Planning For An Unpredictable Future

The world economy has changed beyond imagination in recent years and will continue to change in the future. Given the nature and scale of the change is it possible to predict what might happen and plan for the future?

Understanding the changes

Events around the world are more connected and interconnected than they used to be and so what happens in China and Russia today affects us tomorrow.

Many economies are still struggling to get back to what are considered normal levels of growth and stability, as their reserves and patience are exhausted to depletion.

Debt levels remain horribly high as governments grab different versions of austerity in an attempt to tighten spending and reduce borrowing.

Low levels of demand are of concern too as government policies to stimulate economic growth struggle to make any significant impact.

Consumers benefit from falling energy prices but producers suffer from less profit and respond by withdrawing investment in infrastructure and staff.

Other factors such as the rapid growth of cities and the effects of an aging population that, at face value, may seem less important are proving to be crucial.

Cities around the world are growing at a tremendous pace and drawing in millions of people, which is negatively affecting the sustainability of rural areas and populations.

People are also living longer and having fewer children, which is causing the active labour force to both age and shrink, which is creating deep structural issues for local communities and economies.

Technology is having an effect too as the digital economy tightens its grip and devices like the smartphone bind people and services in previously unimagined ways.

Developments in artificial intelligence and robotics, albeit still in the early stages of their evolutionary cycle, are starting to disrupt business and entire industry sectors.

Trading relationships between countries are becoming more complex as economies grow ever more reliant on each other for a robust recovery.

Planning for an unpredictable future

It may not be possible to predict how any or all of these factors will affect the future but it is possible to consider different growth patterns and therefore different likely scenarios:

  •  weak but unpredictable growth that restricts planning in any meaningful or strategic way
  •  weak but predictable growth that enables planning based on modest but interrupted growth
  •  strong but uneven growth that enables planning based on periods of high but volatile growth
  •  strong and predictable growth that enables planning on a long-term and strategic basis

Regardless of particular growth levels economies will have to embrace uncertainty, build reserves, and organise in a way that absorbs intermittent shocks and spikes in volatility.

So, we may not be able to predict the future but we can plan for different versions of what might happen and therefore better manage what does happen.