
53.72
34 Slovak Republic
76.26
56.72
35 Bulgaria
70.09
97 Saudi Arabia
53.69
35 Poland
75.46
97 Madagascar
56.65
36 Romania
69.26
98 Honduras
53.55
36 Panama
75.39
98 Egypt
56.12
37 Croatia
69.18
99 Lesotho
53.07
37 Luxembourg
75.36
99 Burundi
56.07
38 Spain
69.11
100 Venezuela
53.04
38 Italy
75.23
100 Malawi
55.41
39 Italy
68.99
101 Morocco
52.97
39 Cyprus
74.86
101 Myanmar
54.74
40 Greece
67.79
102 Mozambique
52.08
40 Philippines
74.50
102 Venezuela
53.95
41 Ukraine
66.75
103 Pakistan
51.37
41 Uruguay
74.48
103 Botswana
53.65
42 Malaysia
66.33
104 Malawi
51.33
42 Tajikistan
74.40
104 Bhutan
53.44
43 Kazakhstan
66.23
105 Kuwait
51.15
43 Chile
74.22
105 Senegal
52.87
44 Panama
65.94
106 Senegal
49.82
44 Mongolia
74.21
106 Mozambique
52.48
45 Serbia
65.61
107 Tunisia
49.81
45 Iceland
74.15
107 Saudi Arabia
52.23
46 Costa Rica
65.49
108 Lao PDR
49.78
46 Moldova
73.88
108 Pakistan
50.96
47 Chile
64.72
109 India
49.34
47 Croatia
72.95
109 Lesotho
49.67
48 Argentina
64.51
110 Burkina Faso
48.54
48 Peru
72.94
110 Guinea
49.07
49 Uruguay
64.49
111 Bangladesh
48.35
49 Malta
72.88
111 Lao PDR
49.02
50 Armenia
64.40
112 Rwanda
48.15
50 Argentina
72.88
112 Ethiopia
48.90
51 Philippines
64.27
113 Guinea
47.59
51 Colombia
72.70
113 Tunisia
48.72
52 Kyrgyz Republic
63.72
114 Nepal
47.55
52 Greece
71.73
114 Rwanda
47.71
63.70
115 Ethiopia
47.37
53 Singapore
71.35
115 India
46.42
54 Mongolia
63.48
116 Myanmar
47.00
54 Spain
70.95
116 Burkina Faso
45.93
55 Mexico
63.12
117 Nigeria
46.25
55 Costa Rica
70.87
117 Nigeria
45.43
56 Colombia
62.96
118 Cte d'Ivoire
45.18
56 Macedonia, FYR
70.38
118 Mali
44.80
57 Thailand
62.91
119 Algeria
44.93
57 Serbia
70.37
119 Nepal
44.62
62.84
120 Mali
44.52
58 Vietnam
70.32
120 Algeria
43.93
59 Bolivia
62.79
121 Chad
38.83
59 Paraguay
70.15
121 Cte d'Ivoire
41.37
60 Macedonia, FYR
62.23
122 Burundi
37.54
60 Nicaragua
69.27
122 Chad
37.31
61 China
62 Paraguay
61.85
61.47
123 Mauritania
124 Yemen
37.46
34.06
61 Mexico
62 Bolivia
69.24
69.22
123 Mauritania
124 Yemen
34.73
25.54
(Contd)
Table 4: Rankings by pillar (contd.)

Rank Country
Score
Rank Country
Score
1 Japan
2 Norway
75.39
74.59
64 Guatemala
55.08
54.89
3 New Zealand
74.19
65 Azerbaijan
54.82
4 Denmark
74.12
66 Singapore
54.76
5 Germany
73.47
67 Namibia
54.22
6 Switzerland
73.28
68 El Salvador
53.88
7 Finland
73.06
69 Tajikistan
53.87
8 Canada
72.97
70 Turkey
53.86
9 Ukraine
72.40
71 Zambia
52.80
10 Austria
72.09
72 Brazil
52.77
11 Estonia
71.69
73 Thailand
51.80
12 Latvia
71.56
74 Ghana
51.27
13 Slovenia
71.40
75 Qatar
50.65
14 Australia
71.23
49.61
70.69
77 Honduras
49.35
16 United States
70.44
78 Sri Lanka
49.34
17 Sweden
70.42
79 Cambodia
49.00
18 Netherlands
69.53
80 Guyana
48.90
19 Bulgaria
69.40
81 Mauritius
48.00
20 Hungary
69.14
82 Jordan
47.92
21 Armenia
68.76
47.40
22 Belgium
68.39
84 Tanzania
47.10
23 Romania
68.37
85 Senegal
46.54
24 Czech Republic
68.35
86 Cameroon
46.43
25 Lithuania
68.34
87 Bangladesh
45.87
26 Ireland
67.58
88 Bhutan
45.55
27 Luxembourg
66.85
89 Mozambique
44.81
28 Israel
66.78
44.79
29 France
66.53
91 Madagascar
44.59
30 Kyrgyz Republic
65.79
92 Indonesia
43.95
31 Slovak Republic
65.66
93 China
43.43
32 Poland
65.65
94 Ethiopia
43.19
33 Philippines
65.47
95 Egypt
42.96
34 Kazakhstan
64.57
96 Kuwait
42.62
35 Panama
63.85
97 Botswana
41.85
36 Cyprus
63.78
98 Malawi
41.59
37 Croatia
63.49
99 Malaysia
41.46
38 Uruguay
63.29
100 Barbados
41.02
39 Malta
63.13
101 Kenya
40.71
40 Italy
62.93
102 Morocco
40.69
41 Peru
62.39
103 Myanmar
39.76
42 Argentina
61.83
104 Uganda
39.16
43 Korea, Rep.
61.73
105 Pakistan
39.15
44 Chile
61.69
106 Guinea
37.74
45 Paraguay
61.42
107 Burkina Faso
36.94
46 Macedonia, FYR
61.30
108 Venezuela
36.58
47 United Kingdom
61.12
109 Mali
36.20
48 Greece
60.65
110 Tunisia
35.97
49 Mongolia
60.44
111 South Africa
35.24
50 Iceland
60.07
112 Lesotho
33.74
51 Vietnam
59.42
113 Rwanda
33.55
52 Portugal
59.41
114 India
33.47
53 Moldova
58.81
115 Saudi Arabia
33.34
54 Costa Rica
58.39
116 Nigeria
32.42
55 Nicaragua
58.20
117 Lao PDR
31.64
56 Mexico
58.11
118 Nepal
30.93
57 Spain
57.99
119 Cte d'Ivoire
28.54
58 Bolivia
56.60
120 Chad
27.93
59 Colombia
56.32
121 Burundi
26.93
60 Albania
56.05
122 Mauritania
24.43
61 Jamaica
62 Serbia
55.94
55.13
123 Algeria
124 Yemen
20.29
17.54
The region includes five countries that are ranked in

the top 10 for the highest healthy life expectancy at birth.
Despite this, labour force participation drops by more than
20 percentage points, on average, in transitioning from the
2554 to the 5564 Age Group pillar.
Japan (5), the best performer in the region, is part of
the Human Capital Indexs top 10. It has achieved nearuniversal basic education and has a tertiary education
attainment rate of over 50% for its working age population,
ranking it first in the world. With the worlds highest
aged-dependency ratio and second highest healthy life
expectancy, there is greater potential to be tapped by
closing the gender gap and tapping into the skills of the
older workforce, particularly as labour force participation
falls from 84% in the 2554 Age Group to 69% for the
5564 Age Group.
New Zealand (9) is the second best performer in
the region and equally part of the Index overall top 10.
It ranks first on the 5564 Age Group pillar due to its
high educational attainment and the age groups active
participation in the labour force. Australia (13) follows, with
a strong performance on the 1524 Age Group pillar due
to high tertiary and vocational education enrolment rates.
More than 90% of its employment share is in medium- and
high-skilled occupations and less than 5% of youth are not
in employment, education or training (5th overall).
The regions top five is completed by Singapore (24)
and the Republic of Korea (30), which ranks first in the
world for its tertiary enrolment rate. Unlike for the other top
performers in the region, however, business perceptions of
the quality of its education system are comparatively low
(63rd) and the country also ranks low in the ease of finding
skilled employees and its labour force participation.
The Philippines (46), Mongolia (51), Malaysia (52),
Thailand (57), Vietnam (59) and Sri Lanka (60) are next.
China (64) ranks in the mid-range of the overall Index
scores. Its younger population fares better than its 5564
and 65 and over age groups as a result of increasing
educational attainment in the population. Indonesia (69)
trails China and follows a similar human capital profile
across its age group pillars.
Next are Iran (80), Bhutan (87), Cambodia (97) and
Bangladesh (99), followed by India (100). Although the
latters educational attainment has improved markedly
over the different age groups, its youth literacy rate is still
only 90% (98th), well behind the rates of other emerging
markets. India also ranks poorly on the labour force
participation rate due to its large informal sector.
Lao PDR (105) and Nepal (106) are next. Both
countries scores in the younger population are worse
than for their elder generations due to low secondary
school enrolment rates. Nepal, moreover, has the highest
incidence of child labour in the region (107th overall),
with one in three children affected. Myanmar (112) and
Pakistan (113) rank at the bottom of the region as a

Figure 1: Distance to the ideal score, 2015

Finland
Norway
Switzerland
Canada
Japan
Sweden
Denmark
Netherlands
New Zealand
Belgium
Austria
Ireland
Australia
France
Slovenia
Estonia
United States
Lithuania
United Kingdom
Iceland
Luxembourg
Germany
Latvia
Singapore
Czech Republic
Russian Federation
Cyprus
Poland
Israel
Korea, Rep.
Ukraine
Hungary
Malta
Slovak Republic
Italy
Croatia
Kazakhstan
Portugal
Romania
Greece
Spain
Bulgaria
Armenia
Kyrgyz Republic
Chile
Philippines
Uruguay
Argentina
Panama
Serbia
Mongolia
Malaysia
Costa Rica
United Arab Emirates
Macedonia, FYR
Qatar
Thailand
Mexico
Vietnam
Sri Lanka
Peru
Colombia
Azerbaijan
China
Tajikistan
Albania
Trinidad and Tobago
Turkey
Indonesia
El Salvador
Moldova
Mauritius
Bolivia
Jamaica
Paraguay
Jordan
Barbados
Brazil
Guyana
Iran, Islamic Rep.
Dominican Republic
Ghana
Zambia
Egypt
Saudi Arabia
Guatemala
Bhutan
Botswana
Cameroon
Nicaragua
Venezuela
South Africa
Kuwait
Namibia
Morocco
Honduras
Cambodia
Tunisia
Bangladesh
India
Kenya
Uganda
Tanzania
Madagascar
Lao PDR
Nepal
Lesotho
Rwanda
Mozambique
Malawi
Senegal
Myanmar
Pakistan
Algeria
Ethiopia
Burkina Faso
Cte d'Ivoire
Mali
Guinea
Nigeria
Burundi
Mauritania
Chad
Yemen
20
40
60
80
100
Score

Table 5: Human Capital Index 2015 rankings by region
Asia and the Pacific

Rank
5
9
Country
Europe and Central Asia

Score
Rank
Country
Latin America and the Caribbean

Score
Rank
Country
Score
Japan
New Zealand
82.74
81.84
1
2
Finland
Norway
85.78
83.84
45
47
Chile
Uruguay
71.80
71.18
13
Australia
80.22
Switzerland
83.58
48
Argentina
71.01
24
Singapore
78.15
Sweden
82.73
49
Panama
71.01
30
Korea, Rep.
76.84
Denmark
82.47
53
Costa Rica
69.75
46
Philippines
71.24
Netherlands
82.30
58
Mexico
68.50
51
Mongolia
70.75
10
Belgium
81.12
61
Peru
68.13
52
Malaysia
70.24
11
Austria
81.02
62
Colombia
67.63
57
Thailand
68.78
12
Ireland
80.59
67
Trinidad and Tobago
67.10
59
Vietnam
68.48
14
France
80.15
70
El Salvador
66.89
60
Sri Lanka
68.19
15
Slovenia
79.95
73
Bolivia
66.46
64
China
67.47
16
Estonia
79.88
74
Jamaica
65.95
69
Indonesia
66.99
18
Lithuania
79.33
75
Paraguay
65.68
80
Iran, Islamic Rep.
63.20
19
United Kingdom
79.07
77
Barbados
65.09
87
Bhutan
61.11
20
Iceland
78.86
78
Brazil
64.60
97
Cambodia
58.55
21
Luxembourg
78.79
79
Guyana
64.17
99
Bangladesh
57.62
22
Germany
78.55
81
Dominican Republic
62.79
100
India
57.62
23
Latvia
78.39
86
Guatemala
61.34
105
Lao PDR
56.16
25
Czech Republic
77.60
90
Nicaragua
60.65
106
Nepal
55.77
26
Russian Federation
77.54
112
113
Myanmar
Pakistan
52.97
52.63
27
Cyprus
77.33
91
96
Venezuela
Honduras
60.51
58.93
28
Poland
77.06
31
Ukraine
76.21
32
Hungary
75.82
33
Malta
75.77
34
Slovak Republic
75.48
35
Italy
75.44
36
Croatia
75.37
37
Kazakhstan
74.56
38
Portugal
74.50
39
Romania
73.94
40
Greece
73.70
41
Spain
73.30
42
Bulgaria
72.81
43
Armenia
72.50
44
Kyrgyz Republic
71.82
50
Serbia
70.97
55
Macedonia, FYR
69.31
63
Azerbaijan
67.58
65
Tajikistan
67.24
66
Albania
67.20
68
71
Turkey
Moldova
67.09
66.81
result of their poor performance on educational outcomes

throughout all the Age Group pillars.
Europe and Central Asia
Over 40 countries are covered from the Europe and Central
Asia region. It ranks in second place globally, after North
America. The regions overall average score is 77.06. The
region also ranks in second position on all five Age Group
pillars. On the overall Index, the gap between the best and
worst performers in the region tends to be smaller than
for most other regions except Latin America. The regions
best performing countries, including Finland (1), Norway
(2) and Switzerland (3) dominate the Indexs overall top 10,
(Contd)
whereas the lowest performing countries are Albania (66),

Turkey (68) and Moldova (71).
Most countries in the region are very close to having
achieved universal primary school enrolment; however,
some countries, such as Azerbaijan (63) and Romania
(39), still lag behind. Four of the regions countries are
below the world average for their basic education survival
rate: Malta (33), Spain (41), Germany (22) and Bulgaria
(42). Macedonia (55) and Moldova (71) are still confronted
with a double-digit incidence of child labour. The region is
also performing below the world average for the 1524 Age
Group pillar on four indicators: Labour force participation
rate, Unemployment rate, Long-term unemployment rate
Follow @ricardo_hausman
RICARDO HAUSMANN
Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the InterAmerican Development Bank, is Professor of the Practice of Economic Development at Harvard University,
where he is also Director of the Center for International Development. He is Chair of the World Eco READ
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MAY 31, 2015
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The Education Myth

