The Morality & Markets project is an examination of the causes of the public’s current lack of confidence in the ability of markets to deliver prosperity for all. In this blog, we provide an outlet for new thinking and briefings in areas that are important to our ongoing research.
Hamish McRae is an award-winning journalist and one of the UK’s best-known economics writers. He has held editorial positions with The Guardian and The Independent and continues to write regularly for the latter paper and the Evening Standard. McRae is perhaps best known for his 1994 bestseller The World in 2020: Power, Culture, and Prosperity, which set out his analysis of contemporary developments in and his predictions for the future of global politics and economics. Translated into more than a dozen languages, The World in 2020 stands out both for the clarity of its arguments and because many of McRae’s predictions have proven to be strikingly accurate.
The following conversation took place in June 2019 to mark a quarter-century since the first publication of The World in 2020 and to reflect on events as we approach the predictive horizon of that work. We discussed a diversity of topics, including the implications of technological change, the economic rise of China and India, the difficult business of making predictions decades in advance, and the apparent plateauing of living standards in the developed world.
Below is an edited transcript of the main parts of that discussion. We also include an audio version here as a downloadable podcast via the link below.
A Conversation with Hamish McRae
Dr Simon Kaye: It’s been 25 years since the publication of your book The World in 2020, so this is a good moment to look back at it. What motivates this kind of work? What is the interest in trying to look forward? Because it’s difficult to do: you’re necessarily setting up claims that are easily falsifiable.
Hamish McRae: I think we all think about the future and plan implicitly for it – in choosing a career, in choosing where we live, in choosing how we think forward about our personal lives, and then of course in our business lives. We think about how the world might develop. What I was – am – trying to do is give people a framework for them to structure their ideas more rationally. There are some things we really know with a high level of confidence about the future – population change, for example – and there are some things we cannot know at all. I think that since we all plan implicitly I want to try and help people plan better, understand better what’s changing, and then shape their own lives in a way that fits in to how the world might turn out.
SK: It’s an infamously difficult thing to do, particularly in the world of business and economics. One of the reasons we sometimes call economics the dismal science is because it doesn’t really have much predictive capacity. It’s just a bunch of people making predictions and some percentage of them will be right by default.
HMcR: I would say that economics is neither dismal nor a science!
SK: What would you say are the biggest economic differences between the world as it is now and the world of the early 1990s, when you were writing the book?
HMcR: In terms of the balance of the world economy there has been a huge shift to the emerging world. In the 90s something like two-thirds of the growth in the world was coming from the developed countries. Now two-thirds is coming from the emerging world and that changes everything. Over a generation the importance of the emerging world over the next generation will continue and be one of the dominant features. The second big thing I would identify is how technology is changing the way we work and live – destroying jobs, creating new jobs, creating new work patterns, enabling people to live in different countries from which they work. That was not the world prior to the internet. We all have huge access to information we did not have before. You and I, sitting here with a laptop, have access to a similar quality of research and information as an entire research department 30 years ago. It democratises access and I think that’s wonderful.
SK: It is wonderful! As an aside, though, I think it’s striking how few people actually take advantage of that opportunity.
HMcR: Well maybe they take advantage unknowingly in that they go on their Facebook feed and someone else has picked up something. There is a problem that there is so much information. How do you sort through it in an intelligent and thoughtful way? But these types of problems have always existed.
“If you had to choose a moment to be born knowing nothing about your circumstances – not knowing whether you’d be born black or white, rich or poor, man or woman – what would be the moment in history you would choose? And the answer is ‘now’.”
SK: So overall would you describe yourself as an optimist when it comes to the technological impact on the way we live our lives and the way the economy works?
HMcR: I don’t think I’m an optimist, I’m a rational observer of the improvement in the human condition. Human beings live longer now, they’re much better educated, and, as pointed out by Barack Obama over the past two or three years: if you had to choose a moment to be born knowing nothing about your circumstances – not knowing whether you’d be born black or white, rich or poor, man or woman – what would be the moment in history you would choose? And the answer is ‘now’. There is no moment of past history, for the mass of humanity, that has been a better time to be born. That doesn’t mean there aren’t huge challenges ahead, but I don’t think it’s optimistic to point this out, it’s just observing the world we live in.
SK: Which makes it even more fascinating that so many people have become more pessimistic about market economics and capitalism, have become more negative and fearful for their livelihoods and the future progress of the politics and economics of the UK – there’s an ‘elite’, for want of a better word, that’s quite optimistic, and then there’s the great mass of people who are quite pessimistic and are starting to behave differently and think differently as a result.
