What will be the ‘New Normal’?

We are currently going through one of the most uncertain periods of history many of us have ever known so understandably, everyone is trying to make sense of where we’re going and as part of that, how we got here. Theories, predictions and blame games abound so it’s often hard to know what to believe. I spent a day a couple of weeks ago at a futurists round table organised by Stephen from the European Futures Observatory considering the answers to some of these questions in preparation for a book he’s going to write on the age of scarcity. People might find it useful to consider these suggestions and questions for the future at a time when it’s hard to know what to believe.

Economic long waves and cycles

One of the most reassuring points that I took away with me was the importance of looking at economic cycles and the long waves that these take to help determine the future and the next wave. One well known theory mentioned that is often used to explain and predict economic cycles is the seasonal Kondratieff Theory Long Wave Theory. This is basically a cyclical metaphor of four seasons: Spring - inflationary growth; Summer – recession or stagflation; Autumn - deflationary growth and a plateau and; Winter - depression. So there is some hope to be taken from the certainty that we know winter always turns to spring. However, the bad news is we are probably not yet in winter... and these cycles run over fairly long periods of time. The website for the theory outlines previous phases since 1784 in the United States and has a graph that illustrates the phases really clearly. The wave is a model of long cycles of debt build up and the denial or ignorance of this which we now know the current crisis was a result of. However, although the economy clearly functions in cycles, the current economic crisis presents a different economic and global framework for the future that requires new ways of working.

As part of what he is calling the ‘New Normal’, Stephen presented five different ways that the world might change in the future and raised some questions that you might like to respond to below.

1. The restoration of wealth

The recapitalisation of the private sector balance sheet may lead to the restriction of consumption in the global economy which may slow economic growth.

  • Are banking reserve ratios likely to be higher, restricting the pool of credit? Will this make it harder for VCOs to start new projects? (See this post about the importance of preserving cash in this climate - scroll down to a post by Natalie.)
  • Will there be a greater degree of transparency in the financial markets, which may lead to accounting and audit reform? This could have a considerable impact on VCOs who are already subject to increasing regulation and expectations of evidence.
  • Could we see a degree of social turbulence as a result of the destruction of middle class savings at a global level? The VCS has a key role to play in addressing social tensions and achieving social cohesion, especially if inequality becomes more pronounced.

2. The Icarus effect

Emerging economies have risen highest in recent years but are now suffering a ‘flight to quality’. If this leads to political instability in the recently industrialised poor nations (known as the RIPE nations), will the process of globalisation be weakened?

  • Are the emerging economies unlikely to remain the engines of growth in the world economy? Will VCOs in these countries face increased pressure as less wealth comes in? (This think piece explores some of the implications of the end of the ‘north-south divide’ on NGOs.)
  • Will global trade settle at a lower level for some years to come?

3. The danger of Neo-Nationalism.

The basic instinct of communities who feel threatened is to look after their own. And yet, if all communities did this and protected their home markets, there would be a considerable lessening in world trade. What actions will serve to restrain neo-nationalism?

  • Can we envisage a new institutional framework that assists the productive flows of capital internationally?
  • Is the flow of people a help or a hindrance to the integration of the global economy? Global population movements have a significant impact on the VCS  -for more on this, see the findings from our seminar on the future of migration.
  • How can common concepts of ‘security’ assist the process of international trade and commerce?

4. The return of Big Brother

The nationalisation of the banking sector across the globe has reversed the trend of the liberalisation of business. We have yet to see how far into business life government will act as it seeks to regulate the economy.

  • Can governments resist the opportunity to operate a commercial banking sector for political ends?
  • Will the global expansion of the budget deficit ‘crowd out’ private sector investment?
  • Will greater regulation ‘crowd out’ entrepreneurship and innovation? The stifling of innovation can a particular risk for the VCS – see this post for examples of how to create opportunities in the midst of recession from the Young Foundation.

5. The end of the Enlightenment

A more nationalistic era, combined with sluggish economic growth and a more interventionist government may put pressure on the liberal democratic foundations upon which a market economy is based.

  • Are people willing to trade individual freedoms for economic security?
  • Can an international framework be devised that delivers security for communities? What will be the role of international institutions and NGOs in this?
  • Can the rule of law progress from the national to the supra-national?

Hear more about the ‘New Normal’

 Stephen will be presenting on some of the possible futures we might see as part of the ‘New Normal’ future economy at our forthcoming Exchange for the Future on the 19th May. Book a place now

Or for more futures insights, read Stephen’s blog ‘The Futurist’ or sign up to his weekly futures newsletter that places a current topic into a wider futures perspective to explore the underlying trends. Email stephena@eufo.org to be added to the list.

Last updated at 15:08 Mon 18/May/09.
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