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TIRANA In an era characterized by political polarization and policy paralysis, we should celebrate
broad agreement on economic strategy wherever we find it. One such area of agreement is the idea
that the key to inclusive growth is, as then-British Prime Minister Tony Blair put in his 2001
reelection campaign, education, education, education. If we broaden access to schools and improve
their quality, economic growth will be both substantial and equitable.
As the Italians would say: magari fosse vero. If only it were true. Enthusiasm for education is
perfectly understandable. We want the best education possible for our children, because we want
them to have a full range of options in life, to be able to appreciate its many marvels and participate
in its challenges. We also know that better educated people tend to earn more.
Educations importance is incontrovertible teaching is my day job, so I certainly hope it is of some
value. But whether it constitutes a strategy for economic growth is another matter. What most people
mean by better education is more schooling; and, by higher-quality education, they mean the
effective acquisition of skills (as revealed, say, by the test scores in the OECDs standardized PISA
exam). But does that really drive economic growth?
In fact, the push for better education is an experiment that has already been carried out globally.
And, as my Harvard colleague Lant Pritchett has pointed out, the long-term payoff has been
surprisingly disappointing.
In the 50 years from 1960 to 2010, the global labor forces average time in school essentially tripled,
from 2.8 years to 8.3 years. This means that the average worker in a median country went from less
than half a primary education to more than half a high school education.
How much richer should these countries have expected to become? In 1965, France had a labor force
that averaged less than five years of schooling and a per capita income of $14,000 (at 2005 prices).
In 2010, countries with a similar level of education had a per capita income of less than $1,000.
In 1960, countries with an education level of 8.3 years of schooling were 5.5 times richer than those
with 2.8 year of schooling. By contrast, countries that had increased their education from 2.8 years of
schooling in 1960 to 8.3 years of schooling in 2010 were only 167% richer. Moreover, much of this
increase cannot possibly be attributed to education, as workers in 2010 had the advantage of
technologies that were 50 years more advanced than those in 1960. Clearly, something other than
education is needed to generate prosperity.
As is often the case, the experience of individual countries is more revealing than the averages. China
started with less education than Tunisia, Mexico, Kenya, or Iran in 1960, and had made less progress
than them by 2010. And yet, in terms of economic growth, China blew all of them out of the water.
The same can be said of Thailand and Indonesia vis--vis the Philippines, Cameroon, Ghana, or
Panama. Again, the fast growers must be doing something in addition to providing education.
The experience within countries is also revealing. In Mexico, the average income of men aged 25-30
with a full primary education differs by more than a factor of three between poorer municipalities
and richer ones. The difference cannot possibly be related to educational quality, because those who
moved from poor municipalities to richer ones also earned more.
And there is more bad news for the education, education, education crowd: Most of the skills that a
labor force possesses were acquired on the job. What a society knows how to do is known mainly in
its firms, not in its schools. At most modern firms, fewer than 15% of the positions are open for
entry-level workers, meaning that employers demand something that the education system cannot
and is not expected to provide.
When presented with these facts, education enthusiasts often argue that education is a necessary but
not a sufficient condition for growth. But in that case, investment in education is unlikely to deliver
much if the other conditions are missing. After all, though the typical country with ten years of
schooling had a per capita income of $30,000 in 2010, per capita income in Albania, Armenia, and
Sri Lanka, which have achieved that level of schooling, was less than $5,000. Whatever is preventing
these countries from becoming richer, it is not lack of education.
A countrys income is the sum of the output produced by each worker. To increase income, we need
to increase worker productivity. Evidently, something in the water, other than education, makes
people much more productive in some places than in others. A successful growth strategy needs to
figure out what this is.
Make no mistake: education presumably does raise productivity. But to say that education is your
growth strategy means that you are giving up on everyone who has already gone through the school
system most people over 18, and almost all over 25. It is a strategy that ignores the potential that is
in 100% of todays labor force, 98% of next years, and a huge number of people who will be around
for the next half-century. An education-only strategy is bound to make all of them regret having been
born too soon.
This generation is too old for education to be its growth strategy. It needs a growth strategy that will
make it more productive and thus able to create the resources to invest more in the education of
the next generation. Our generation owes it to theirs to have a growth strategy for ourselves. And that
strategy will not be about us going back to school.
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Banyan
Despite being a woman

South Asia is one of the worst places in the world to be female
Jun 13th 2015 | From the print edition
Tweet
60
INDIAs bachelor
leader, Narendra
Modi, struggles with
the opposite sex. Last
year he tried to be
seen to revere his
mother by rushing to
her side after his big
election victory. But
then he failed to invite
her to his grand
inauguration. He has
talked, admirably, about the need to respect women. But he defines our mothers,
daughters and sisters by their relationships with men and as treasures to protect. It
does not help his reputation that, until he was running for the prime ministership, he
refused to acknowledge that he has an estranged wife, whom he was forced to
marry as a teenager and has not lived with since.
For a man usually so eloquent, Mr Modi occasionally lands his sandalled foot in his
mouth: on June 7th he made an especially crass comment during an otherwise
successful visit to Bangladesh, praising his host, Sheikh Hasina, the prime minister, for
being tough on terrorism despite being a woman. Critics back home accused Mr Modi
of having retrograde views, typical of those who revere the country as Mother India
but who treat women atrociously. Yet such attitudes are widely shared, not just in India
but across South Asia. The whole region fails to grant women equal respect or
opportunities.
That may seem odd, given how prominent a role women play in
South Asian politics. China, Japan, Russia and many other
countries have failed to produce a female prime minister or
president. South Asia has had several. If Hillary Clinton is elected
next year to lead the worlds most powerful democracy, it will be a
full half-century after Indira Gandhi first led the worlds largest one.
Sri Lankas Sirimavo Bandaranaike pipped her to become the
worlds first female head of government, in 1960. In that country,
uniquely, both a mother and her daughter have held the highest
political office. In the late 1990s Chandrika Kumaratunga even
served as president at the same time as her ageing mother, Mrs
Bandaranaike, completed a third, mostly ceremonial, term as
prime minister.
Women prosper at the top of South Asian democracies partly
because they are propelled by dynasties that long formed the core
of political parties. In Bangladesh the two battling begums have
ensured that no other politician gets a look-in. Sheikh Hasina lets
no one forget she is the daughter of the countrys murdered
founder, Sheikh Mujibur Rahman. Her fierce rival Khaleda Zia, the
In this section
The most
persecuted people
on Earth?
Mapped out
Dont inhale
Vagina monologue
Peacemongers
Despite being a
woman
Reprints
Related topics
Hasina Wajed
China
Bangladesh
Narendra Modi
opposition leader, joined politics after the murder of her husband,
Asia
also an early president. Pakistans only female prime minister, the
late Benazir Bhutto, entered politics after the execution of her
father, Zulfikar Bhutto, a populist prime minister. In India some talk seriously of Priyanka
Gandhi as a future leader of the Congress Partymostly because her mother, Sonia
Gandhi, has done the job, as well as her lookalike granny, Indira.
But if South Asia is one of the best places on Earth for elite women who aspire to a
political career, it is one of the worst places to be an ordinary woman. The occasional
chauvinism faced by females at the top pales beside the burdens heaped on those at
the bottom. South Asian women fare terribly in a Mothers Index put together in May
by Save the Children, a British charity. It ranks 179 countries according to the wellbeing of their women, using indicators such as maternal mortality, the survival of young
children and womens involvement in politics. Subcontinental nations come out the
worst in Asia. Women in India and Pakistan (ranked 140th and 149th) have a quality of
life only a little brighter than those in Afghanistan (152nd) and far behind those in China
(61st), who are far more likely to survive childbirth, or see their offspring spend a long
time in school.
Not everything is gloomy. Over the past 25 years, thanks to economic growth and
official health schemes, some things have improved dramatically for South Asians.
Take the blight of child weddings. In the mid-20th century the average Indian woman
was married at 15 and endured early, frequent and often debilitating pregnancies. Now
Indian women are more likely to tie the knot after getting an education, marrying on
average at 21.
Another measure is the 289,000 women, globally, who died in childbirth in 2013. South
Asia accounted for a quarter of them. But here too, improvements are striking. The
rate of such deaths in the region has plummeted from 550 for every 100,000 live births
in 1990 to 190 now. Poorer countries in South AsiaNepal, Afghanistan and
Bangladeshhave made notable gains by providing free maternal and child care, and
recruiting more female health workers.
Let money do the talking
Yet South Asia will need to spend a lot more on women in order to see further
improvements. The region devotes barely 1% of GDP to public health (China spends
3.1%). This puts a heavy burden on those who give birth and take most responsibility
for child care. In part this is because of lingering poverty: World Health Organisation
figures from 2012 show that combined public and private funds for health care, per
person, came to a little over $50 per year in South Asia. Africa spent nearly double
that; in East Asian countries it was ten times more. In North America spending on
health, per person, was $8,500 a year.
The resources spent on women in South Asia are shared more unevenly than in most
places. Among the richest quintile in Delhi (it is a similar story in Dhaka and elsewhere),
women can enjoy maternal and other care close to first-world standards. By contrast
the poorest quintile in the same cities, especially in slums, endure conditions as bad
or worsethan in far poorer villages: in Delhi only 19% of such women have someone
skilled present when they give birth. Barely half of their children have had a measles jab
and nearly three-fifths are stunted. Reducing such inequality would be one way to make
existing resources go further in South Asia. But that is likely to happen no quicker than
changing old-fashioned attitudes to women.
From the print edition: Asia
Southeast Asias Democracy Downer | Foreign Policy
http://foreignpolicy.com/2015/03/23/southeast-asias-democracy-downer-burma-thailand-malaysia-myanmar/
Southeast Asias Democracy Downer

And you thought the Arab Spring was disappointing.
BY CHRISTIAN CARYL
MARCH 23, 2015 - 1:25 PM
CHRISTIAN.CARYL
@CCARYL
Three years ago, on April 1, 2012, I had the great privilege to watch Burmese citizens take part in their first free election in a quarter of a century. As votes go, this was actually a pretty
modest one it was a mere by-election, so only a few seats in the national assembly were up for grabs. In practical terms, the voters choices had little real impact on the balance of forces
in the country at large.
Yet that modest reality didnt seem to matter. People seized the opportunity to exercise their rights with joy. Campaign rallies for the pro-democracy opposition party, the National League
of Democracy (NLD), turned into raucous celebrations of Nobel Laureate Aung San Suu Kyi, the woman who has long embodied the democratic aspirations of Burmese languishing under
one of the worlds harshest military dictatorships. Her partys main rival, the pro-government United Solidarity Development Party (USDP), struggled to get traction. The outcome
surprised no one: when the votes were counted, the NLD had won 43 of the 44 seats it contested. Aung San Suu Kyi entered parliament in triumph.
Burma appeared to be part of a larger regional trend. President Thein Sein, the ex-general who set his country on a Gorbachev-style course of opening and reform in 2010, was said to have
found his inspiration in neighbors like Indonesia, Thailand, and the Philippines, all of which had, at various moments in the years before, achieved strong economic growth after moving
away from autocracy and toward democratic norms. (The fact that Burma was also eager to escape western sanctions and find new international partners who could save it from its
confining dependence on China probably didnt hurt.)
At the time, one could make a case that even authoritarian stalwarts in the region, like Malaysia and Singapore, were on the verge of some sort of popular reckoning. In a 2011 election,
Singapores long-dominant ruling party was jolted by its worst electoral result in half a century (though it retained control of parliament). And the steadily rising power of Malaysias
opposition, led by the dogged Anwar Ibrahim, suggested that the old guard was facing a new challenge from a self-assertive middle class increasingly resentful of ocial lies and
entrenched corruption.
A degree of healthy skepticism was always warranted, of course. No one ever expected Southeast Asia, aected as it is by deep religious, ethnic, and economic divides, to glide eortlessly
into a democratic nirvana. But I doubt that even the skeptics would have predicted that the aspirations of the regions reformers would run aground quite so quickly. Southeast Asia is now
experiencing a broad backlash against democracy a softer version, if you will, of what the Middle East has been enduring in the aftermath of the Arab Spring. All across the [Southeast
Asia] region, governments respect for rights is in free fall, says Phil Robertson of Human Rights Watch. And like everyone else in the region who cares about these issues, were
scrambling to re-double our eorts.
In Thailand, last years military coup has snued out the prospects for a return to democracy for the foreseeable future. While the junta that currently rules the country keeps touting its
plans for ambitious national reforms, its ham-handed treatment of even the mildest signs of opposition doesnt bode well. The general pessimism is compounded by the lingering
uncertainty surrounding 87-year-old King Bhumibol Adulyadej. Long celebrated by Thais as a reassuring source of political stability, the 87-year-old monarch is increasingly frail, and the
possibility that he might soon leave the scene compounds the general sense of instability.
The political situation in Malaysia is also a mess. The countrys general election in 2013 ended up showing just how far the country is from anything like real democracy. Even though the
ruling coalition earned just 47 percent of the popular vote, it ended up with 60 percent of the seats in parliament the result of a highly distorted electoral system designed to favor those
in power.
The extent to which the forces of Prime Minister Najib Razak have been jolted by the result is clear from the way theyve behaved since then. Rather than seeking some sort of co-existence
with the opposition, the government has banked on confrontation. Security forces have cracked down aggressively on dissent, arresting numerous critics. The government has launched a
fresh campaign against Anwar, once again throwing him into jail on dubious morality charges. (The photo above shows riot police outside a courthouse in Putrajaya last month.) And it
hasnt stopped there. Just this past week the police even resorted to arresting Anwars daughter, Nurul Izzah Anwar, a member of parliament who was detained after criticizing the
governments actions against her father. (She has since been released, but the scandal triggered by her detention has further poisoned relations with the opposition.)
The governments prickliness could well have something to do with popular concern about grand-scale corruption. A growing scandal around the mismanagement of a multi-billiondollar sovereign wealth fund, whose advisory board is chaired by the prime minister, is clouding Najibs political prospects.