HMcR: One problem is that there is a negativity bias in news: if you say things are terrible you’re seen as a sage and if you say things are getting better you’re seen as a lightweight optimist. Another problem is the measurement of living standards. If we – in my case – look at my grandchildren in America on screen, on WhatsApp, that comes free. Think of the advantage of being able to keep families together across the globe because of these technologies, and you pay nothing for it. That’s a wonderful advantage to our lives.
SK: One of the striking things about the book is that you seem to be predicting some of the really big talking points of the current moment. There’s a passage here where you seem to identify the potential for Brexit, and you’re writing this before the introduction of the Euro! You also point out the risks of certain types of populism and divided politics emerging in the US. I’d love to hear you talk about how you got to those conclusions so long ago but also whether this shows that most current events, economic or otherwise, have their roots in these longer term progressions and trends. And if that’s the case is there a way to get better at predicting things by looking at those longer trends?
HMcR: I think we will get better. There’s two things, there are long term trends and there are turning-points. The longer-term trends are fairly easy to identify. The potential for a turning-point is fairly easy to identify but of course getting the timing and nature of that turning-point and how it will break down into practical changes in people’s lives is very difficult. In some ways it’s easier to see the big structural changes than the twists of politics which live on top of those big structural changes.
SK: So the underlying substructure may be more clear if you take the long view rather than focusing on the daily, short-term rigmarole.
HMcR: It’s much easier to see what will happen in 15 or 20 years rather than two or three.
SK: These things average out over longer time scales?
HMcR: Exactly. That’s not to say there aren’t sometimes turning-points. There are sometimes huge technical advances that really do change things – for example the invention of the motor car – but I think that you can actually look at basic economics and say this is what is likely to happen and the detail will often be wrong, but you can make some thoughtful predictions that will more or less turn out right if you look at long term trends then make a guess as to whether there might be a turning point or a reaction against it. An example of something I think I got wrong was Russia: I could see that Russia would have a difficult time through the 90s but I thought that by 2020 it would have sorted itself out and become a much more Western market-based economy nation. But it hasn’t, the chaos was so bad that it brought in someone who understood politics, pride and nationalism and didn’t really understand how you need to wean the Russian economy off its dependence on oil, gas and minerals and create a balanced economy. I was over-optimistic about Russia, that it would make a transition. I was probably overly pessimistic about China, you could see the Deng Xiaoping changes had already happened and we’d had about 10 years’ experience of those and it was on the way to becoming the world’s largest economy but I thought if it was going to be economically successful it couldn’t remain so politically unified. It has managed to maintain its political system more strongly than I’d expected. How long that goes on I don’t know.
SK: Is that unsustainable?
HMcR: I think it will change in some sort of radical way within the next 25 years. It’s the biggest thing happening in our lives. It’s much bigger than the normal day-to-day news agenda of the West, it’s huge. For the first time in 150 years the US will no longer be the world’s largest economy. That’s huge! It will still be one of the richest economies but it will not be largest. That’s a shift of power of the sort that only takes place every one or two centuries.
“It’s much easier to see what will happen in 15 or 20 years rather than two or three.”
SK: Towards the end of your book, you make a very interesting comment about the opportunities presented by the economic conditions as we edge towards 2020:
“Politicians have a duty to explain a choice to people: it will be hard to increase living standards over the next generation unless people are prepared to accept in the first instance a greater degree of self-discipline and on occasion a greater degree of external discipline too.”
This is fascinating because in the developed world we have seen a plateauing of the increase in living standards. You correctly pointed out the potential for that, but what do you mean by self-discipline and external discipline?
HMcR: Well, three things. Point one, I do think we’re under-measuring the increase in living standards. How do you measure a service that comes free? It doesn’t appear in GDP, and I think that is important. Quite a lot of work is going on trying to measure it better, but it’s not come through in general GDP statistics. Point two, I think that there are signs that within the West we are becoming more self-disciplined. For example, labour relations in the West are much better now in the sense there are far fewer strikes, workplaces are much calmer than in the 1980s. We just had the second-lowest level of disputes in Britain since records began. That suggests that though people may feel dissatisfied with their day-to-day lives, they’re certainly carrying on trying to work and work within the system, accept it, and do better for themselves and their families. That’s a form of self-discipline. You can measure other things, such as falling crime, falling teenage pregnancy – ways in which we are becoming calmer as a society. And the final point is some form of external coercion. We accept much greater surveying of our lives from street cameras, more tracking and the sharing of personal data such as in airports. This is being taken far further in China and the interesting question will be whether Chinese practice spreads to Europe and America and how far this will be resisted. But I do think those changes have generated more self-discipline and seen more acceptance of external discipline.
