Do the Four Global Fources Provide a Reliable Road Map?

McKinsey&Company’s “The Four Global Forces Breaking All the Trends” posits the world economy’s operating system is undergoing fundamental change as a result of four fundamentally disruptive forces - the ascent of emerging markets, the acceleration of technological change, the dramatic rise of the world’s aging population, and the continued entanglement of global connections. In the authors’ views, the scope and scale of change resulting from the confluence of these forces is far greater than anything humans have experienced. “Compared with the Industrial Revolution, we estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact.” Conceptualizing this monumental change is nearly impossible. However, we can engage in a thought exercise to gauge how these disruptive forces will alter the world we know. To do this, we will ask questions related to whether the confluence of these disruptive forces will create a gap within the international order that will allow for fundamental changes to the most powerful and active global institutions. For example, will substitutes to the World Bank arise? Will an alternative to the World Trade Organization arise and achieve legitimacy?

The ascent of emerging markets is typically discussed in terms of economic growth within the BRICS (Brazil, Russia, India, China, and South Africa). As McKinsey&Company point out, economic growth, capital flows, and trade volumes have increased at higher percentages between economies than Western economies. China’s ambition to become global leader manifests in many ways including its establishment of the Asian Infrastructure Investment Bank (AIIB) which aims to diminish the World Bank’s dominance. Some 60 nations have joined the bank and it may be able to lend at a capacity rivaling the World Bank within the next 5 years. The bank is but one initiative undertaken by China. Other complementary initiatives include the BRICS Bank and “One Belt, One Road” which aims to build infrastructure to support trade routes between China and the West. These initiatives underscore the phenomenon identified by McKinsey&Company.

As the current trade skirmish between the United States and China reaches greater intensity, many are questioning the ability of the WTO’s framework and rules to resolve trade disputes. However, this crisis will at least temporarily increase the power of the WTO because it is the only common framework and adjudication system available to both China and the United States. In fact, the Chinese government recently instituted a “request for consultations” which triggers the WTO’s trade dispute settlement mechanism.

So, where are we going? The world is headed towards greater conflict as new institutions rise and vie for prominence. While it’s unclear what forms these conflicts may take and the degree to which they impact our everyday experiences, it’s clear that emerging markets - particularly China - are directing the path forward.