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Southeast Asias Democracy Downer | Foreign Policy
http://foreignpolicy.com/2015/03/23/southeast-asias-democracy-downer-burma-thailand-malaysia-myanmar/
And then theres Burma, the biggest disappointment of all. This fall the country will hold its first national election since the start of the current reform process. Though many Burmese
expected that the vote would give new momentum to democratization, such hopes now look increasingly unwarranted. The NLDs campaign to amend the current constitution, which
contains provisions specifically designed to prevent Aung San Suu Kyi from running for president, has foundered. Ethnic tensions between Burmas Buddhist majority and the Muslim
Rohingya minority have fueled a rise in militant nationalism that the government has been happy to exploit. The security forces have reacted harshly to recent student protests and
imposed jail terms on a growing number of critics. One of the most striking signs of deepening intolerance was the verdict imposed last week on a Rangoon bar manager and two of his
colleagues, who were sentenced to two and half years of hard labor for posting a picture of the Buddha wearing headphones.
Thein Seins liberalization process also awakened hope by oering the prospect of a sustainable peace in Burmas multi-faceted civil war, which has been going on from the moment the
country achieved independence in 1948. Thein Seins government promised to launch fresh negotiations with all of the ethnic minority groups who have been fighting against the central
government the only exception, until recently, being the Kachin, a mostly Christian group who inhabit a resource-rich territory in the north.
But now a long-dormant conflict has re-emerged, drawing the Burmese army into ferocious fighting with Kokang militants along the Chinese border. This latest mini-war isnt just a
security issue; it also has potentially far-reaching implications for the domestic political situation. The fact that the Kokang are ethnic Chinese means that the conflict oers the Burmese
armed forces a perfect opportunity to portray themselves as heroic defenders against external aggression and thus to improve their own standing in the approaching election. Ashley
South, an analyst at Thailands Chiang Mai University, warns that the governments willingness to negotiate with other restive minorities is dwindling: I think the prospects of substantial
political dialogue before the elections are close to zero.
All this would be dispiriting enough. But its also striking how little the opponents of ocialdom have been doing to fight back. Thailands opposition, which is mostly loyal to the
mercurial exiled tycoon Thaksin Shinawatra, is deeply demoralized. Internal rifts are weakening Anwar Ibrahims coalition even as it struggles to defend itself against the Malaysian
governments attacks. And Aung San Suu Kyis NLD, which has failed in its attempts to outmaneuver the authorities, has been notably reluctant to take the side of student protestors,
disgruntled laborers, or persecuted Muslims prompting some critics to question her policies. Of course, as the Lady has shown so often in the past, one should never underestimate her.
Southeast Asia is a place of mind-boggling complexity and dynamism, so its probably better to refrain from predictions about the future of democracy. But one thing is for sure: its
getting harder to be an optimist.
MOHD RASFAN/AFP/Getty Images
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2 of 3
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News of Taliban leader's death could throw wrench in

Afghan peace process
Some see saboteur's hand in timing of news, which

could delegitimize Taliban representatives at talks
July 29, 2015 7:45PM ET
http://america.aljazeera.com/articles/2015/7/29/reports-of-dead-talibanleader-could-send-shockwaves-across-afghanistan.html
The death of reclusive Taliban leader Mullah Omar has yet to be confirmed by
the group itself, but his supposed demise two years ago in a Pakistani
hospital could have a very real impact on the here and now throwing a
wrench into Afghanistans nascent peace process and providing space for ISIL
to gain traction among splintering insurgent factions.
Some have seen the hand of a saboteur in the timing the news broke just
two days before Afghan authorities and Taliban representatives are due to sit
down for talks thought sanctioned by the reportedly dead Omar. It would
certainly seem to undermine the legitimacy of Taliban representatives taking
part in the talks and hints at a potential power struggle within the groups
higher ranks.
The apparent confirmation of his death by the Afghan government came
Wednesday. Abdul Hassib Seddiqi, a spokesman for Afghanistans intelligence
service, told reporters that Omar, who led a bloody insurgency against Afghan
and U.S. forces in the country after being toppled from power in 2001, died in
a hospital in the Pakistani city of Karachi in April 2013. We confirm officially
that he is dead, Seddiqi said, though he offered no explanation for why this
information was being disclosed now.

Rumors of Omars death have surfaced several times in recent years, usually
traced back to unnamed Afghan officials and always denied by Taliban
leadership. The one-eyed insurgent leader has not been seen in public since
the 2001 invasion sent him fleeing into Pakistan, which has long been accused
of sheltering him along with other Taliban members. Since then, Mullah Omar
has released only written statements the latest just five days ago never
appearing in videos or offering other proof of life.
But Wednesday marked the first time Afghanistan offered official
confirmation, and White House spokesman Eric Schultz said the U.S. believed
that the reports this time around were credible. And while Taliban officials
initially denied Omars death prior to Sediqis comments at which time the
official line form Kabul was that it was investigating reports after the
statement confirming his demise, Taliban officials could not be reached for
comment.
Regardless of the reports veracity, experts on the Taliban insurgency
struggled to explain the timing of the announcement, which they said would
certainly complicate the peace effort. The death of Omar would raise
questions about on whose behalf the Taliban representatives who agreed to
sit down with Kabul officials are operating. On July 15, the group released a
statement supposedly drafted by Omar that signaled his approval of the
process.
It is already thought that the decision to negotiate with Afghanistan has
fractured an already diffuse insurgency. If it is found that the those sitting
down for talks are doing so without Omars blessing, it could further
undermine the process.
My sense is that someone wanted to sabotage the peace talks, said Michael
Kugelman, an Afghanistan expert with the Wilson Center in Washington, D.C.
Why would the Afghan government, which so deeply wants peace, make this
announcement now? Its a mystery.
One possible culprit, Kugelman said, was Pakistans powerful intelligence
apparatus, the ISI, which has long allowed the Afghan Taliban to take refuge
within its borders. Pakistans government has vocally backed the talks. But the
ISI has leveraged the Afghan Taliban in order to keep its rival, India, at bay,
and its position on ending the insurgency is therefore in question. The
bottom line is that someone wanted to throw a wrench in these peace plans,
Kugelman added. Theres no other logical explanation.
Another theory experts have floated is that Kabul either knew or suspected
that Omar had died long ago, but needed the Taliban to be more transparent
about it in order for talks to succeed. Its possible they wanted to flush him
out, to end the uncertainty about whether hes alive and in charge, said
Jonah Blank, a senior political scientist at the RAND Corp. think tank. They
need to know who their interlocutor is, because if theyre going to spend time
talking to people they need guarantees those people are actually able to
deliver.
On Wednesday Afghan President Ashraf Ghanis office sought to downplay
any potential disruption the Taliban leaders death would cause the peace
process, saying in a statement: The government of Afghanistan believes that
grounds for the Afghan peace talks are more paved now than before, and
thus calls on all armed opposition groups to seize the opportunity and join
the peace process.
Analysts, however, suspect the exact opposite could occur. Though the
Taliban has presented a unified front with regards to peace, the apparent
disappearance of their leader is believed to have sparked dissent among the

ranks. It isnt clear whether Taliban commanders believe Omar to be dead or
incapacitated one theory holds that he had a stroke, rendering him unable
to project his authority in audio or video recordings. But as Blank pointed out,
You can only go on for so long fighting under a chain of command that may
or may not even exist.
The Afghan governments announcement on Wednesday has already sparked
a flurry of speculation about who would succeed or indeed has succeeded
Mullah Omar. Both a close advisor to the former leader, Akhtar
Muhammad Mansour, and one of Omars own sons are believed to have
positioned themselves for the role. Some say a violent, internecine leadership
struggle would take place, or is already playing out. This could, in theory,
bolster Afghanistans security forces. Their ability to stamp the Taliban out of
its stronghold in the southern and eastern hinterlands has been in question,
especially since U.S. and NATO troops formally withdrew from the country last
year.
At the same time, if the Taliban is not able to disprove the allegations, longsimmering questions about the groups leadership crisis will explode into the
open. This could lead to a lot of violence and factionalism, and I dont think
the Taliban will have the time, energy or desire for peace talks, said
Kugelman.
There is another wildcard in all this: the ascendance of the Islamic State in
Iraq and the Levant, or ISIL. The groups leader, Abu Bakr al-Baghdadi, has
called on likeminded insurgents the world over to disavow groups like AlQaeda and the Taliban and declare allegiance to his caliphate, which now
stretches across parts of Syria and Iraq. In addition to satellite affiliates in
Libya, Tunisia and Egypt, the group is believed to be currying favor among
disaffected Taliban fighters in Afghanistan and Pakistan.
ISIL should be very happy about this announcement, said Kugelman. Many
Taliban militants have been unhappy about their leader being quiet for so
many years, especially as the group weakened over the course of the U.S.
occupation. If Mullah Omar is dead, their religiously binding vows of loyalty
would be void, and they will "have no reason to stick it out anymore. Many
will heed the call of the Islamic State. This will really drive up recruitment in
Afghanistan and Pakistan.
The Trans-Pacific Partnership Trade Deal Explained - The New York Times
http://www.nytimes.com/2015/05/12/business/unpacking-the-trans-pacific-partnership-trade-deal.html?rr...
http://nyti.ms/1PeAGlZ
BUSINESS DAY
The Trans-Pacific Partnership Trade Deal Explained

By KEVIN GRANVILLE
MAY 11, 2015
Updated: June 25
Like a huge container ship pushing its way into port, the trade pact known as the Trans-Pacific Partnership has dropped anchor in
Washington. The document is weighty and secret, stretching to perhaps 30 chapters. It took 10 years of talks to take shape, and it would set new
terms for trade and business investment among the United States and 11 other Pacific Rim nations a far-flung group with an annual gross
domestic product of nearly $28 trillion that represents roughly 40 percent of global G.D.P. and one-third of world trade.
Despite opposition from Democrats, the Senate on June 23 handed President Obama a crucial victory in his effort to win trade promotion
authority the power to negotiate trade deals that cannot be amended or filibustered by Congress. Shorn of a measure to offer enhanced
retraining and education assistance to workers displaced by the international trade accord, the legislation advanced after the Senate narrowly
voted to end debate. Both measures were approved separately the next day.
The maneuver secured final approval for the trade promotion bill, a crucial step toward completion this year of the Trans-Pacific
Partnership, the most ambitious trade deal since the North American Free Trade Agreement in the 1990s.
Why the Pact Is So Divisive

Supporters say it would be a boon for all the nations involved, that it would unlock opportunities and address vital 21st-century issues
within the global economy, and that it is written in a way to encourage more countries, possibly even China, to sign on. Passage in Congress is
one of President Obamas final goals in office, but he faces stiff opposition from nearly all of his fellow Democrats.
Opponents in the United States see the pact as mostly a giveaway to business, encouraging further export of manufacturing jobs to low-wage
nations while limiting competition and encouraging higher prices for pharmaceuticals and other high-value products by spreading American
standards for patent protections to other countries. A provision allowing multinational corporations to challenge regulations and court rulings
before special tribunals is drawing intense opposition.
Why This, Why Now?

The pact is a major component of President Obamas pivot to Asia. It is seen as a way to bind Pacific trading partners closer to the United
States while raising a challenge to Asias rising power, China, which has pointedly been excluded from the deal, at least for now.
It is also seen as a means to address a number of festering issues that have become stumbling blocks as global trade has soared, including
e-commerce, financial services and cross-border Internet communications.
There are also traditional trade issues involved. The United States is eager to establish formal trade agreements with five of the nations
involved Japan, Malaysia, Brunei, New Zealand and Vietnam and strengthen Nafta, its current agreement with Canada and Mexico.
Moreover, as attempts at global trade deals have faltered (such as the World Trade Organizations Doha round), the Trans-Pacific
Partnership is billed as an open architecture document written to ease adoption by additional Asian nations, and to provide a potential
template to other initiatives underway, like the Transatlantic Trade and Investment Partnership.
What Are Some of the Issues on the Table?

Tariffs and Quotas Long used to protect domestic industries from cheaper goods from overseas, tariffs on imports were once a standard,
robust feature of trade policy, and generated much of the revenue for the United States Treasury in the 19th century. After the Depression and
World War II, the United States led a movement toward freer trade.

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Today, the United States and most developed countries have few tariffs, but some remain. The United States, for example, protects the
domestic sugar market from lower-priced global suppliers and imposes tariffs on imported shoes, while Japan has steep surcharges on
agricultural products including rice, beef and dairy. The pact is an attempt to create a Pacific Rim free-trade zone.
Environmental, Labor and Intellectual Property Standards United States negotiators stress that the Pacific agreement would seek
to level the playing field by imposing rigorous labor and environmental standards on trading partners, and supervision of intellectual property
rights.
Data Flows The United States wants the Pacific trade pact to address a number of issues that have arisen since previous agreements were
negotiated. One is that countries agree not to block cross-border transfers of data over the Internet, and not require that servers be located in the
country in order to conduct business in that country. This proposal has drawn concerns from some countries, Australia among them, that it
could conflict with privacy laws and regulations against personal data stored offshore.
Services A big aim of the Pacific pact is enhancing opportunities for service industries, which account for most of the private jobs in the
American economy. The United States has a competitive advantage in a range of services, including finance, engineering, software, education,
legal and information technology. Although services are not subject to tariffs, nationality requirements and restrictions on investing are used by
many developing countries to protect local businesses.
State-Owned Businesses United States negotiators have discussed the need to address favoritism often granted to state-owned business
those directly or indirectly owned by the government. Although Vietnam and Malaysia have many such corporations, the United States has
some too (the Postal Service and Fannie Mae, for example). The final agreement may include terms that seek to insure some competitive
neutrality while keeping the door open to Chinas future acceptance of the pact.
Why All the Secrecy?

The office of the United States Trade Representative has said that negotiators need to communicate with each other with a high degree of
candor, creativity and mutual trust. To create the conditions necessary to successfully reach agreements in complex trade and investment
negotiations, governments routinely keep their proposals and communications with each other confidential.
But previous trade agreements were shared more openly and, despite the secrecy efforts, portions of the document have been leaking out,
through WikiLeaks and other organizations.
Why Isnt China In on the Talks?

China has never expressed interest in joining the negotiations, but in the past has viewed the pact with concern, seeing a potential threat as
the United States tries to tighten its relationship with Asian trading partners. But lately, as the talks have accelerated, senior Chinese officials
have sounded more accepting of the potential deal, and have even hinted that they might want to participate at some point. At the same time, the
deal provides China some cover as it pursues its own trade agreements in the region, such as the Silk Road initiative in Central Asia.
United States officials, while making clear that they see the pact as part of an effort to counter Chinas influence in the region, say they are
hopeful that the pacts open architecture eventually prompts China to join, along with other important economic powers like South Korea.
The Shadow of Nafta, and the Debate in Washington

Nafta, signed by President Bill Clinton in 1993, helped lead to a boom in trade among the United States, Mexico and Canada. All three
countries exported more goods and services to the other two, cross-border investments grew, and the United States economy has added millions
of jobs since then. But of course not all those trends were attributable to Nafta, and the benefits were not equal: The United States had a small
trade surplus with Mexico when the pact was signed, but that quickly became a trade deficit that has widened to more than $50 billion a year.
Critics of Nafta also point out that job growth in the United States does not account for the loss of jobs to Mexico or Canada; the A.F.L.-C.I.O.
contends about 700,000 United States jobs have been lost or displaced because of Nafta.
Nafta was a significant victory for President Clinton after a difficult congressional battle, where he won support from just enough fellow
Democrats to ensure passage. The votes were 234 to 200 in the House, and 61 to 38 in the Senate.
President Obama may yet win that kind of outcome. Working with Republican leadership in the House and Senate, he gained final approval
for trade promotion authority, a critical step that allows the White House to present the trade package to Congress for a straight up-or-down
vote, without amendments.
But the tortuous legislative process further soured relations with many fellow Democrats, as well as unions and progressive groups, who

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vehemently oppose the Trans-Pacific Partnership. Many Democrats said the president would have to address their concerns over labor and
environmental standards and investor protections when he returns to Congress seeking approval of the trade deal.
Jonathan Weisman contributed reporting.
Some further reading on the Trans-Pacific Partnership, from The New York Times and elsewhere.
A detailed defense of the trade pact from the website of the United States Trade Representative.
A report on China taking a watch and study position on the deal.
Senator Elizabeth Warren criticizes the secrecy surrounding the negotiations. | President Obama says Ms. Warren is absolutely wrong in her
opposition to the deal.
The Economic Policy Institute, a liberal research group, on why the pact is likely to hurt American workers.
The deal is essential for national security reasons: a column by Thomas L. Friedman.
Room for Debate What Weve Learned From Nafta: Six concise and varied viewpoints on why Nafta has been a success, or not.
2015 The New York Times Company

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Are Marshall Goldsmiths Triggers the Only Way to Change?