SK: So it’s not coercive in the traditional sense because the things you’re describing for the most part are happening with people’s permission and there are clearer assets and advantages entailed as trade-offs. You’re saying that there are real changes to people’s living standards that aren’t captured by traditional metrics. You’ve been writing recently on similar topics to this – the fact that people seem to be actively happy or at least not discontented in their work, that a lot of our statistics on how the economy performs suggest that it is performing just fine, for example in terms of the labour market. There’s a contradiction or a paradox here: faith in capitalism is declining, people seem to be more and more willing to support political parties or figures who cast doubt on classical economic approaches to sustaining growth. How can we reconcile these two things?
HMcR: I can’t give a good answer to that. I think part of the explanation may be excessive expectations. You see, I don’t know, the Kardashians, Love Island… you see people behaving in a way the average person can’t afford to behave. This gives the impression that we are disadvantaged because we see glitter, footballers earning millions, and we can’t do that ourselves. I think that’s one of the problems. Another of the problems is that there has been some increase in inequalities over the past 30 years. Income inequality has been pretty flat, wealth inequality has risen. And for people a fair way up the scale that’s fine – did you know the median family wealth is about £225,000? – I don’t think people think of it in those terms, but there has been an increase in inequality and that’s troubling. Inequalities narrowed massively through to the 1970s, so in wealth inequality now we’re still more equal than in the 1960s, but there has been some recent increase and that’s going to cause some tension.
I suppose I also wonder if there really is more challenging of capitalism now than there was in the 70s? There could even be less. Just look at the labour unrest in the 70s or the nationalisation in the 40s and 50s and the sense that capitalism couldn’t be trusted then. I’m not sure that deep down there’s more dissatisfaction now than there was for much of the post-war period.
“I do think we’re under-measuring the increase in living standards. How do you measure a service that comes free? It doesn’t appear in GDP, and I think that is important.”
SK: It has nevertheless become totally normalised recently for people to talk about there being a ‘crisis of capitalism’.
HMcR: I think there was one of the periodic crises of the financial system with the  crash and I think that was a mixture of irresponsible banking and irresponsible politicians and irresponsible monetary policy. This was one of these periodic financial crises which do occur from time to time. But everyone who says there’s a crisis of capitalism is perfectly happy to use a mobile phone and it’s capitalism – American capitalism – that gave them a mobile phone. This is an underrated gift the American system has given the world, which is the mobile phone and the apps, Google, all of it. Maybe it is even a demonstration of the success of capitalism that people take what is given for granted.
SK: There’s certainly an irony here: we’re equipping people with these ‘gifts of capitalism’, including affordable mobile phones and access to new sources of knowledge, and to some extent this is serving to wake people up to the fact they are disadvantaged compared to the top 1 per cent of earners. We’re equipping people more and more and thus democratising discontent with the system that equipped them.
HMcR: One other little twist on that: we’re always talking discontent in the West. There isn’t so much discontent in China, India or indeed Africa. In net terms, the world is much more content with capitalism and the market economy, it’s just in pockets of the fashionable pampered West that people feel discontented.
SK: What would you see as being the main upcoming or already-present obstacles for economic growth and flourishing in the coming decades? Things like environmental problems, shifts in the way the labour market works – are these the things we should be focusing on?
HMcR: There are two big headwinds. Headwind one is demography. Every developed country in the world and many developing ones are becoming older – that is wonderful, in that we don’t want people to die young – people living longer is a good thing on balance! But it does mean a change in the number of people of conventional working age relative to the number of dependants. In economic terms that’s a headwind even though in human terms it’s a blessing, and so that has to be coped with, we have to encourage people to work longer and find ways of helping people enjoy working longer, we have to give people the choices to save and help them make those choices in a thoughtful way. The second big headwind is undoubtedly the environment. We’ve used too much of the global resources in increasing living standards to be fully sustainable and we have to figure out ways of getting richer while putting a smaller footprint on the planet’s resources. And there’s more of us – we’re at 7.5 billion now and by 2050 we’ll be pushing ten billion. We’ve got to figure out how to make sure the footprint of those ten, living much better than we do now, is smaller than our present footprint. It’s a challenge but much can be done.
