Whereas in Global Trends 2015 we viewed globalization—growing interconnectedness reflected in the expanded flows of information, technology, capital, goods, services, and people throughout the world—as among an array of key drivers, we now view it more as a “mega-trend”—a force so ubiquitous that it will substantially shape all of the other major trends in the world of 2020.
The reach of globalization was substantially broadened during the last 20 years by Chinese and Indian economic liberalization, the collapse of the Soviet Union, and the worldwide information technology revolution. Through the next 15 years, it will sustain world economic growth, raise world living standards, and substantially deepen global interdependence. At the same time, it will profoundly shake up the status quo almost everywhere—generating enormous economic, cultural, and consequently political convulsions.
Certain aspects of globalization, such as the growing global inter-connectedness stemming from the information technology revolution, are likely to be irreversible. Real-time communication, which has transformed politics almost everywhere, is a phenomenon that even repressive governments would find difficult to expunge.
Yet the process of globalization, powerful as it is, could be substantially slowed or even reversed, just as the era of globalization in the late 19th and early 20th centuries was reversed by catastrophic war and global depression. Some features that we associate with the globalization of the 1990s—such as economic and political liberalization—are prone to “fits and starts” and probably will depend on progress in multilateral negotiations, improvements in national governance, and the reduction of conflicts. The freer flow of people across national borders will continue to face social and political obstacles even when there is a pressing need for migrant workers.
Moreover, the character of globalization probably will change just as capitalism changed over the course of the 19th and 20th centuries. While today's most advanced nations—especially the United States—will remain important forces driving capital, technology and goods, globalization is likely to take on much more of a “non-Western face” over the next 15 years.
Currently, about two-thirds of the world's population live in countries that are connected to the global economy. Even by 2020, however, the benefits of globalization won't be global. Over the next 15 years, gaps will widen between those countries benefiting from globalization—economically, technologically, and socially—and those underdeveloped nations or pockets within nations that are left behind. Indeed, we see the next 15 years as a period in which the perceptions of the contradictions and uncertainties of a globalized world come even more to the fore than is the case today.
An Expanding and Integrating Global Economy
Most forecasts to 2020 and beyond continue to show higher annual growth for developing countries than for high-income ones. Countries such as China and India will be in a position to achieve higher economic growth than Europe and Japan, whose aging work forces may inhibit their growth. Given its enormous population—and assuming a reasonable degree of real currency appreciation—the dollar value of China's gross national product (GNP) may be the second largest in the world by 2020. For similar reasons, the value of India's output could match that of a large European country. The economies of other developing countries, such as Brazil and Indonesia, could surpass all but the largest European economies by 2020. 
Continued Economic Turbulence. Sustained high-growth rates have historical precedents. China already has had about two decades of 7 percent and higher growth rates, and Japan, South Korea, and Taiwan have managed in the past to achieve annual rates averaging around 10 percent for a long period.
Fast-developing countries have historically suffered sudden setbacks, however, and economic turbulence is increasingly likely to spill over and upset broader international relations. Many emerging markets—such as Mexico in the mid-1990s and Asian countries in the late 1990s—suffered negative effects from the abrupt reversals of capital movements, and China and India may encounter similar problems. The scale of the potential reversals would be unprecedented, and it is unclear whether current international financial mechanisms would be in a position to forestall wider economic disruption.
With the gradual integration of China, India, and other developing countries into the global economy, hundreds of millions of working-age adults will join what is becoming, through trade and investment flows, a more interrelated world labor market. World patterns of production, trade, employment, and wages will be transformed.
Where these labor market pressures lead will depend on how political leaders and policymakers respond. Against the backdrop of a global economic recession, such resources could unleash widespread protectionist sentiments. As long as sufficiently robust economic growth and labor market flexibility are sustained, however, intense international competition is unlikely to cause net job “loss” in the advanced economies.