The worlds most eminent executive coach demonstrates the high level of
discipline needed for sustainable leadership development.
by Art Kleiner
Triggers: Creating Behavior That Lasts, Becoming the Person You Want
to Be
by Marshall Goldsmith and Mark Reiter, Crown Business, 201
The commonly held belief that life gets easier at the top is partly true. The loftier your role in a large
enterprise, the more control you have over your day-to-day activities (and the more you are compensated
for them). But the challenges also get tougher. For one thing, youre more visible. Your mistakes, and your
ability to recover from them, will be noticed. Also, fewer positions exist at that rarefied level. To advance,
you have to either displace someone above you or create an entirely new business. Failure is not an option,
unless you can make it seem like success. To manage all this with integrity thats a challenge indeed.
There are two ways to proceed. You can practice relentless discipline: curbing every impulse, making every
moment count, and preparing diligently for each potential challenge. Or you can approach the world with
insouciant savoir-faire, trusting that your charm and resourcefulness will get you through, while making it
all look easy.
Marshall Goldsmith has a genius for both approaches in his coaching, his writing about leadership, and
his own life. This makes him an invaluable guide for leaders who want, or need, to improve their impact.
On the insouciant side, he is a clever, cheerful, and highly experienced bon vivant. If the phrase life is
good is ever placed in a dictionary, Goldsmiths picture should be next to it. And yet he is also the most
disciplined person you are ever likely to learn about. Indeed, his latest book, Triggers: Creating Behavior
That Lasts, Becoming the Person You Want to Be (Crown Business, 2015), coauthored with Mark Reiter, is
a guide to the use of discipline as a simultaneous source of self-control and joy.
Every night, Goldsmith forces himself to do one of the most difficult things imaginable. He has a friend
call him and ask the same 22 questions. (Remarkably, they are still friends.) These questions all start with
the phrase, Did I do my best [today] to, and the endings may be strategic (Did I do my best to set clear
goals?), professional (preserve all client relationships?), philosophical (be grateful for what I
have?), physical (exercise?), or personal (Did I do my best to say or do something nice for Lyda?
[his spouse]). Many of them are directly related to increasing his own leadership skill: Did I do my best to
learn something new? To avoid destructive comments about others?
Every night, Marshall Goldsmith has a friend call him and ask the same 22 questions.
He has done this for years, revising the questions as his priorities evolve. Its noteworthy that he doesnt
just answer; he rates his efforts that day for each question on a scale of one to 10. If hes honest with
himself, and there is every reason to believe he is, then this is, in effect, a neo-Calvinist 21st-century form
of mental self-flagellation. Except the desired result is not election to heaven, but success here on earth.
These questions are one example of what Goldsmith calls triggers, or deliberately designed
environmental cues that move you continuously, relentlessly, in the direction of productive, beneficial
change. This book explains how to construct and set these triggers for yourself, and use them to help you
overcome your own self-indulgence. The triggers are not unlike the nudges that Cass Sunstein, a law
professor, regulator, and author, proposes the government build into, say, tax structures and healthcare
laws, so that people are automatically drawn to lead more self-regulating lives. (For this reason,
conservative firebrand Glenn Beck has called Sunstein the most dangerous man in America.)
But Goldsmiths triggers are more soulful than the Sunstein nudges, because theyre all self-chosen. My
mission is to help people become the person that they want to be, writes Goldsmith, not tell them who
that person is. Although I appreciate the triggers humanism, and the intelligence in their design, I still
find myself recoiling from the prospect of adopting them myself. I personally prefer a soupon of selfindulgence with my savior-faire. I dont want that level of self-discipline. I just want the results.
But I take Goldsmith at his word when he says that this is the only way to get those results, or to generate
serious change. And I buy his unspoken, but all too real, implication: If you dont put yourself through a
regimen of self-scrutiny, if you dont force yourself to assess how well you followed through on your
promises, then you probably dont deserve to be a CEO.
At the heart of this book is a question about the proper way to live. To what extent must we lead disciplined
lives to be powerful people? Is that discipline a matter of duty, compensating for the original sin of being
imperfect, or is it a matter of joy, of calling forth the inner golden virtue that lies deep within all of us? In
Goldsmiths eyes, it is both and if you dare to take on the practices he recommends, you may come to
agree with him.
WHERE CREATIVITY COMES FROM
THE SCIENCE OF GENIUS

OUTSTANDING CREATIVITY IN ALL DOMAINS
MAY STEM FROM SHARED ATTRIBUTES AND
A COMMON PROCESS OF DISCOVERY
By Dean Keith Simonton
Illustration by Noma Bar
dentifying genius is a dicey venture. Consider, for example, this ranking of The
Top 10 Geniuses I recently stumbled
across on Listverse.com. From fi rst to last
place, here are the honorees: Johann Wolfgang
von Goethe, Leonardo da Vinci, Emanuel Swedenborg,
Gottfried Wilhelm Leibniz, John Stuart Mill, Blaise
Pascal, Ludwig Wittgenstein, Bobby Fischer, Galileo
Galilei and Madame de Stal.
What about Albert Einstein instead of Swedenborg? Some of the
living might also deserve this appellation Stephen Hawking comes
to mind. Another female genius or two might make the cut, perhaps
Marie Curie or Toni Morrison. And if a chess champion, Fischer, is
deemed worthy, other geniuses outside the arts and sciences ought to
deserve consideration Napoleon Bonaparte as a military genius,
Nelson Mandela as a political genius or Bill Gates as an entrepreneurial genius, to name a few candidates.
All these questions and their potential answers can make for some
lively cocktail party conversations. What they reveal is how little we
understand about the origins of intellectual and creative eminence.
Explorations of this age-old debate have long sought to tease out the
common features of geniuses working in disparate domains. The
existence of unifying threads including genetic factors, unusually
broad interests and a link with psychopathy suggests that the mind
of a genius has a discernible shape and disposition.
FAST FACTS
GENIUS, DEFINED
Genius has been viewed
two different ways: as achieved
eminence and as exceptional
intelligence. The former metric
offers the more useful definition.
Genetics and life experiences
both contribute to genius. Creative
contributions can occur only after
a domain has been mastered,
but genetics can help a person
improve faster and accomplish
more with a given amount
of expertise.
Genius can share certain potentially negative traits with mental
illness, but when these traits are
combined with specific positive
attributes, the result is creativity
rather than psychopathology.
A scientific genius has
different expertise than an artistic
genius, but all creative geniuses
may depend on the same general
process: blind variation and
selective retention.
M in d . S c i e nti f i c A m e r i c an .c o m
osq413Simo3p.indd 21
SCIENTIFIC AMERICAN
21
10/8/13 6:14 PM
Ultimately the goal is to explain how

an eminent thinker arrives at his or her
world-changing moment, or moments,
of insight. Although such breakthroughs
often seem to appear in a flash, the underlying mechanisms are likely to be
much more orderly. According to one
theory I helped to develop, a genius hunts
widely almost blindlyfor a solution
to a problem, exploring dead ends and
backtracking repeatedly before arriving
at the ideal answer. If this line of research
bears out, we can start to investigate
whether genius can be cultivated, unleashing a wealth of new ideas for the
benefit of all.
The Meaning of Genius

The first hurdle in the study of genius
is to settle on a working definition. The
word itself harks back to ancient Roman
mythology, according to which every
male was born with a unique genius that
served as a kind of guardian angel, and
22
SCIENTIFIC AMERICAN
every female had a juno. Much later,

after the Renaissance, the word became
more exclusive in its application, with
only a few people showing genius. Philosopher Immanuel Kant believed, for
example, that a genius was someone who
produced works that were both original
and exemplary. The term did not acquire
scientific meaning until the late 19th century, when psychologists came to define
genius in two distinct ways.
The fi rst approach was to identify
genius with exceptional achievement, as
Kant did. These accomplishments elicit
admiration and emulation from other
experts in that field and often the world
at large. Unquestioned examples of such
works include Newtons Principia,
Shakespeares Hamlet, Tolstoys War
and Peace, Michelangelos Sistine Chapel frescoes and Beethovens Fifth Symphony. Even though this defi nition can
be extended to encompass extraordinary
leadership, such as military brilliance,
and prodigious performance, including

some chess grandmasters, most scientific research concentrates on outstanding
creativity within the sciences or the arts,
which will also be the focus here.
The second definition of genius coincided with the emergence of intelligence
tests in the first half of the 20th century.
A genius was someone who scored sufficiently high on a standard IQ test usually landing in the top 1 percent, with a
score above 140, as proposed by psychologist Lewis Terman, the formulator of
one of the original intelligence tests.
These two definitions have little in common. Many persons with superlative IQs
do not produce original and exemplary
accomplishments. One example is Marilyn vos Savant, who was once certified by
the Guinness Book of World Records as
having the highest recorded IQ of any living person. Her weekly Ask Marilyn column for a Sunday newspaper supplement
did not inspire a new genre of science, art
FRANK HEUER Redux Pictures
Psychologists often assess geniuses by their achievements, such as painting the Sistine Chapel, rather than by IQ scores.
10/8/13 6:14 PM
or even journalism. And many exceptional achievers do not attain genius-level IQs.
William Shockley, for example, received
a Nobel Prize in Physics for coinventing
the transistor yet had an IQ score well
below 140. Exceptional achievement,
then, seems the more useful measure.
Too often in popular writing, genius
is conceived as a discrete categorythis
Genius, in which he argued that genius

is innate, based on his observations that
geniuses tend to emerge from lineages
that included other brilliant individuals.
In response to criticisms, Galton later introduced the well-known nature-nurture issue. He conducted a survey of
fa mous English scientists to discover
some of the environmental variables
GENIUSES ARE LIKELY TO EXHIBIT UNUSUALLY WIDE

INTERESTS AND HOBBIES, OFTEN CONTRIBUTING TO
MORE THAN ONE DOMAIN OF EXPERTISE.
person is a genius, but that person is not.
Yet just as people can vary in IQ, they
can also differ in the magnitude of their
creative achievements, with either a single notable contribution or a lifetime of
prolific work. One such one-hit wonder is Gregor Mendel, who at tained
lasting fame for a single paper that
reported his classic experiments in genetics. Had Mendel never taken an interest
in breeding peas, his name would be
unknown today. Charles Darwins fame,
in contrast, rests on far more than On
the Origin of Species. Nobel laureate
Max Born once said that Einstein
would be one of the greatest theoretical
physicists of all time even if he had not
written a single line on relativity.
Hence, Darwin and Einstein exhibited
greater genius than did Mendel. Accordingly, much research is devoted to assessing relative degrees of genius most
often gauged by creative productivity.
SCIENCE SOURCE
Origins of Genius
Finding the sources of consummate
creativity has occupied the minds of philosophers and scientists for centuries. In
1693 English poet John Dryden wrote,
Genius must be born, and never can be
taught. Two and a half centuries later
French author Simone de Beauvoir countered, One is not born a genius, one becomes a genius. The fi rst scientific investigation devoted exclusively to genius
concerned this precise issue. In 1869
Francis Galton published Hereditary
w w w. S c i e nti f i c A m e r i c an .c o m/M in d
involved in nurturing brilliance, and he

examined factors such as birth order
and education.
By the second half of the 20th century psychologists had moved to an extreme nurture position, in which creative
genius rested solely on the acquisition of
domain expertise. This idea was frequently expressed as the
10-year rule. Nobody
can expect to reach the
heights of creativity without mastering the necessary knowledge and skill
because only experts can
create or so the thinking went. Indeed, Einstein learned lots of physics before he commenced
his creative career.
This explanation cannot account for all the
details, however. First, geniuses often
spend less time acquiring domain expertise than their less creative colleagues.
Studies have linked accelerated acquisition with long, prolific and high-impact
careers. The 10-year rule is an average
with tremendous variation around the
mean. Further, major breakthroughs
often occur in areas where the genius
must create the necessary expertise from

scratch. Telescopic astronomy did not
exist until Galileo pointed his new instrument toward the night sky to discover
what had never been seen before nor even
expected. The moon had mountains,
Jupiter had moons and the sun had spots!
Second, geniuses are more likely to
exhibit unusually wide interests and hobbies and to display exceptional versatility,
often contributing to more than one
domain of expertise. This tendency not
only was true in the era of Renaissance
men but also is evident today. According
to a 2008 study, Nobel laureates in science are more involved in the arts than
less eminent scientists. Given that geniuses might not sleep any less than the rest of
us, these extraneous activities would seem
to distract from a dogged focus on a narrow field of interest. Einstein slept even
more hours than the norm, but he still
took time off to play Bach, Mozart and
Schubert on his violin. At times these avocational activities inspire major insights.
Galileo was probably able
to identify the lunar
mountains because of his
training in the visual arts,
particularly in the use of
To build the two-lens

telescope he used to
survey the skies, Galileo
had to first learn how to
grind his own lenses
and discover the optimal
lens combination.
chiaroscuro to depict light and shadow.

