  Let me start off with a quote
from one of my former bosses
He said, 'Look, fortunes
are going to be made but the
trick is figuring out where
the risk is going to come from.'
  On the one hand, we're sitting here
today without much visibility
on what those risks are but we
need to be able to
figure out what those risks
are because they will determine
how successful we are in the future
  The reality is, we
don't focus on those risks
but the truth is, in years
to come, we'll hit ourselves in
the forehead and say, 'How could
we not have seen that?'
  All you will remember
is that we didn't see it.
  So I'm here today to talk
about those types of risks. Risks
in economics, risks in politics
in particular. We can have a conversation
afterwards on what's the risk
in the social sphere might be.
  I've been cautioned that my
speech has to be positive
  So I will let you know
that at the very end I have
a few constructive, positive things
to say.
  Economics.
  It is absolutely clear to
me that the defining
challenge that we face today
is how we're going to create economic
growth.
  How are we going to restore growth
in the developed world without
having to rely on QE
  in the United States, across
Europe and Japan,
  but also how are we going
to ensure economic growth
continues across the emerging
markets where 90%
of the world's population lives
today?'
  Moreover, where over 70%
of the population is under the
age of 25.
  Last year in October 2014
 , the IMF
  stated that as far as
they were concerned, in their world
economic outlook, that the world
would never, ever see
the growth rates that we saw before
2007.
  McKinsey this year put
out a fascinating report
projecting 50 years out
and arguing that growth rates
globally are going to plummet
to around 2%. That's nearly
50% lower than what we've
seen over 50 years.
  Take a look across the emerging markets
  Countries that have at
least 50 million people
are growing at incredibly
low rates. Places like South
Africa have 1.4%
growth forecasted, and Brazil
just last week, with the World
IMF Conference, in their
estimates, Brazil will be contracting
this year.
  Why does this matter? It
matters because in order
for us to meaningfully put
a dent in poverty, and
to be able to increase per
capita incomes, we need to be growing
by at least 7%
a year.
  Whether it's Argentina,
  Russia, Brazil, India
etc. Nigeria. Have
a look at the top 15
countries that at least
50 million people each in
the emerging world and this will
make you worry.
  It's not just economics
where we have this bubbling risk
that we tend to ignore.
  Also in politics
There's clearly a rise
in political disorder. The
Economist Intelligence Unit last
year put out a report stating
that 65 of the world's
150 countries
that they looked at would see
significant increases in
political and social risk
  Meanwhile, Horizon 2025
has put out a report saying
that 80% of the world's
population will be living in fragile
states by 2025
 ' General Martin Dempsey
who is the Joint Chief
of Staffs in the United States
today has argued that this is the
most dangerous period
that he's ever seen in his
life.
  Partly driven by ideological
views from religion, but also
from the scarcity of natural
resources and concerns
around depleting water around
the world.
  I might add at this point
that we live in a very
unique period of time and I
know Andy showed you the graph
of population growth. It's
really worth stressing the
point that in the 1960s
the world population was
at 3 billion.
  Today it's over 7 billion
We will not see the world's
population plateaux out
until 2100
according to demographers, at
which point we'll be 10 billion
people on the planet. It's
really important for us
to understand that we happen
to be living in a very unique
period of time where the confluence
of factors such as
demographics, natural
resource depletion, concerns
around income inequality, and
the disruption of technology
are now setting in.
  All of these factors
are creating a situation
where economic growth could
stall and is stalling and
could actually become a big
problem for the way we live.
  How are governments and public
policy members addressing
these issues?
  If I haven't depressed you enough
I'm about to depress you even more
  On the one hand, we have
issues around trade. Pascal
Lamy, who was the Head of
the WTO in 2013
raised the alarm that trade
around the world has actually
come down, and that at that point
if you look back 10 years, we
have actually not seen an increase
in trade around the world
  Part of the reason we're seeing a
decline in trade is protectionism
Not just in developed countries
but also developing countries
Not just naked, what
I call naked protectionism
where they're adopting tariffs
and quotas, but more insidious
types of protectionism
in all forms of factors
of production, whether it's capital
or labour.
  This is actually causing
a concern around global trade
which economists for a
long time have argued is a
key pillar of our ability
to create economic growth and reduce
poverty. Cross border
flows have declined
If you look at a report
by the Institute of Finance
but also McKinsey about
six months ago, they've argued
that cross border flows, particularly
with the risk of the United States
raising its interest rates
have caused a suction
of capital from the emerging
world back into the developed world
The consequences of this
are that we see significantly
lower investment in public
goods such as education, healthcare
and infrastructure, but also
we see the cost of capital
rise across the emerging
world.
  Another key factor, another
trend, is that we're seeing the rise
of state, and
by that I mean the rise
of the role of government. Not
just in emerging countries
where governments do have
the responsibility to provide
public goods, perhaps beyond
what we see in developed markets
but that they also are the arbiter
of capital and labour. But
we're also seeing a
rise of state in
developed countries where governments
are providing significantly
more welfare payments.
  About a year and a half ago
Angela Merkel, chancellor
of Germany, stood up and
said, 'We should be worried about
7, 25
50.' Her audience looked perplexed
because people didn't know what she was talking about
She said, 'Europe is 7%
of the world's population. It's
25% of
world GDP and represents
50% of welfare
payments.
  If you add the United States
to that number, you have about 13%
of the world's population, 50%
of world GDP and nearly
90%
  of world welfare payments.'
Clearly this is unsustainable
  If you look at the top 10
  biggest employers, largest
employers around the world today
  any guesses for who the largest
employer is?
  First and second are government
The United States Military
with approximately 3.2
million, number 2 is the Chinese
259
00:08:41,510 --> 00:08:41,090
army.
  Only the number 3 on
that list is the first
time we see a private company. In
this case, Walmart, with 2.1
million people.
  I won't go through the full list but
perhaps unsurprisingly Indian
Railways is on there. British
NHS.
  Basically 7 out of the 10
are governments. So there is
significant pressure for governments
to expand and provide
opportunities, and I think
the question earlier on about
people, what will happen with all
this technology? I think we will
see a greater expansion of
government.
  Now as I said, I'm
not really here to depress
you but these are the facts
The question then becomes, 'Well
what are we going to do about it? 'What
should we do about it?' I'm reminded
that October 2013
  a ship capsized in Lampedusa
which is a small island off Italy.
  Around 360
Africans drowned including
a woman who was found
having drowned with her 7-month-old
baby which she had given birth
to during when she was drowning
who was still attached to her umbilical
cord.
  The reason I tell this story
is because
  Pope Francis quickly
came out and said
'This is a new level, a new
low of globalisation
of indifference.' It was largely
because there was really almost
  no media coverage
of what had happened.
  As I look out into the
future and think about economic
growth, issues around political
strictures and how it is we're
able to create the economic
growth that we so desperately need
I think it's really important
to encourage us
as a minimum to not become
globally indifferent
  How does that happen? It means
that we have to call to task
our political systems to
actually perform, and a part
of that is really looking
at these systems, political
and economic systems, and
challenging them to be the
best that they can be.
  As part of doing that
it may mean that we have to
shed some of our ideological
beliefs that these systems are
inherently good.
  It's not to say that we
think that people should not
have free rights or human rights
but it's to really credibly
with a
  cold towel over our heads
really look at our systems
and see where the opportunity
for improvement may lie.
  Unfortunately, I'm running out
of time, so I can't go into
great detail on what those
solutions may be, but of
course you can buy my next book
which will have that information
Thank you so much.