Mobility and Laggards. Although the living standards of many people in developing and underdeveloped countries will rise over the next 15 years, per capita incomes in most countries will not compare to those of Western nations by 2020. There will continue to be large numbers of poor even in the rapidly emerging economies, and the proportion of those in the middle stratum is likely to be significantly less than is the case for today's developed nations. Experts estimate it could take China another 30 years beyond 2020 for per capita incomes to reach current rates in developed economies.
Widening income and regional disparities will not be incompatible with a growing middle class and increasing overall wealth. In India, although much of the west and south may have a large middle class by 2020, a number of regions such as Bihar, Uttar Pradesh, and Orissa will remain underdeveloped.
Moreover, countries not connected to the world economy will continue to suffer. Even the most optimistic forecasts admit that economic growth fueled by globalization will leave many countries in poverty over the next 15 years.
If the growing problem of abject poverty and bad governance in troubled states in Sub-Saharan Africa, Eurasia, the Middle East, and Latin America persists, these areas will become more fertile grounds for terrorism, organized crime, and pandemic disease. Forced migration also is likely to be an important dimension of any downward spiral. The international community is likely to face choices about whether, how, and at what cost to intervene.
The Technology Revolution
New technology applications will foster dramatic improvements in human knowledge and individual well-being. Such benefits include medical breakthroughs that begin to cure or mitigate some common diseases and stretch lifespans, applications that improve food and potable water production, and expansion of wireless communications and language translation technologies that will facilitate transnational business, commercial, and even social and political relationships.
Moreover, future technology trends will be marked not only by accelerating advancements in individual technologies but also by a force-multiplying convergence of the technologies—information, biological, materials, and nanotechnologies—that have the potential to revolutionize all dimensions of life. Materials enabled with nanotechnology's sensors and facilitated by information technology will produce myriad devices that will enhance health and alter business practices and models. Such materials will provide new knowledge about environment, improve security, and reduce privacy. Such interactions of these technology trends—coupled with agile manufacturing methods and equipment as well as energy, water, and transportation technologies—will help China's and India's prospects for joining the “First World.” Both countries are investing in basic research in these fields and are well placed to be leaders in a number of key fields. Europe risks slipping behind Asia in creating some of these technologies. The United States is still in a position to retain its overall lead, although it must increasingly compete with Asia and may lose significant ground in some sectors.
To Adaptive Nations Go Technology ‘s Spoils. The gulf between “haves” and “have-nots” may widen as the greatest benefits of globalization accrue to countries and groups that can access and adopt new technologies. Indeed, a nation's level of technological achievement generally will be defined in terms of its investment in integrating and applying the new, globally available technologies—whether the technologies are acquired through a country's own basic research or from technology leaders. Nations that remain behind in adopting technologies are likely to be those that have failed to pursue policies that support application of new technologies—such as good governance, universal education, and market reforms—and not solely because they are poor.
Those that employ such policies can leapfrog stages of development, skipping over phases that other high-tech leaders such as the United States and Europe had to traverse in order to advance. China and India are well positioned to achieve such breakthroughs. Yet, even the poorest countries will be able to leverage prolific, cheap technologies to fuel—although at a slower rate—their own development.
Rapid technological advances outside the United States could enable other countries to set the rules for design, standards, and implementation, and for molding privacy, information security, and intellectual property rights (IPR).
Nations also will face serious challenges in oversight, control, and prohibition of sensitive technologies. With the same technology, such as sensors, computing, communication, and materials, increasingly being developed for a range of applications in both everyday, commercial settings and in critical military applications the monitoring and control of the export of technological components will become more difficult. Moreover, joint ventures, globalized markets and the growing proportion of private sector capital in basic R&D will undermine nation-state efforts to keep tabs on sensitive technologies.
At the same time, technology will be a source of tension in 2020: from competition over creating and attracting the most critical component of technological advancement—people—to resistance among some cultural or political groups to the perceived privacy-robbing or homogenizing effects of pervasive technology.