The expertise acquisition theory
also undervalues the genetic components that underlie a large number of
cognitive abilities and personality traits
that correlate with genius. In a recent
meta-analysis, I found that at least 20
percent of the variation in creativity
could be attributed to nature. For exam-
THE AUTHOR
DEAN KEITH SIMONTON is Distinguished Professor of Psychology at the University of California, Davis. He is author of more than 400 articles and chapters, plus a dozen books, and
he edited The Wiley-Blackwell Handbook of Genius (in press).
SCIENTIFIC AMERICAN
23
10/8/13 6:14 PM
MEASURING GENIUS
ple, creative achievement is strongly associated with the personality trait of

openness to experience, a highly heritable characteristic. The broad interests in
art and music of many geniuses are clear
manifestations of this trait. Many other
predictors of achievement also have high
heritabilities, such as cognitive and behavioral flexibility, along with a tolerance of ambiguity and change.
Nurture may still account for the
lions share of genius, and mastering a
domain remains central. At the same
time, genetics contributes heavily to the
IQs
Scientists
190s
Philosophers
Writers
Gottfried
Wilhelm
Leibniz
Johann
Wolfgang
von Goethe
Artists
Composers
180s
Blaise
Pascal
John
Stuart Mill
Voltaire
170s
Pierre-Simon
Laplace
George
Berkeley
Samuel Taylor
Coleridge
160s
Isaac
Newton
Ren
Descartes
Charles
Dickens
Michelangelo
150s
Johannes
Kepler
Baruch
Spinoza
Michel
de Montaigne
Leonardo
da Vinci
Wolfgang
Amadeus
Mozart
140s
Charles
Darwin
Emanuel
Swedenborg
Molire
Peter Paul
Rubens
Ludwig van
Beethoven
130s
Nicolaus
Copernicus
Jean-Jacques
Rousseau
Robert Burns
Rembrandt
van Rijn
Gioachino
Rossini
Miguel
de Cervantes
Bartolom
Esteban
Murillo
Cristoph
Willibald
Gluck
120s
rate at which someone acquires the necessary skills and knowledge. Those with
more innate talent can improve faster,
launch their careers earlier and be more
productive. In addition, genetics may
help explain the different trajectories of
equally well-trained individuals. Einstein
did not know as much physics as many of
his contemporary theoretical physicists,
but what he did know went a long way.
He could honestly say, Imagination is
more important than knowledge.
These influences are just a few of the
ways genetics shapes the potential for
genius. Let it suffice to note that I have

probably understated the impact of
genes on genius.
Madness and Magnificence

Researchers have long been tantalized by the question of whether the biological endowment of a genius also confers great setbacks. Greek philosopher
Aristotle is reputed to have said, Those
who have become eminent in philosophy,
politics, poetry and the arts have all had
tendencies toward melancholia.
This idea received wide currency in
ISTOCKPHOTO
n 1926 Catharine Cox estimated the IQs of 301

eminent individuals. Using biographical data on
early intellectual development, she and her collaborators calculated IQ using the formula IQ = 100 MA/
CA, where MA = mental age and CA = chronological
age. Some representative results are shown here. (The
actual scores are taken from a secondary analysis of
her data that I recently published with Anna V. Song of
the University of California, Merced.) These rankings
illustrate the value of using achieved eminence, rather
than intelligence test scores, as a measure of genius.
Philosopher George Berkeley, for example, did not
leave a greater mark on the world than Newton or Leonardo. Further, eight of these creative geniuses have
D.K.S.
IQs below the genius threshold of 140.
WHEN HIGH IQS HANG OUT

Genius societies offer a social network for the top tier of test takers By Lena Groeger
evin Langdon was writing several books and designing an

inside-out clock. Karyn Huntting Peters was organizing a
global problem-solving network. Alfred Simpson juggled
multiple Web-programming projects in his free time. These three
people might not have had much in common except for their
unusually high IQs.
All three belong to exclusive high-IQ societies. Mensa International, whose members test scores must land above the 98th
percentile (or one in 50), may be the most popular, but it is just
one option for the discerning test taker. The Triple Nine Society
demands an IQ in the 99.9th percentile, whereas the Mega Society cuts off at the 99.9999th percentile (one in one million). The
memberless Grail Society claims to accept one in 100 billion people no one has applied so far.
24
SCIENTIFIC AMERICAN
Although members of IQ societies do not fit a single profile,

they often join in search of a sense of belonging. Ive heard
a lot of people refer to themselves as
aliens until they found
a group like this, says
Peters, who serves as
an officer of
Mensa
1/50
Intertel
1/100
Poetic Genius
1/200
Cerebrals
1/300
Triple Nine Society

1/1,000
10/8/13 6:14 PM
the 19th and 20th centuries at the hands

of psychiatrists and psychoanalysts.
Among the great writers, Virginia
Woolf, Anne Sexton and Sylvia Plath all
committed suicide. Vincent van Gogh
did as well, and earlier he had cut off part
of his ear to give to a prostitute. Newton
sometimes suffered from extreme paranoia, and Galileo, possibly an alcoholic,
was often bedridden with depression.
Nevertheless, many psychologists have
argued that such cases are the exceptions, not the rule. Some positive psychologists today consider creative genius
a human strength or virtue.
My 2005 review of the literature,
which summarized studies with varied
methodologies, indicates that the association between genius and mental illness has considerable strength. Very
creative writers tend to obtain higher
scores on the psychopathology-related
parts of the Minnesota Multiphasic Personality Inventory, a widely accepted
personality test. A study using another
instrument, the Eysenck Personality
Questionnaire, found that extremely creative artistsand high-impact psychologists, for that matter tend to receive
elevated scores on the tests psychoticism
scale, meaning that they are, among
other things, egocentric, cold, impulsive, aggressive and tough-minded. Last,
highly eminent scientists tend to score
higher on sections of the Cattell 16 Personality Factor Questionnaire that signify they are withdrawn, solemn, internally preoccupied, precise and critical.
All told, top performers are not a very
normal bunch.
Psychiatric studies bolster these re-
THE RATE AND INTENSITY OF CERTAIN

PSYCHOPATHIC SYMPTOMS ARE NOTICEABLY HIGHER
IN VERY CREATIVE PEOPLE THAN IN OTHERS.
sults. The rate and intensity of certain
psychopathic symptoms, such as depression and alcoholism, are noticeably
higher in very creative individuals than
in the general population. Research also
suggests that these divergent thinkers
are more likely to come from family lines
that are at higher risk for psychopathology. Even if an extraordinary innovator
is normal, his or her family members
may not be.
In line with these fi ndings, in 2009
psychiatrist Szabolcs Kri, then at Semmelweis University in Hungary, found a
genetic basis for both creativity and psychosis in a variant of the neuregulin 1
gene. In this study, Kri recruited a group
of highly creative individuals and found
that the participants who had this specif-
the Prometheus Society. But get them all together, and they
become extremely talkative theyre up until five in the morning. Langdon, who has founded or co-founded several high-IQ
societies and now edits the journal of the Mega Society, also
reports having joined to find people more like himself.
Others do it for the challenge. I joined Prometheus just to see
if I could, Simpson says. He now deals with the societys membership requests. He receives about two or three a week, although
only three or four new members are accepted every year. The
International
Society for
Philosophical
Enquiry
1/1,000
One in a Thousand
Society
1/1,000
Vertex Society
1/11,000
ic gene variant, which is linked with an

increased risk of developing a mental disorder, also scored higher on measures
of creativity.
Out-and-out psychosis, however,
can shut down creative genius. This
tragic reality was dramatically illustrat-
Prometheus Society
1/11,000
ed in the 2001 fi lm A Beautiful Mind,

the biopic about Nobel laureate John
Nash and his struggles with schizophrenia. The costs and burdens of psychological dysfunction are also immediately
apparent in the art of the mentally ill,
such as the works preserved in the
Prinzhorn Collection in Heidelberg,
Germany, done by psychiatric patients
in the early 20th century. Few if any of
these artworks show signs of genius. To
quote Dryden again, wits are sure to
madness near allied, and thin partitions
do their bounds divide.
Recent research conducted by psychologist Shelley Carson of Harvard University and her colleagues has sought to
identify these thin partitions. Creative
achievement is positively associated both
admissions process for these societies usually hinges on a score

on an approved test, some of which have names such as Mega or
Titan. Typical questions include analogies, the manipulation of
complex three-dimensional shapes, or word problems that must
be translated into equations.
Critics question whether IQ tests measure intelligence accurately, but genius societies rarely claim to represent true genius:
the merging of intellect, creativity and outstanding achievement.
Peters notes that her high-IQ colleagues are acutely aware of their
own ignorance. Simpson concurs. None of us consider ourselves a genius, he says. Well, maybe
theres this one guy, but he hasnt been in the society
for a while now.
Mega Society
1/1,000,000
Lena Groeger is a science journalist based

in New York City.
SCIENTIFIC AMERICAN
25
10/8/13 6:15 PM
PABLO PICASSOS CHAOTIC PROCESS
11
15
22
26
with cognitive disinhibition openness

to supposedly extraneous ideas, images
or stimuli and higher intelligence and
greater working memory. These mental
capacities can potentially ameliorate the
negative effects of cognitive disinhibition
and even channel them to more useful
ends. This synergy may well constitute
the cognitive basis for serendipity. Not
everybody would be able to work out the
profound implications of such humdrum
26
19
SCIENTIFIC AMERICAN
events as water overflowing a bathtub or

an apple falling from a tree. But Archimedes and Newton did. [For more on creativity and eccentricity, see The Unleashed
Mind, by Shelley Carson, on page 28.]
Thinking Outside the Box

Archimedes and Newton both
worked in scientific fields, raising the possibility that their brands of creativity may
have been similar. A more revealing ques-
27
tion might be to investigate how their

route to original thought compares with
that of a superlative writer or musician. A
physicists way of thinking has little, if
anything, in common with that of a painter. For example, learning how to solve a
differential equation has as much utility
for a painter as learning linear perspective
has for a physicist zero in most cases.
Yet the themes uniting geniuses, as discussed earlier, suggest that a common cre-
2 0 1 2 E S TAT E O F PA B L O P I C A S S O A r t i s t s R i g h t s S o c i e t y A N D E R I C H L E S S I N G A r t R e s o u r c e (G u e r n i c a) ;
2 0 1 2 E S TAT E O F PA B L O P I C A S S O A r t i s t s R i g h t s S o c i e t y (s k e t c h e s)
In his dozens
of sketches for
Guernica (right),
Picasso explored
numerous styles.
A sampling of his
drawings of the bull
(below) reveal the
breadth of his exploration. Hunting
widely for answers,
abandoning some
ideas and backtracking to earlier
concepts are hallmarks of a theory of
creativity known as
blind variation and
selective retention.
10/8/13 6:15 PM
ative principle may exist. Domain expertise, such as the knowledge of advanced problem-solving strategies,
supports thinking that is routine, even
algorithmic it does not inherently lead
to the generation of novel, useful and surprising ideas. Something else must permit
a person to go beyond tradition and training to reach the summit of genius.
According to a theory proposed in
1960 by psychologist Donald Campbell,
creative thought emerges through a process or procedure he termed blind variation and selective retention (BVSR). In
short, a creator must try out ideas that
might fail before hitting on a breakthrough. Campbell did not precisely define what counts as a blind variation, nor
did he discuss in any detail the psychological underpinnings of this process. As a result, his ideas were left open to criticism.
Using a mixture of historical analyses, laboratory experiments, computer
simulations, mathematical models and
case studies, I have devoted the past 25
years to developing BVSR into a comprehensive theory of creative genius in all
domains. The blindness of BVSR merely
means that ideas are produced without
foresight into their eventual utility. The
creator must engage in trial-and-error or
generate-and-test procedures to determine the worth of an idea. Two common
phenomena characterize BVSR thinking:
superfluity and backtracking. Superfluity means that the creator generates a variety of ideas, one or more of which turn
out to be useless. Backtracking signifies
that the creator must often return to an
earlier approach after blindly going off in
the wrong direction. Superfluity and
backtracking are often found together in
the same creative episode. Exploring the
wrong track obliges a return to options
that had been originally cast aside.
The reflections of Hermann von
Helmholtz, a prolific physicist with numerous creative breakthroughs to his
name, capture this process of discovery:
I had to compare myself with an
Alpine climber, who, not knowing
the way, ascends slowly and with
toil, and is often compelled to re-
COGNITIVE DISINHIBITION, HIGHER INTELLIGENCE

AND GREATER WORKING MEMORY MAY CONSTITUTE
THE BASIS FOR SERENDIPIT Y.
trace his steps because his progress
is stopped; sometimes by reasoning, and sometimes by accident, he
hits upon traces of a fresh path,
which again leads him a little further; and finally, when he has
reached the goal, he fi nds to his
annoyance a royal road on which
he might have ridden up if he had
been clever enough to find the right
starting point at the outset.
This account of venturing blindly
into uncharted territory and retracing
steps resonates with evidence from other
eminent creators. As Einstein once said,
If we knew what we were doing, we
wouldnt call it research.
To see superfluity and backtracking
in practice, consider the sketches that
Pablo Picasso produced in preparation
for his 1937 Guernica painting. Among
them are clearly superfluous sketches,
which have a human head on a bulls
body (for example, sketches 19 and 22 on
the opposite page). Picasso soon discovered that this was a dead end and backtracked to an earlier bulls head drawing
(15), before continuing to the fi nal two
sketches (26 and 27). Notice that the artist went too far in one direction in the last
sketch, from which he backtracked yet

again. Even more telling, after that last
sketch Picasso largely reversed himself to
a much earlier formulation (11), which
shares the most unique features with the
final version: the widely separated eyes,
the thin-lipped open mouth with tongue,
the menacing rather than inert visage and
the Cubist rather than neoclassic style.
These sketches are typical of blind variations both in the arts and in the sciences.
Only further research can expand
the theory into a comprehensive, predictive model whose claims can be thoroughly tested. Even so, BVSR can help us
make sense of certain quirks of creative
geniuses, including their personality
traits and developmental experiences.
Although they devote considerable time
to achieving expertise, they also pursue
other hobbies. Their openness to new
ideas and their breadth of interests infuse
them with seemingly irrelevant stimulation that can enrich blind variations.
As 19th-century German philosopher Arthur Schopenhauer said, Talent
hits a target no one else can hit; genius
hits a target no one else can see. Exceptional thinkers, it turns out, stand on
common ground when they launch their
arrows into the unknown. M
FURTHER READING
Scientifi c Talent, Training, and Performance: Intellect, Personality, and Genetic
Endowment. D. K. Simonton in Review of General Psychology, Vol. 12, No. 1,

pages 2846; March 2008.
Genius 101. D. K. Simonton. Springer Publishing, 2009.
So You Want to Become a Creative Genius? You Must Be Crazy! D. K. Simonton in
The Dark Side of Creativity. Edited by D. H. Cropley, A. J. Cropley, J. C. Kaufman and

M. A. Runco. Cambridge University Press, 2010.
Creativity and Discovery as Blind Variation: Campbells (1960) BVSR Model after
the Half-Century Mark. D. K. Simonton in Review of General Psychology, Vol. 15, No. 2,
pages 158174; June 2011.
From Past to Future Art: The Creative Impact of Picassos 1935 Minotauromachy on
His 1937 Guernica. R. I. Damian and D. K. Simonton in Psychology of Aesthetics,

