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High Noon for the Global Economy

Will the growing world population adversely affect the global economy?

March 9, 2001

Will the growing world population adversely affect the global economy?

There are two big, geyser-like forces at work in the world — and they have huge implications for people all over the world. The first force is the addition of at least two billion people over the next 20 years to the earth’s already sizable population of six billion. Virtually all the newcomers will be in the developing world, where three billion people live on less than $2 a day. The result will be unprecedented environmental and social stresses.

The second force is the worldwide unfolding of an entirely new economy, catalyzed by increasingly cheap information and communications technologies. This new economy opens up vast horizons for global development, including catch-up opportunities for poor countries.

But the new economy is also ruthless in the way it rewards and sanctions performance. It gives enormous advantages to players that are fast, connected, knowledgeable and reliable — while marginalizing the others.

The rate of change produced by these two forces is in stark contrast with the slow evolution of human institutions.

Whether they are nation-states, government departments, international institutions or large organizations of any type, they tend to remain steeped in the hierarchical model inherited from the industrial age. They thus evolve slowly and in a linear way.

In contrast, the two main forces of modern-day globalization are strongly exponential in character. The demographic force is propelled by the exponentiality of the demographic curve. It is essentially driven by scarcity: scarce space, soil, water, clean air. Meanwhile, the new economy force is propelled not by scarcity, but plentifulness.

Think of Moore’s Law, which a young Gordon Moore — later a co-founder of Intel — used to describe with amazing precision the ability of engineers to double the power of computer chips every 18 months. Or think of Metcalfe’s Law, which states that the value of a machine increases by the power of its square with each new member of a network that it is connected with (such is the case with telephones).

As you can tell from the chart, the two exponential forces are the ones gaining momentum. Their curves move away from the linearly evolving change curve of human institutions. Time fractures into different fields: the “fast time” of change in the field of the two dynamic forces — and the slow, “bureaucratic time” in the case of the institutions that are supposed to facilitate human and social development.

No wonder people sense that different clocks are ticking. A dangerous “governance gap” develops where the curves go apart. In other words, while technology and population speed ahead, governments and other institutions have a hard time adapting.

It is right within the confines of this governance gap that much trouble breeds. First, there was the financial crisis of 1997-98. Then, there was the increasing malaise about politicians — and their ability to do much about anything.

Finally, there have been those protests from rich and poor nations alike about the seeming inability of established institutions to meet their needs and to respond to the momentous changes afoot.

But it is when it comes to the lingering non-resolution of burning global issues that this governance gap becomes most glaring — and most threatening. And this is the place where governments and global institutions must come together and focus their efforts in a united fashion to come up with new approaches to global problem-solving. However difficult this road will prove to be, this is the world’s only hope of closing the dangerous governance gap.

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