Lingering Social Inequalities
Over the next 15 years, illiteracy rates of people 15 years and older will fall, according to UNESCO, but they will still be 17 times higher in poor and developing countries than those in OECD  countries. Moreover, illiteracy rates among women will be almost twice as high as those among men. Between 1950 and 1980 life expectancy between the more- and less-developed nations began to converge markedly; this probably will continue to be the case for many developing countries, including the most populous. However, by US Census Bureau projections, over 40 countries—including many African countries, Central Asian states, and Russia—are projected to have a lower life expectancy in 2010 than they did in 1990.
Even if effective HIV/AIDS prevention measures are adopted in various countries, the social and economic impact of the millions already infected with the disease will play out over the next 15 years.
The debilitation and death of millions of people resulting from the AIDS pandemic will have a growing impact on the economies of the hardest-hit countries, particularly those in Sub-Saharan Africa, where more than 20 million are believed to have died from HIV/AIDS since the early 1980s. Studies show that household incomes drop by 50 to 80 percent when key earners become infected. In “second wave” HIV/AIDS countries—Nigeria, Ethiopia, Russia, India, China, Brazil, Ukraine, and the Central Asian states—the disease will continue to spread beyond traditional high-risk groups into the general population. As HIV/AIDS spreads, it has the potential to derail the economic prospects of many up-and-coming economic powers.
This scenario provides an illustration of how robust economic growth over the next 15 years could reshape the globalization process—giving it a more non-Western face. It is depicted in the form of a hypothetical letter from the head of the World Economic Forum to a former US Federal Reserve chairman on the eve of the annual Davos meeting in 2020. Under this scenario, the Asian giants as well as other developing states continue to outpace most “Western” economies, and their huge, consumer-driven domestic markets become a major focus for global business and technology. Many boats are lifted, but some founder. Africa does better than one might think, while some medium-sized emerging countries are squeezed. Western powers, including the United States, have to contend with job insecurity despite the many benefits to be derived from an expanding global economy. Although benefiting from energy price increases, the Middle East lags behind and threatens the future of globalization. In addition, growing tensions over Taiwan may be on the verge of triggering an economic meltdown. At the end of the scenario, we identify some lessons to be drawn from our fictional account, including the need for more management by leaders lest globalization slip off the rails.
Letter from Head of World Economic Forum to a Former US Federal Reserve Chainman On the Eve of the Annual Meeting
January 12, 2020
Dear Mr. Chairman:
As you know, the last few years have been rough. I finally persuaded the Asians to drop their boycott, and this year we're meeting in China instead of Davos. From now on it will be Switzerland every other year and Asia in the alternate years. I thought at first that I could get the Asians to back down, but they are united. Even the Japanese were not willing to bend. I'm not convinced this was all one big Chinese plot as some are charging. I'm not even sure whether the Chinese were fully in favor of it. Once it caught hold, they had to show some leadership and support Asian claims, but I think they are so confident of their current status that meeting every year in Davos did not bother them. Hosting the sessions actually puts pressure on them to make concessions and deal with some of the complaints about how they do business.
This reminds me of a particular theme I've been developing in my mind as I reflect on how globalization has now evolved. At the turn of the century, we equated globalization with Americanization. America was the model. Now globalization has more of an Asian face and, to be frank, America is no longer quite the engine it used to be. Instead the markets are now oriented eastwards.
That's not to say that the system runs on its own. Only after learning a couple of tough lessons did we see how much management was involved or how easily globalization could come off the rails. We business leaders have had to learn to step in more aggressively.
The 9/11 tragedy was a wake-up call. Terrorism still poses a physical and strategic challenge. In order to protect ourselves, we had to put up barriers, but there was a danger that we would do so much that we would undermine the very basis of globalization—the free flow of capital, goods, people, etc. We tried to strike a delicate balance between security and openness. There's been a lot of criticism about US visa restrictions cutting back on the number of foreign students, and American scientists worried about the US's science and technology leadership slipping away to Asia.
This gets me to my second point. Ten or 15 years ago we did not realize the extent to which the Asian giants were ready to take up the slack. The Chinese and Indians have really maintained the momentum behind globalization. It started out as a US-China dynamic, but now the Asian market is self-generating and not so dependent on trade with the US. Moreover, the competition between China and India over energy supplies and markets has spurred further growth and innovation.