Creativity, and the Arts, Vol. 5, No. 4, pages 360369; November 2011.
SCIENTIFIC AMERICAN
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10/8/13 6:15 PM
Seek and you will find: why curiosity is key to personal and nat...
http://www.theguardian.com/commentisfree/2015/jun/07/seek-a...
Seek and you will find: why curiosity is key

to personal and national success
Ian Leslie
Calls for innovation in our economy are commonplace, but how we nurture inquiring
minds is too often overlooked
Sunday 7 June 2015 00.05BST
A user of the popular question-and-answer website Quora recently asked how to become
a billionaire. The question received a fascinating answer from an authoritative source:
Justine Musk, former wife of Elon Musk, the serial entrepreneur, inventor, engineer
and billionaire. Ms Musk advised the questioner to stop thinking about money and
instead to get deeply, intensely curious about the world.
Perhaps she was on to something: the incurious face a dim future. Wages for routine,
intellectually undemanding work are falling as software takes more and more tasks away
from humans. Even in professions such as accountancy and law, there are fewer jobs
available to those who prefer to think only along straight lines.
At the same time, across the developed world, an increasing share of income is going to
those with advanced educations. The most reliable predictor of educational
achievement is, according to the psychologist Sophie von Stumm, of Goldsmiths,
University of London, a hungry mind.
Twenty-rst-century economies are rewarding those with an unquenchable desire to
learn, question and solve and punishing those who dont. Its no longer enough to be
competent or smart: computers are both, but no computer can yet be said to be curious.
Today, its not just what you know that counts its how much you want to know.
Curiosity is a wellspring of innovation. Only last month, George Osborne dened
productivity as the key long-term problem for the UK economy. Although the British are
talented spenders, were just not making enough things people want to buy. Britain
needs to nurture the kind of world-beating businesses that America is so good at
generating. Even the Labour partys leadership candidates have been discussing how to
encourage the next Steve Jobs.
But how to do so? We often discuss entrepreneurs and inventors as men, or women, of
1 of 3
7/18/15, 12:35 PM
action. But the most successful ones tend to be intellectually voracious, too, even if the
information they gather isnt necessarily found in academic textbooks. Jobs was a
merely competent technician. What made him exceptional, other than his will to
succeed, was his curiosity. He was interested in everything: the Bauhaus design
movement, eastern philosophy, the history of technology. He put all this into the
creation of Apple. A tutor recalled his very inquiring mind he refused to accept
automatically received truths and he wanted to examine everything himself.
Jobss curiosity paid o in unexpected ways. At university, he took a course in
calligraphy for no other reason than that it interested him. This prompted him to pay
close attention to the fonts used on the rst Macs, which in turn ensured the presence of
classical fonts on every home computer made since.
When Je Bezos, the founder of Amazon, was a child, his mother discovered him trying
to take his crib apart with a screwdriver. As a teenager, he started a summer camp for
intellectually inquisitive children called the Dream Institute, at which children read great
novels, studied black holes and wrote computer programs.
Musk, Jobs, and Bezos are exceptional examples of the power of curiosity. But the same
principle applies to everyone. Greater rewards are going to the intellectually curious as
industries become more complex, competitive and knowledge-intensive. Take football.
Top managers are no longer there just to pick the team or give a rousing half-time talk.
They are required to be polymaths, uent in tactics, business, physiotherapy and
psychology. Asked why so many of todays most successful managers had playing
careers that were truncated through injury or simply because they werent good enough,
Jos Mourinho, himself an example, replied: More time to study.
Whats true of football is even more true of industries that already relied on brains. The
trend towards greater complexity is evident in advertising, law, nance and technology.
Employers are looking for people with a erce drive to understand and a storehouse of
knowledge that spans many disciplines and topics. The old question is it better to be a
specialist or a generalist? now has a denitive answer: both. Curious people are
self-starters. Psychologists measure curiosity using a scale called Need for Cognition
(NFC). If youre low in NFC, you avoid mental eort when you can, relying on learned
routines and habits to get you through the day. If youre high in NFC youre more likely
to read books, enjoy crossword puzzles and read articles like this one. You get a kick out
of thinking.
Curious people are good at solving dicult problems for their employers because theyre
really solving them for themselves. However, despite its rising value, we are not very
good at cultivating curiosity. Our education systems are increasingly focused on
preparing students for specic jobs. To teach someone to be an engineer or a lawyer,
however, is not the same as teaching them to be a curious learner. So we nd ourselves
stuck in a self-defeating cycle. We ask schools to focus on preparing students for the
world of work, rather than on inspiring them, and we end up with uninspired students
2 of 3
7/18/15, 12:35 PM
and mediocre professionals. At the same time, many companies value eciency so
highly that they forget to allow their employees to explore new ideas and ways of
working, of the kind that might just lead to protable breakthroughs. The internet has a
paradoxical eect. On the one hand, its the most powerful tool for intellectual curiosity
ever invented. On the other, it provides a stream of easy answers that can degrade our
ability to ask meaningful questions. Those who use it to gather knowledge and explore
questions in depth will thrive. Those who substitute it for a genuine spirit of inquiry will
not and neither will those who spend so much time playing games or looking at pictures
of kittens that they forget to read books (in a reversal of the cliche, it may be that cats are
killing curiosity).
As societies and as individuals, we urgently need to recognise the value of intellectual
curiosity. But we are in danger of creating a curiosity divide that feeds into our existing
social and economic inequalities; as the writer Kevin Drum put it: The internet is
making smart people smarter and dumb people dumber. It would be a tragedy if
intellectual curiosity were to become the preserve of an ever-narrowing cognitive elite.
This isnt just a problem for an economy its a problem for our souls. The true beauty of
learning stu, even apparently useless stu, is that it reminds us that we are part of a
project that is far greater than ourselves, one that has been under way for as long as
humans have been sharing knowledge. And if we stop asking good questions were
merely accepting someone elses answers. As Vladimir Nabokov said: Curiosity is
insubordination in its purest form.
Ian Leslie is the author of Curious: The Desire to Know and Why Your Future Depends on
It
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Study: Women Are Better Leaders - Business Insider
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http://www.businessinsider.com/study-women-are-better-leaders-2014-1
BOB SHERWIN, CONTRIBUTOR

JAN. 24, 2014, 1:22 PM
In a three-part series for

Business Insider, Sherwin, the
COO of leadership
consultancy Zenger
Folkman, examines women's
leadership effectiveness,
representation in corporate
America, and solutions for
increasing their ranks, building
upon the firm's research first
published in a 2012 Harvard
Business Review article.
In today's large organization, as
women climb up the corporate
ladder they vanish. While the
statistics vary slightly around the
world, this is an extremely
consistent pattern.
AP
GM CEO Mary Barra
At the lowest levels, more than half of the employees in organizations are female. As you move to
each successively higher level in the organization, the number of women steadily shrinks. At the
CEO level, worldwide, there are only 3% to 4% who are women.
We find this to be a puzzling, even mysterious phenomenon when you examine the hard data
that describes the overall success that women have when placed in successively higher
leadership positions. It is even more curious when you analyze the success they have in those
functional areas that have traditionally been dominated by males.
For more than a decade, our organization has been collecting 360 feedback data from leading
organizations worldwide. We now have 450,000 feedback instruments pertaining to about
45,000 leaders, covering a wide variety of industries. The studies that follow include our most
7/29/15 7:04 PM
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current data collected in

2011 and 2012. The
sample we have used
includes just under
16,000 leaders of whom
two-thirds were male
and one-third female.
Each participant had on
average 13 respondents,
including their manager,
their direct reports and
their peers.
Zenger Folkman
Overall
effectiveness
An aggregate look at how
women leaders
compared to their male counterparts shows the following.
Zenger Folkman
Because of the large sample size for this study the difference shown here is statistically
significant and does not occur by chance.
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Differences by Age
To better understand the differences between males and females it is instructive to look at
overall leadership effectiveness by age. The effectiveness of women as leaders appears to change
over time. As women and men begin their careers there is very little perceived difference. Then
men soon are perceived to be slightly more effective than women. As women mature they are
perceived in an increasingly positive way and more effecting than their male counterparts.
The gap between them and men continues to diverge, until they reach their 60s, when the gap
begins to narrow. At its peak the largest difference between males and females is 9 percentile
points. The following graph shows the average percentile gap between males and females.
Zenger Folkman
What Causes the Difference

What do women do that creates this difference in leadership effectiveness? One of the clues for
us came from talking with women about this research. When we ask them to explain why women
were perceived as more effective, what we frequently heard was, In order to get the same
recognition and rewards, I need to do twice as much, never make a mistake and constantly
demonstrate my competence. (The shorter version of what we regularly heard from women was
that we must perform twice as well to be thought half as good.)
When we looked at our data on males and females, we looked at results from a competency
called Practicing Self Development. This competency measures the extent to which people ask
for feedback and make changes based on that feedback. We know that as most people begin their
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career they are very motivated to ask for feedback and take actions to improve. Over time most
people gain competence and tend to not ask for feedback as often.
This graph shows
percentile scores from
men and women on the
competency of practicing
self development.
Note that the results are
fairly similar until about
40 years of age. At that
point women maintain
the habit of asking for
feedback and taking
action to improve. Note
Zenger Folkman
that the effectiveness of
men on this competency
continues to decline as they age. Men assume that they are doing fine and dont really need
much feedback.
Differences by competency
Our standard 360-degree feedback instrument measures 16 competencies. A comparison of how
women and men are perceived in terms of these specific competencies shows the following:
Zenger Folkman
The chart above shows the differences between men and women and has arrayed them in
descending order. It confirms that women actually scored higher than men on 12 of the 16
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competencies. The differences on ten of them were statistically significant. Men scored higher on
two competencies, "develops strategic perspective" and technical or professional expertise.
Note the large difference on the first competency, Takes Initiative. Each reader will probably
have some theory as to why this is so. Our explanation gravitates toward the double duty, which
many women live with that necessitates them getting things done in order to survive.
Females and Nurturing Competencies

The majority of people we talk with make the assumption that women will excel at nurturing
competencies such as developing others, inspiring and motivating others, relationship building,
collaboration and teamwork. The chart above demonstrates that these competencies are more
positive for women. But those competencies with the largest positive differences are taking
initiative, displaying integrity and honesty, and driving for results. These are not nurturing
competencies.
These competencies highlight that women were seen as more effective in getting things done,
being role models and delivering results. These skills describe leaders who take on difficult
challenges, ensure that people act with integrity, and who simply achieve challenging results.
Differences by function
Our current fact pattern becomes even more intriguing when we analyzed various functional
areas within an organization. Here is what the data showed:
Folkman
Zenger
We found it interesting that in the traditional male bastions of sales, legal, engineering, IT and
the R&D function; women actually received higher effectiveness ratings than males. Many of our
stereotypes are obviously incorrect. Again, the concern about women not being able to perform
well in those functional areas is resoundingly refuted by the data. Only in facilities management
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and maintenance do they not do well.
Differences by level in the organization

Finally, as women move up the ladder in an organization, the higher they move the more
positively they are perceived.
Zenger Folkman
To the degree that senior executives and boards of directors are putting men into senior
positions, fearing that women will not perform well at higher levels, we hope that this
information adds to the assurance that they need not worry about that.
Bob Sherwin is the chief operating officer of Zenger Folkman, a provider of leadership
research, assessment, development and implementation programs.
More: Women And Leadership CEOs
7/29/15 7:04 PM
It Pays to Be Nice - The Atlantic
http://www.theatlantic.com/business/archive/2015/06/it-pays-to-be-nice/396512/
BUSINESS
It Pays to Be Nice
even when other people are screwing you over.
Market Basket's CEO was so nice that his employees adored himand saved his job.
Steven Senne/ AP
OLGA KHAZAN
JUN 23, 2015
Research labs, like most workplaces, come in two broad varieties: The cut-throat kind, where researchers are always throwing
elbows in a quest for prestige, and the collaborative kind, where they work together for the good of the team. And when David Rand
rst established his Human Cooperation Lab at Yale University, he was clear about the kind of culture he wanted to promote.
Rands post-docs help each other and share their expertise willingly, he says. Rand spends some of the labs money on social events
and happy hours. Not in a lame, cheesy way, but in a way thats fun for people, he told me recently. It creates bonds among
people and makes them not want to cut each other down.
Thats because Rands research center is devoted to examining the behavioral economics of niceness, and over the years his studies
have pointed to one clear takeaway: Being collegial is good for both individual workers and for businesses as a whole.
Its a comforting message to hear these days. In The New York Times last weekend, Georgetown University business professor
Christine Porath lamented the decline of civility in the workplace. A quarter of those I surveyed in 1998 reported that they were
treated rudely at work at least once a week, she writes. That gure rose to nearly half in 2005, then to just over half in 2011.

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That might be because of a perception that, at least in business, nice guys nish last. In the previous issue of The Atlantic, Jerry
Useem reported that there are some perks to being a jerkor at least, an ultra-condent, occasional rule-breaker.
But other research shows that in many situations, it pays to be nice. Not because it helps other people, but because it helps you.
Lets say youre a machiavellian automaton out in the world. You have no scruples and no basic sense of human decency. The only
thing that drives you is an unyielding desire to scramble to the top of the ladder. In that case, Rand says, when you have one-o
interactions with someone, then its in your self-interest to take advantage of them. (You cut in line for the bathroom at the
museum because you dont live in that town anywaythat sort of thing).
But if youre interacting with someone repeatedly, like in an oce environment, its in your best interest to be cooperative, Rand
says. Usually, colleagues work together for longer than just a few days. People start to realize that if they yield to a co-worker one
day, he or she will yield to them the next.
And even if that specic person doesnt pay the niceness back, someone else might. According to the
RELATED STORY
theory of indirect reciprocity, others might take notice of your kindliness and form a higher opinion of you
in general, Rand says. Eventually, you might be able to cash in all that good will in the form of a huge favor
or pay raise. Its worth noting that this works best if bosses highlight their employees cooperative
behaviors, rather than their sales gures. But the point remains: At work, everyones playing a long
gameone in which the spoils go to the accommodating.
ADVERTISEMENT
Why It Pays to Be a Jerk
Of course, Rand says, there are some companies where this understanding of reciprocity does not exist. Instead, the prevailing
ethos is no matter what you do for me today, I will not cooperate with you tomorrow.
He recommends that CEOs discourage that kind of thinking for the sake of their bottom lines. What an organization is a bunch of
people trying to do something together, he said. The goal of a business is to get the members of the organization to put the good
of the organization ahead of their own personal good.
The conclusions of Rands studies support corporate do-gooders. Judging by his research, you should be nice even if you dont trust
the other person. In fact, you should keep on being nice even if the other person screws you over.
In one experiment, he found that people playing an unpredictable prisoners-dilemma type game benetted from being lenient
forgiving their partner for acting against them. The same holds true in the business environment, which can be similarly noisy,
as economists say. Sometimes, when someone is trying to undermine you, theyre actually trying to undermine you. But other
times, its just an accident. If someone doesnt credit you for a big idea in a meeting, you cant know if he or she just forgot, or if it
was an intentional slight. According to Rands research, you shouldnt, say, turn around and tattle to the boss about that persons
chronic tardinessat least not until he or she sabotages you at least a couple more times.
If someone did something that hurt me, and I get pissed, and I screw them over, that destroys that relationship over a mistake,
Rand said. And losing allies, especially in a cooperative environment, can be costly. In his studies, the strategy that earns the most
money is giving someone a pass and letting the person take advantage of you two or three times.
A 2013 study of his has an interesting takeaway for hiring managers looking to ll a role quickly: He found that when negotiating, if
you have no idea what the other person is going to demand, its better to make a more generous oer than to be stingy. At least that
way, a deal gets made. If you err on the side of being too tight-sted, meanwhile, the other person might get oended and walk
away. His conclusion: In an uncertain world, fairness nishes rst.
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If I get pissed, and I screw them over, that destroys that

relationship over a mistake.
Its not just Rands studies that celebrate workplace menches. People in all industries increasingly desire leaders who are more like
Gandhi and less like Gordon Gekko. As I wrote last year, theres evidence that people are embracing female leaders in greater
numbers, in part because, according to a meta-analysis from 2011, Leadership now, more than in the past, appears to incorporate
more feminine relational qualities, such as sensitivity, warmth, and understanding.
In its 2014 leadership survey, the PR rm Ketchum wrote that theres a seismic move away from an outdated, macho model of
solitary leadershipa command-and-control approach centered on one-way rhetoric, obsessively controlled messaging and solitary
decision-makingand towards a new, more feminine archetype. Though respondents to the survey still said they preferred male
leaders by a slight margin (54 percent to 46 percent), they also said that women possessed more of the individual leadership
characteristics they desired, like bringing out the best in others and being transparent. Women came out on top on 10 of the 14
leadership attributes the rm examined.
Fred Kiel, head of the executive development rm KRW international, recently studied 84 CEOs and more than 8,000 of their
employees over the course of seven years. The results, written up in the Kiels recent book Return on Character, found that people
worked harder and more happily when they felt valued and respected. So-called character-driven CEOs who possess four virtues
integrity, compassion, forgiveness, and accountabilitylead companies whose returns on assets are ve times larger than those of
executives who are more self-centered, he found.
In the Harvard Business Review, Emma Seppala, the associate director of Stanford Universitys Center for Compassion and Altruism
Research, details additional boons for nice bosses:
Harvard Business Schools Amy Cuddy and her research partners have also shown that leaders who project warmtheven
before establishing their competenceare more eective than those who lead with their toughness and skill. Why? One
reason is trust. Employees feel greater trust with someone who is kind.
And an interesting study shows that when leaders are fair to the members of their team, the team members display more
citizenship behavior and are more productive, both individually and as a team. Jonathan Haidt at New York University
Stern School of Business shows in his research that when leaders are self-sacricing, their employees experience being
moved and inspired.
For a stark, recent example of how niceness can reap rewards in the long-run, look no further than the story of Arthur Demoulas,
CEO of the New England grocery chain Market Basket. As Inc. reported, Demoulas went out of his way to learn many of his 25,000
employees names and to greet them warmly each time he visited. He paid workers at least $12 per hour, well over the minimum
wage, and he maintained a prot-sharing plan even as he bled money during the nancial meltdown.