SK: So, as in The World in 2020, we’re happy to dismiss the Malthusian crisis argument that there is a top limit to the number of people the planet can sustain but at the same time those people when they expect higher and higher living standards have an enormous environmental impact on the world around them.
HMcR: And we have to figure out how to create decent lives for those people. There was a study by Brookings last year which pointed out that for the first time in human history, half the world’s population is middle class and richer. This is a middle-class world we’re moving to, so we have to find a way of creating middle class living standards that put a lighter footprint on the world’s resources.
SK: That does sound like a challenge, though of course great strides are being made in places like Europe. In the UK, we’re decarbonising our economy quite rapidly.
HMcR: And we are living in slightly different ways. We’re walking more, driving less, telecommuting means you’re only going into work once or twice a week rather than every day. We are adjusting to this.
“I think in 2050 Brexit will be a blip. That will be because the EU will become a looser organisation, much more like a confederation, and the idea of an ‘ever closer union’ will be finished.”
SK: On to the big question – the unfair question! You’re set to deliver the manuscript for “The World in 2050”, or whatever the title ends up being, next year. So where do things go from here? How can we predict what’s going to happen next? For example, in this country, uncertainty around things like Brexit may be too much of a problematic big question for us to make meaningful predictions.
HMcR: I think in 2050 Brexit will be a blip. That will be because the EU will become a looser organisation, much more like a confederation, and the idea of an ‘ever closer union’ will be finished…
SK: That sounds like something the UK would be happy to be a member of!
HMcR: Well I think we probably will de facto be a member of that in some sort of form. You can’t see any of the detail but I think something called the EU will still exist, but it will be more a ‘multi-speed’ EU which seems to work much better. Europe will be less important in the world anyway; it’ll have gone from representing 20 per cent of world GDP to around 12 per cent maybe 10 per cent. So Brexit is a middle-weight issue, not a huge one though of course it preoccupies us now. Though of course I did predict that Britain would probably have left the EU, along with Greece I thought, by 2020. That might yet be right! So I think that the big influences will be demography – the big questions are how does the developed world cope with its aging population; how does China cope with becoming a much older society; how does China cope with India becoming the world’s most populous country? Most of the growth in population will be coming from the Indian subcontinent and from Africa. And that leads to the final demographic issue – how does Africa cope? How does Nigeria cope when it has a larger population than the United States? I think that’s really interesting and in many ways a troubling challenge.
There’s also probably another big technological advance around the corner that we can’t see. We couldn’t see the importance of the iPhone when it was launched, only Steve Jobs could see that. I think that we can also see increasing and profound concern about the environment, that’s pretty clear. I think we will see an accommodation on global trade that will be more a move to manage trade than the free trade of the WTO, Bretton Woods, World Bank vision of the 1940s – i.e. there will be some limits on trade over the next 30 years, a lot of effort to try to make things locally. Trade will be moving ideas around, not moving goods around. That may be a drag on global growth or global welfare standards. There will be a lot of limits on the movement of people, that’s something that will happen more and more and more. That will be a sea change; a worrying one.
“The awareness of how unthinking, unimaginative, arrogant elites could destroy the livelihoods - lives - of millions of people: as that fades, the world becomes a more dangerous place.”
SK: One of the things many people predict for the coming decades is a migration crisis or a series of migration crises. Environmental shifts and economic changes will have push and pull effects on people.
HMcR: I think that’s a very serious concern and absolutely right. I think there will be a tightening of borders, and an effort to alleviate the causes of those crises. I think the difficult thing for people in the rich West to get their heads round is that they will increasingly be a minority. The US will go on increasing its population but Europe won’t. For a group of countries used to running the show it will be quite hard for them to accept they don’t run the show and the show is run much more by India, China and perhaps some large African countries such as Nigeria.
SK: Would you say the next book is likely to have a slightly more troubled, less optimistic tone?
HMcR: I think it has a more uncertain tone. We have lived through the last 30 years with the experience of the awful first half of the 20th century behind us. There are still people alive now who took part in one of those two great conflicts. That governs the way we think: how important it is not to allow irrational, absurd, dreadful hatreds to burst out into war in the way they did. That will fade, and is fading. The awareness of how unthinking, unimaginative, arrogant elites could destroy the livelihoods - lives - of millions of people: as that fades, the world becomes a more dangerous place. But if I were to rank the likely ability of India and China to manage the next 30 years – along with the United States – compared with the way Europeans managed the world’s affairs a hundred years ago, I think they’d probably do it better!