But we had a few sleepless nights over the years, particularly when China ran into financial problems. The fact that the recovery was quick was probably crucial. I think Beijing would have had trouble coping with a full-blown political crisis. Such turmoil could have stymied its economic rise for a decade or more. Fortunately that did not happen. Although the US helped, the really interesting thing was that China dug itself out without the kind of US or international help we thought it would need. Again we underestimated the extent to which China had created a domestic market that could jumpstart its economy.
What the downturn unfortunately did was ignite the latent nationalism that had been lurking below the surface, again increasing tensions over Taiwan. China has been "feeling its oats" and the risk of miscalculation is growing. I'm getting more and more worried as no one—government or private sector—is stepping into the breach to head off what could be a major security and business crisis.
Tensions were also on the rise between China and India and the other emerging states. The success of the Asian giants made it harder for the smaller guys to catch up. The huge pull from China and India on jobs was not just felt in the West. Now we see higher pay for China's workers finally leading to jobs being exported again to lower-wage economies. In part, this can be attributed to demographics—China is a country that is suddenly looking older, its one-child policy coming back to haunt it.
Early on, the outcry in the West over outsourcing and migration could have stalled globalization, but what can we really do—hold back the "tides" of progress in some rerun of Luddite madness? I detected below the surface a strong temptation in Washington and European capitals to play off the emerging countries against China and India by giving preference to non-Chinese products.
On the positive side, it was high-tech breakthroughs that put some countries on the road to sustainable economic growth. Expanded food production from biotechnology innovations and clean water from better filtration systems were boons that helped eliminate the direst poverty and start an export-driven agricultural sector. China and the US finally ganged up on Europe about GMOs.
Higher commodity prices also have been a godsend—much more so than any debt forgiveness scheme. A couple of the Asian-backed energy consortiums practically run two or three of the smaller states. They're popular because they provide not only their workers but all the surrounding communities with full heath-care. Malaria and TB—not to mention AIDS—are being tackled. I'm reminded that businesses—if one thinks back to the East India Company's total rule over the subcontinent in the eighteenth century—were at the forefront when globalization first got going. Have we come full circle with business taking over again from government?
We've seen some progress in the Middle East with a couple countries actually undertaking market liberalization reforms, but others are still stuck in a rut. Palestine yearns for a George Soros figure who can inject a lot of capital and develop an export outlet, but I don't see anyone willing to make the investment.
Elsewhere, revenues generated by high oil prices have enabled the Saudis and others to stem what has been a plunging standard of living for most of them. That's not good in the long run. I fear there's more to this story that we may not like.
Davos has done a lot, I think, in opening up the old exclusive Western club. I admit at first I did not really see it coming—the fact that China and India with their burgeoning middle classes had begun to create such large markets. In the last few years, the whole balance—as I now realize—has been shifting. Asian consumers are setting the trends, and Western businesses have to respond if they want to grow. Fifteen years ago, few of us knew anything about Asian firms. Now we have Wumart. China also got Washington's attention when it started diversifying its foreign currency holdings and the US public awakened to the fact that it had been living way beyond its means.
By itself, Europe probably would have felt threatened by Asia's rapid rise, but—funny thing—a rising Asia was seen as a counterbalance to a dominant US. Asia's growth also helped Europe get out of its slump. The EU thinks it and China have a lot in common—reverence for regional institutions. China with its Shanghai Cooperation Organization, for example. I'm not so sure.
By the way, I heard that your granddaughter is also spending a semester in China, learning the language. Did you know that one of my grandsons is also there? Perhaps we can get the two of them together at the Davos-in-China meeting.
This scenario illustrates the vast changes that would be likely to result from continued robust economic growth and the stresses and strains that could derail it.
 Dreaming with the BRICS, Goldman Sachs study, October 2003.
 The OECD, Organization for Economic Cooperation and Development, an outgrowth of the Marshall Plan-era Organization for European Economic Cooperation, boasts 30 members from among developed and emerging-market nations and active relationships with 70 others around the world.