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A poster of Arthur Demoulas in a Market Basket on Aug. 28, 2014 (Steven Senne / AP)
His workers didnt forget it: When the Market Basket board red Demoulas last year, thousands of them protested on his behalf,
wielding placards adorned with his face. The employee rallies paved the way for Demoulas to buy out his cousin, who ran the board,
and regain control over the company.
If everyone in the workplace is equal and treated with dignity, they work with a little extra passion, a little extra dedication,
Demoulas told the Boston Globe at the time. I think thats a wonderful business message to the world.
BUSINESS
How Rich People Raise Rich Kids

Even when theyre adopted, the children of the wealthy grow up to be just as well-off as their parents.
ABOUT THE AUTHOR

OLGA KHAZAN is a staff writer at The Atlantic, where she covers health.
Twitter Facebook

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The Genius of 'Want to Grab Coffee?' - The Atlantic
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http://www.theatlantic.com/business/archive/2015/04/the-genius-of-want...
7/29/15 7:16 PM
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How to Be Emotionally Intelligent

By DANIEL GOLEMAN
APRIL 7, 2015
Photo
Credit Wesley Bedrosian for The New York Times

What makes a great leader? Knowledge, smarts and vision, to be sure. To that, Daniel Goleman, author of
Leadership: The Power of Emotional Intelligence, would add the ability to identify and monitor emotions
your own and others and to manage relationships. Qualities associated with such emotional
intelligence distinguish the best leaders in the corporate world, according to Mr. Goleman, a former New
York Times science reporter, a psychologist and co-director of a consortium at Rutgers University to foster
research on the role emotional intelligence plays in excellence. He shares his short list of the competencies.
1. SELF-AWARENESS
Realistic self-confidence: You understand your own strengths and limitations; you operate from
competence and know when to rely on someone else on the team.
Emotional insight: You understand your feelings. Being aware of what makes you angry, for instance, can
help you manage that anger.
2. SELF-MANAGEMENT
Resilience: You stay calm under pressure and recover quickly from upsets. You dont brood or panic. In a
crisis, people look to the leader for reassurance; if the leader is calm, they can be, too.
Emotional balance: You keep any distressful feelings in check instead of blowing up at people, you let
them know whats wrong and what the solution is.
Self-motivation: You keep moving toward distant goals despite setbacks.
3. EMPATHY
Cognitive and emotional empathy: Because you understand other perspectives, you can put things in
ways colleagues comprehend. And you welcome their questions, just to be sure. Cognitive empathy, along
with reading another persons feelings accurately, makes for eective communication.
Good listening: You pay full attention to the other person and take time to understand what they are
saying, without talking over them or hijacking the agenda.
4. RELATIONSHIP SKILLS
Compelling communication: You put your points in persuasive, clear ways so that people are motivated as
well as clear about expectations.
Team playing: People feel relaxed working with you. One sign: They laugh easily around you.
A version of this article appears in print on April 12, 2015, on page ED17 of Education Life with the headline:
Leadership Checklist. Order Reprints| Today's Paper|Subscribe
strategy+business
Leadership Is a Contact Sport: The "Follow-up Factor"

in Management Development
by Marshall Goldsmith and Howard Morgan
from strategy+business issue 36, Autumn 2004
reprint number 04307
Reprint
The Follow-up Factor in

Management Development
content management
Leadership
Is a Contact
Sport
by Marshall Goldsmith and Howard Morgan
Illustration by Robert Goldstrom
Leadership is not just for leaders anymore. Top
companies are beginning to understand that sustaining

peak performance requires a firm-wide commitment to
developing leaders that is tightly aligned to organizational objectives a commitment much easier to
understand than to achieve. Organizations must find
ways to cascade leadership from senior management to
men and women at all levels. As retired Harvard
Business School professor John P. Kotter eloquently
noted in the previous issue of strategy+business, this ultimately means we must create 100 million new leaders
throughout our society. (See Leading Witnesses, s+b,
Summer 2004.)
Organizational experts Paul Hersey and Kenneth
Blanchard have defined leadership as working with and
through others to achieve objectives. Many companies
are stepping up to the challenge of leadership development and their results are quite tangible. In Leading the
Way: Three Truths from the Top Companies for Leaders
(John Wiley & Sons, 2004), a study of the top 20 companies for leadership development, Marc Effron and
Robert Gandossy show that companies that excel at
developing leaders tend to achieve higher long-term
profitability.
But it sometimes seems there are as many approaches to leadership development as there are leadership
developers. One increasingly popular tool for developing
leaders is executive coaching. Hay Group, a human
resources consultancy, reported that half of 150 companies surveyed in 2002 said that they had increased their
use of executive coaching, and 16 percent reported using
coaches for the first time.
content management
3
Howard Morgan (howard@

howardjmorgan.com) is the
founder of 50 Top Coaches,
a collective of many of the
worlds leading executive advisors. He specializes in executive coaching as a strategic
change-management tool. He
is co-editor of the forthcoming
book The Art and Practice of
Leadership Coaching: 50 Top
Executive Coaches Reveal
Their Secrets (John Wiley &
Sons, December 2004).
Yet even executive coaching is a broad category. In

reviewing a spate of books on coaching last year, Des
Dearlove and Stuart Crainer identified at least three
types of coaching: behavioral change coaching, personal
productivity coaching, and energy coaching. (See My
Coach and I, s+b, Summer 2003.) Our own upcoming
book, The Art and Practice of Leadership Coaching: 50
Top Executive Coaches Reveal Their Secrets (written with
Phil Harkins, to be published by John Wiley & Sons in
December 2004), includes discussions about five types
of leadership coaching: strategic, organizational
change/execution, leadership development, personal/life
planning, and behavioral.
Given the increasingly competitive economic environment and the significant human and financial capital expended on leadership development, it is not only
fair but necessary for those charged with running companies to ask, Does any of this work? And if so, how?
What type of developmental activities will have the
greatest impact on increasing executives effectiveness?
How can leaders achieve positive long-term changes in
behavior? With admitted self-interest our work was
described in the CrainerDearlove article, and is frequently cited in reviews of and articles about leadership
coaching we wanted to see if there were consistent
principles of success underlying these different
approaches to leadership development.
We reviewed leadership development programs in
eight major corporations. Although all eight companies
had the same overarching goals to determine the
desired behaviors for leaders in their organizations and
to help leaders increase their effectiveness by better
aligning actual practices with these desired behaviors
they used different leadership development methodolo-
gies: offsite training versus onsite coaching, short

duration versus long duration, internal coaches versus
external coaches, and traditional classroom-based training versus on-the-job interaction.
Rather than just evaluating participant happiness
at the end of a program, each of the eight companies
measured the participants perceived increase in leadership effectiveness over time. Increased effectiveness
was not determined by the participants in the development effort; it was assessed by preselected co-workers
and stakeholders.
Time and again, one variable emerged as central to
the achievement of positive long-term change: the participants ongoing interaction and follow-up with colleagues. Leaders who discussed their own improvement
priorities with their co-workers, and then regularly followed up with these co-workers, showed striking
improvement. Leaders who did not have ongoing dialogue with colleagues showed improvement that barely
exceeded random chance. This was true whether the
leader had an external coach, an internal coach, or no
coach. It was also true whether the participants went to
a training program for five days, went for one day, or did
not attend a training program at all.
The development of leaders, we have concluded, is
a contact sport.
Eight Approaches
The eight companies whose leadership development

programs we studied were drawn from our own roster of
clients over the past 16 years. Although all are large corporations, each company is in a different sector and each
faces very different competitive pressures.
Each company customized its leadership develop-
strategy + business issue 36
Marshall Goldsmith (marshall

@marshallgoldsmith.com) is a
founder of Marshall Goldsmith
Partners, a leadership coaching network. He has worked
with more than 70 major CEOs
and their management teams
and is the author or coauthor
of 18 books on leadership and
coaching. His most recent
book is Global Leadership: The
Next Generation (Financial
Times Prentice Hall, 2003).
Each participant received mini-survey summary

feedback from three to 16 co-workers. Colleagues were
asked to rate the participants increased effectiveness in
the specific selected behaviors as well as participants
overall increase (or decrease) in leadership effectiveness.
Co-workers were also asked to measure the degree of
follow-up they had with the participant. In total, we collected more than 86,000 mini-survey responses for the
11,480 managers who participated in leadership
development activities. This huge database gave us the
opportunity to explore the points of commonality and
distinction among these eight very different leadership
development efforts.
Three of the organizations permitted their names to
be used in articles or conference presentations, enabling
us to reference them in this report; the rest have requested anonymity, although we are able to describe their sector and activities. Two of the organizations also have
allowed their results to be published elsewhere, without
disclosure of the organizations name. The companies
whose programs we studied were:
An aerospace/defense contractor: 1,528 managers
(ranging from midlevel to the CEO and his team)
received training for two and a half days. Each person
reviewed his or her 360-degree feedback in person with
an outside consultant. All received at least three
reminder notes to help ensure that they would follow up
with their co-workers.
A financial-services organization: At GE Capital,
178 high-potential managers received training that lasted five days. Each leader was assigned a personal human
resources coach from inside the company. Each coach
had one-on-one sessions with his or her client on an
ongoing basis (either in person or by phone).
content management
ment approach to its specific needs. Five of the eight

focused on the development of high-potential leaders,
and between 73 and 354 participants were involved in
their programs. The three other companies included
almost all managers (above midlevel), and involved
between 1,528 and 6,748 managers. The degree of international representation varied among organizations. At
two companies, almost all of the participants were
American. Non-U.S. executives made up almost half of
the participants in one companys program. The other
five had varying levels of international participation.
Some of the companies used traditional classroombased training in their development effort. In each of
these companies, participants would attend an offsite
program and receive instruction on what the desired
characteristics were for leaders in their organizations,
why these characteristics were important, and how
participants might better align their own leadership
behavior with the desired model. Some companies, by
contrast, used continuing coaching, a methodology that
did not necessarily involve offsite training, but did rely
on regular interaction with a personal coach. Some companies used both offsite training and coaching.
Along with differences, there were commonalities
among the programs. Each company had spent extensive time reviewing the challenges it believed its leaders
would uniquely face as its business evolved. Each had
developed a profile of desired leadership behaviors that
had been approved by upper management. After ensuring that these desired leadership behaviors were aligned
with the company vision and values, each company
developed a 360-degree feedback process to help leaders
understand the extent to which their own behavior (as
perceived by co-workers) matched the desired behavior
for leaders in the corporation. All eight placed a set of
expectations upon participants. The developing leaders
were expected to:
Review their 360-degree feedback with an internal or external consultant.
Identify one to three areas for improvement.
Discuss their areas for improvement with key
co-workers.
Ask colleagues for suggestions on how to increase
effectiveness in selected areas for change.
Follow up with co-workers to get ideas for
improvement.
Have co-worker respondents complete a confidential custom-designed mini-survey three to 15
months after the start of their programs.
Personal Touch
The overarching conclusion distilled from the surveys in

all the programs was that personal contact mattered
and mattered greatly.
Five of the corporations used the same measurement methodologies, while three used a slightly different approach. All eight companies measured the
frequency of managers discussions and follow-up with
co-workers and compared this measure with the perceived increase in leadership effectiveness, as judged by
co-workers in the mini-surveys. The first five firms

the aerospace/defense contractor, GE Capital, the electronics manufacturer, the diversified services company,
and the media company used a seven-point scale,
from 3 to +3, to measure perceived change in leadership effectiveness, and a five-point scale to plot the
amount of follow-up, ranging from a low of no followup to a high of consistent or periodic follow-up.
They then compared the two sets of measurements by
plotting the effectiveness scores and the follow-up tallies
on charts.
The remaining three firms used slightly different
measurement criteria. The telecommunications company used a percentage improvement scale to measure
perceived increases in leadership effectiveness, as judged
by co-workers. It then compared percentage improvement on leadership effectiveness with each level of
follow-up. Johnson & Johnson and Agilent measured
leadership improvement using the same seven-point
scale employed by the first five companies, but they did
not categorize the degree of follow-up beyond the simple followed up vs. did not follow up.
As noted earlier, follow-up here refers to efforts that
leaders make to solicit continuing and updated ideas for
improvement from their co-workers. In the two companies that compared followed up with did not follow
up, participants who followed up were viewed by their
colleagues as far more effective than the leaders who did
not. In the companies that measured the degree of
follow-up, leaders who had frequent or periodic/consistent interaction with co-workers were reliably seen as
having improved their effectiveness far more than leaders who had little or no interaction with co-workers.
Exhibits 1 to 5, on pages 78, show the results
among the first five companies, which, despite their different leadership development programs, used the same
measurement methodology. This apples-to-apples comparison shows strong correlations across all five companies between the degree of follow-up and the perceived
change in leadership effectiveness.
In the exhibits, perceived change refers to the
respondents perception of their co-workers change in
leadership effectiveness; for example, a rating of +3
would indicate that the co-worker was seen as becoming
a much more effective leader; a rating of 0 would indicate no change in leadership effectiveness. Percent
refers to the percentage of survey respondents grouped
around a given rating; for example, in Exhibit 1,
between 30 and 42 percent of respondents gave a 0
content management
5
An electronics manufacturer: 258 upper-level

managers received in-person coaching from an external
coach. They did not attend an offsite training program.
They were then each assigned an internal coach who had
been trained in effective coaching skills. This coach followed up with the managers every three to four months.
A diversified services company: 6,748 managers
(ranging from midlevel to the CEO and his team)
received one-on-one feedback from an external coach
during two training programs, each two and a half days
long, which were conducted 15 months apart. Although
there was no formal follow-up provided by the coach,
participants knew they were going to be measured on
their follow-up efforts.
A media company: 354 managers (including the
CEO and his team) received one-on-one coaching and
feedback during a one-day program. An external coach
provided follow-up coaching every three to four
months.
A telecommunications company: 281 managers
(including the CEO and his team) received training
for one day. Each leader was given an external coach,
who had continuing one-on-one sessions with his or
her client.
A pharmaceutical/health-care organization: Johnson & Johnson involved 2,060 executives and managers,
starting with the CEO and his team, in one and a half
days of leadership training. Each person reviewed his or
her initial 360-degree feedback with an outside consultant (almost all by phone). Participants received at least
three reminder notes to help ensure that they would follow up with their co-workers.
A high-tech manufacturing company: At Agilent
Technologies Inc., 73 high-potential leaders received
coaching for one year from an external coach, an effort
unconnected to any training program. Each coach had
one-on-one sessions with his or her client on an ongoing
basis, either in person or by phone.
Leadership is a relationship, not

between the coach and the coachee, but
between the leader and the colleague.
Ask and Receive
In a way, our work reinforces a key learning from the

Hawthorne studies. These classic observations of factory
workers at suburban Chicagos Western Electric
Hawthorne Works, which Harvard professor Elton
Mayo made nearly 80 years ago, showed that productivity tended to increase when workers perceived leadership
interest and involvement in their work, as evidenced by
purposeful change in the workplace environment. Our
studies show that when co-workers are involved in leadership development, the leaders they are helping tend to
become more effective. Leaders who ask for input and
then follow up to see if progress is being made are seen
as people who care. Co-workers might well infer that
leaders who dont respond to feedback must not care

very much.
Historically, a great deal of leadership development
has focused on the importance of an event. This event
could be a training program, a motivational speech, or
an offsite executive meeting. The experience of the eight
companies we studied indicates that real leadership development involves a process that occurs over time, not an
inspiration or transformation that occurs in a meeting.
Physical exercise provides a useful analogy. Imagine
having out-of-shape people sit in a room and listen to a
speech on the importance of exercising, then watch
some tapes on how to exercise, and perhaps practice
exercising. Would you ever wonder why these people
were still unfit a year later? The source of physical fitness
is not understanding the theory of working out; it is
engaging in exercise. As Arnold Schwarzenegger has
said, Nobody ever got muscles by watching me work
out! So, too, with leadership development. As Professor
Drucker, Dr. Hersey, and Dr. Blanchard have pointed
out, leadership involves a reliance on other co-workers to
achieve objectives. Who better than these same co-workers to help the leader increase effectiveness?
Indeed, the executive coach is, in many ways, like a
personal trainer. The trainers role is to remind the person being trained to do what he or she knows should be
done. Good personal trainers spend far more time on
execution than on theory. The same seems to be true for
leadership development. Most leaders already know
what to do. They have read the same books and listened
to the same gurus giving the same speeches. Hence, our
core conclusion from this research: For most leaders, the
great challenge is not understanding the practice of leadership: It is practicing their understanding of leadership.
content management
rating that is, they saw no change to leaders who

did no follow-up.
Leadership, its clear from this research, is a relationship. And the most important participants in this
relationship are not the coach and the coachee. They
are the leader and the colleague.
Most of the leaders in this study work in knowledge
environments in companies where the value of the
product or service derives less and less from manufacturing scale and, to use Peter Druckers formulation,
more and more from the processing and creation of
information to define and solve problems. In discussing
leadership with knowledge workers, Professor Drucker
has said, The leader of the past was a person who knew
how to tell. The leader of the future will be a person who
knows how to ask. Our studies show that leaders who
regularly ask for input are seen as increasing in effectiveness. Leaders who dont follow up are not necessarily bad
leaders; they are just not seen as getting better.
Exhibit 1: My Co-Worker Did No Follow-Up
Percent
60
40
20
-3
-2
-1
Perceived Change
Company A
Company B
Company C
Company D
Company E
Mean Leader
60
Percent
content management
Exhibit 2: My Co-Worker Did a Little Follow-Up
40
20
-3
-2
-1
Perceived Change
Company A
Company B
Company C
Company D
Company E
Mean Leader
Exhibit 3: My Co-Worker Did Some Follow-Up
40
20
-3
-2
-1
Perceived Change
Company A
Company B
Company C
Company D
Company E
Mean Leader
Percent
60
Exhibit 4: My Co-Worker Did Frequent Follow-Up
Percent
60
40
20
-3
-2
-1
Perceived Change
Company A
Company B
Company C
Company D
Company E
Mean Leader
content management
Exhibit 5: My Co-Worker Did Consistent or Periodic Follow-Up
Percent
60
40
20
-3
-2
-1
Perceived Change
Company A
Company B
Company C
Company D
Beyond the basic finding that follow-up matters

several other conclusions arise from our research. For
example, the eight-program study indicates that the
follow-up factor correlates with improved leadership effectiveness among both U.S. and non-U.S. executives.
As companies globalize, many executives have
begun to wrestle with issues of cultural differences
among their executives and employees. Recent research
involving high-potential leaders from around the world
has shown that cross-cultural understanding is seen as a
key to effectiveness for the global leader. (See, for example, Marshall Goldsmith et al., Global Leadership: The
Next Generation, Financial Times Prentice Hall, 2003.)
Our study addressed this issue as it affects leadership development programs. Nearly 10,000 of the
respondents in the eight companies whose programs we
reviewed almost 12 percent of our mini-survey sam-
Company E
Mean Leader
ple were located outside the United States. We found

that the degree of follow-up was as critical to changing
perceived leadership effectiveness internationally as it
was domestically. This was true for both training and
coaching initiatives.
At Johnson & Johnson, there were almost no differences in scores among participants in Europe, Latin
America, and North America. The group seen as
improving the most was in Asia. In analyzing the findings, J&J determined that the higher scores in Asia were
more a function of dedicated local management than of
cultural differences, again supporting the correlation
between a caring, contact-rich leadership and its perceived effectiveness.
That follow-up works globally contravenes assumptions that different cultures will have differing levels of
receptiveness to intimate conversations about workplace
content management
9
Inside and Outside
Interaction between the developing leader and his or her

colleagues is not the sole connection that counts. Also
vital is the contact between the leader and the coach. Our
third major finding concerns that relationship: Both
internal and external coaches can make a positive difference.
One reason coaching can be so effective is that it
may inspire leaders to follow up with their people.
Agilent Technologies, for one, found a strong positive
correlation between the number of times the coach followed up with the client and the number of times the
client followed up with co-workers.
The coach, however, does not have to be part of the
company. This conclusion was readily apparent when
we compared the two companies most distinct in the
composition of their coaching corps. Agilent used only
external coaches. GE Capital, by contrast, used only
internal coaches from human resources. Yet both
approaches produced very positive long-term increases
in perceived leadership effectiveness.
Given the apparent ease of accessibility to internal
coaches, firms might naturally use this finding to justify
going inside. But there are at least three important
variables to consider in determining whether to use an
internal HR coach: time, credibility, and confidentiality.
In many organizations, internal coaches are not
given the time they need for ongoing interaction with
the people they are coaching. In some cases, they may
not seem as credible as trained development experts. In
other cases, especially those that involve human
resources personnel filling multiple roles, there may
appear to be a conflict of interest between a professionals responsibilities as coach and as evaluator. If these
perceptions exist, then external coaches may well be

preferable to internal coaches.
But internal coaches can overcome these obstacles.
At GE Capital, the internal coaches were HR professionals who were given time to work with their
coachees. Coaching was treated as an important part
of their responsibility to the company and was not seen
as an add-on if they got around to it. Moreover, the
coachees were given a choice of internal coaches and
picked coaches they saw as most credible. Finally, each
internal coach worked with a leader in a different part of
the business. They assured their coachees that this
process was for high-potential development, not evaluation. As a result of this thorough screening process,
client satisfaction with internal coaches was high and
results achieved by internal coaches (as judged by coworkers) were very positive.
Inside or outside, we discovered that the mechanics
of the coachleader relationship were not a major limiting factor. Our fourth finding was that feedback or
coaching by telephone works about as well as feedback or
coaching in person.
Intuitively, one might believe that feedback or
coaching is a very personal activity that is better done
face-to-face than by phone. However, the companies we
reviewed do not support this supposition. One company,
Johnson & Johnson, conducted almost all feedback by
telephone, yet produced increased effectiveness scores
almost identical to those of the aerospace/defense organization, which conducted all feedback in person.
Moreover, all the companies that used only external
coaches similarly found little difference between telephone coaching and live coaching. These companies
made sure that each coach had at least two one-on-one
meetings with individual executive clients. Some coaches
did this in person, whereas others interacted mostly by
phone. There was no clear indication that either method
of coaching was more effective than the other.
Although sophisticated systems involving some
combination of e-mail, intranets, extranets, and mobile
connectivity are available, follow-up neednt be
expensive. Internal coaches can make follow-up telephone calls. New computerized systems can send
reminder notes and give ongoing suggestions.
However its done, follow-up is the sine qua non of effective leadership development. Too many companies
spend millions of dollars for the program of the year
but almost nothing on follow-up and reinforcement.
Companies should also take care to measure the
behaviors. But the universality of the follow-up principle

doesnt imply universality in its application. Leaders learn
from the people in their own environment, particularly
in a cross-cultural context. Indeed, research by the
Center for Creative Leadership in Greensboro, N.C., has
shown that encouraging feedback and learning from
those around us are both central to success for leaders in
cross-cultural environments. Companies with successful
leadership development programs encourage executives
to adapt the universal principle of follow-up and the frequency of such conversations to fit the unique requirements of the culture in which they working. Despite
other cultural differences, there seems to be no country
in the world where co-workers think, I love it when you
ask me for my feedback and then ignore me.
Continual contact with colleagues

is so effective it can succeed even without
a formal program.
Learning to Learn
Of even greater import is this: Continual contact with

colleagues regarding development issues is so effective it
can succeed even without a large, formal program.
Agilent, for example, produced excellent results, even
though its leaders received coaching that was completely
disconnected from any training. In fact, leaders who do
not have coaches can be coached broadly by their coworkers. The key to changing behavior is learning to
learn from those around us, and then modifying
our behavior on the basis of their suggestions. The
aerospace/defense contractor and the telecommunications company used very streamlined and efficient train-
ing processes and reminder notes to help leaders

achieve a positive long-term change in effectiveness,
without using coaches at all.
If the organization can teach the leader to reach out
to co-workers, to listen and learn, and to focus on
continuous development, both the leader and the organization will benefit. After all, by following up with colleagues, a leader demonstrates a commitment to selfimprovement and a determination to get better. This
process does not have to take a lot of time or money.
Theres something far more valuable: contact. +
content management
effectiveness of their leadership development initiatives,

and not just the employees satisfaction with them. Our
results indicate that when participants know that surveys
or other methods of measuring program effectiveness are
slated to occur three to 15 months from the date of the
program, a higher level of commitment is created
among them. This follow-up measurement creates a
focus on long-term change and personal accountability.
Although measuring outcomes would seem to be
second nature for most companies, the success of leadership development programs has conventionally been
assessed through the satisfaction of the participants. This
metric is of limited relevance. Among the companies in
our study that offered leadership development training,
virtually all participants came away highly satisfied. At
the aerospace/defense contractor and Johnson &
Johnson, the average satisfaction rating among more
than 3,500 participants was 4.7 out of a possible 5.0.
Executives loved the training, but that didnt mean they
used the training or improved because of it.
Reprint No. 04307
Resources
Des Dearlove and Stuart Crainer, My Coach and I, s+b, Summer 2003;
www.strategy-business.com/press/article/22062
Elizabeth Thach, The Impact of Executive Coaching and 360 Feedback
on Leadership Effectiveness, Leadership & Organization Development
Journal, Vol. 23, No. 4, 2002; http://fiordiliji.emeraldinsight.com/
vl=2762214/cl=12/nw=1/rpsv/lodj.htm
Marshall Goldsmith, Ask, Learn, Follow Up, and Grow, in The Leader
of the Future: New Visions, Strategies, and Practices for the Next Era, edited
by Frances Hesselbein, Marshall Goldsmith, and Richard Beckhard (Peter
Drucker Foundation and Jossey-Bass, 1996)
Linda Sharkey, Leveraging HR: How to Develop Leaders in Real Time,
in Human Resources in the 21st Century, edited by Marc Effron, Robert
Gandossy, and Marshall Goldsmith (John Wiley & Sons, 2003)
Diane Anderson, Brian Underhill, and Robert Silva, The Agilent APEX
Case Study, in Best Practices in Leadership Development 2004, edited
by Dave Ulrich, Louis Carter, and Marshall Goldsmith (Best Practices
Publications, forthcoming 2004)
Marshall Goldsmith, Cathy L. Greenberg, Alastair Robertson, and Maya
Hu-Chan, Global Leadership: The Next Generation (Financial Times
Prentice Hall, 2003)
10
strategy+business magazine
is published by Booz & Company Inc.
To subscribe, visit www.strategy-business.com
or call 1-877-829-9108.
For more information about Booz & Company,
visit www.booz.com
2004 Booz & Company Inc.

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ASIA PACIFIC LEADERSHIP PROGRAM (APLP) G15, 2015-2016

(Ho Chi Minh City, Source: APLP GIST)

Asia Pacific Leadership Program

The APLP Starter Pack is a collection of shorter, non-academic

APLP G1 Starter Pack: Page

APLP G15 Starter Pack; Explorers Guide

3. Regional Overviews and Select National News (pages 104130)

more. We want you to come into the APLP to explore not as a

APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page

Asias share of global GDP, 17002050

APLP G1 Starter Pack: Page

The Middle Income Trap: Unable to compete

do not follow this pattern. Instead, they have

exports and with advanced economies in

GDP per capita ($)

of Korea. But many middle-income countries

Avoiding the middle income trap

resource-driven growth, with low-cost labor and capital, to productivity-driven growth.

APLP G1 Starter Pack: Page

Makings of the Asian Century

The engines of the Asian Century are the Asia-7 economies

Actions at three levels

APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page 1

Asian Century vs. Middle Income Trap

Middle Income Trap Scenario

Middle East &

Asia GDP: $174 trillion

APLP G1 Starter Pack: Page 1

Asia GDP: $65 trillion

APLP G1 Starter Pack: Page 1

Excerpt: 'The New Asian Hemisphere'

APLP G1 Starter Pack: Page 1

APLP G1 Starter Pack: Page 1

APLP G1 Starter Pack: Page 1

APLP G1 Starter Pack: Page 1

The Decline of the West: Why America Must

MAR 20, 2012

A U.S. Navy officer points to a map / Reuters

MORE FROM NATIONAL JOURNAL

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APLP G1 Starter Pack: Page

APLP G1 Starter Pack: Page

Asia as Global Leader Not So Fast

So could Asia rise to the occasion and, in

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The regional landscape offers clues.

APLP G1 Starter Pack: Page 2

Ho Kwon Ping is chairman of Singapore Management University and executive chairman of

APLP G1 Starter Pack: Page 2

A handful of Asian conundrums the worlds boardrooms should chew over

OVER THE PAST decade innumerable

APLP G1 Starter Pack: Page 2

APLP G1 Starter Pack: Page 2

The quest for quality

APLP G1 Starter Pack: Page 2

Broadly speaking, Asias big internet

APLP G1 Starter Pack: Page