Dr Krzysztof Rybinski Partner Emeritus, Ernst & Young Warsaw, 10 June 2038

1. Gordian Knots – Alexandrian SolutionsRegions - CorporationsThe Future of Regionsin a Perspective of Global ChangeSeminar organized by Ministry of Regional Development Dr Krzysztof Rybinski Partner Emeritus, Ernst & Young Warsaw, 10 June 2038

2. Political cannibalism • Easter Islands story • We define political cannibalism as a situation, when countries fail to reach broad consensus on how to deal with important global problems and they implement local tactics to maximize country welfare in the short run • 2008 examples: biofuels and agflation, responses to agflation, global imbalances and credit crunch • Polish example of political cannibalism: Poland’s CAP support, energy sector restructuring (blackouts)

3. Last 30 years drama amid political cannibalism • Countries failed to reach agreement of rising food prices (recall failure of FAO conference in Rome in June 2008), US, EU, Brasil continued to expand biofuels, • EM demand for food and energy rose sharply • Climate disasters • All of that pushed food and energy prices, food prices trippled by 2011, oil rose to 300$ • Millions died in poor countries from famine, millions were relocated, „drive and kill the poor” attitude prevailed • In 2014 world slumped into 4-year long recession, this period is called today the Dark Teens, also because energy shortages caused massive black-outs around the globe

4. We did know it was coming, did we not … • Take a look at some forecasts made 30 years ago, in 2008

5. In a book published exactly 30 years ago authors warned that:

6. Scarce energy and climate • Production of traditional sources of energy will peak before 2020 • With oil prices rising there is an increased tendency to use coal, which clashed with Kyoto goals to reduce CO2 emissions • Clean technologies (CCS) are not ready, it will take time • EU should be prepared to face serious energy crisis, „energy wars” should not be excluded • Vision, strategy, full commitment of all stakeholders and innovation in a must (recall IEA report published on 6 June 2008) • Without changing world governance progress on the climate front will be too slow to matter

7. Scarce energy and climate GDP produced per unit of energy, world average and regions • Current pace of increasing energy efficiency is not enough • According to IEA US will become more efficient but the growth effect will make its CO2 emissions stable • China, Asia and later Africa will increase emissions • Europe should make its energy efficiency technology available to emerging markets (who will pay?)

8. Climate • Debate about CO2 mechanisms in Europe (world) should be redirected from CO2 production to CO2 consumption, or more broadly to human ecological footprint deficit • CO2 mechanism should not be used as a „tax” on less developed countries, it should be fair and designed to reach Kyoto objectives

9. Climate – disasters as daily life • Countries and regions should be prepared to deal with climate disasters (sudden shocks as well as slowly moving deterministic trends) • Today floods and tornadoes in Europe are daily life, water is rationed in many places

10. Population : 1950, 2005 and 2050 Source: UN demographic forecasts

11. Aging and migration

12. Aging and migration • Aging will have dramatic (but slow-moving) implications on productivity, savings, public finances. It will also shift voting power from young to old generation, which will stop reforms • „Smart migration” may be a good policy-choice to deal with aging and falling share of active labor

13. People waiting to cross the street Anytown, Europe 2038 Source: Cover of the World Bank report on migrations

14. Chindia: China and …. Lethal competitor or …. Paper dragon

15. Chindia: China and India. Will challenge western world firms … or will remain in its historical puppet role

16. Already 30 yeards ago Chindia we biggest contributors to world growth Source: WEO, IMF, Oct 2007

17. History Source: EC „Globalisation: Trends, Issues and Macro Implications for the EU”, Economic Papers, July 2006

18. But western politicians kept saying …

19. Chindia will make mistakes and will fail …

20. Very fast changes !!! Source: EC „Globalisation: Trends, Issues and Macro Implications for the EU”, Economic Papers, July 2006

21. Asia financial power FX reserves and SWFs, Q4 2007 IPOs

22. Politicians also failed to note China IC development Patent filings by office in 2005 in thousands * Data for EU-15 are the sum of patent filings from national patent offices and the European Patent Office. According to WIPO, EPO patent filings in 2005 amounted to 60.8 thousands. The total number of patent filings for EU-15 may be overstated as the EPO grants patents on behalf of the member states of the European Patent Convention (EPC), the membership of which is larger than that of the European Union because some EPC member states are not members of the European Union. Furthermore many European patent applicants seek patent protection in multiple EPC member States, therefore, non-resident patent filings by Europeans in other EPC member State offices and at the EPO have become common. For the same reasons the total number of patent filings for CEE-4 may be underrated. Data for Italy are not available. Latin America-6 includes: Brazil, Chile, Colombia, Cuba, Ecuador and Peru. Source: World Intellectual Property Organization.

23. China was „banned” from participation in global governance IMF vote share, selected countries • USA – 16.77% • Germany - 5.88%, France - 4.86%, Italy– 3.19% • Netherlands – 2.34%, Belgium – 2.09% • China – 3.66% • India – 1.89%

24. Recall some facts … • In 2007 54% of places on top100 Shanghai list of best universities were occupied by US schools, they took 8 top places • In 2038 more than 50% of top100 places are occupied by Asian universities, which offer highest wages and best research environment • In 2010 PBoC funded an annual Thought Leadership Prize worth 100m renminbi (more 20m $ at 2010 exchange rate), also called „21st century Nobel Prize”, for disruptive innovation • Since 2024 this prize has been awarded each year to research teams based in Asia

25. World in 2038 • In 1999 there were 7 Americans on Forbes 10 richest men list • Already in 2007 there were 4 from India, one from Mexico and Russia, and only 2 Americans and 2 Europeans • In 2038 first 20 places on baidu.cn list (which took over Forbes in mid 2020s) are occupied by businessmen from China, India, Russia, Brasil, Mexico and Arab countries • Fortune 500 list begins today with a very well known names such as Hunlan, Dongfeng, Huawei, Geely, Lenovo, Mahindra, Satyam, Tata, Wipro, Baidu • It seems hard to believe today that 30 years ago best known brands were Coca Cola, GE, Microsoft or Google

26. Europe in 2038 • EU has been renamed West-European Union after only six contries reamained • WEU growth in the last 10 years was only 0.3%, quality of life has deteriarated in many reigions • Euro is still official WEU currency, but its share in global reserves fell to 4% from 25% 30 years ago

27. Lazy, social, but innovative Europe was able to face the charging dragon, but it failed to take right steps 30 years ago

28. It failed to create EU vision 2050 „EU - world brain” • Strategic priorities: • EU as the most intelligent part of the world • EU as the headquarters of global corporations • EU as a place where creative minds from South and North meet to live, study, work and enjoy life

29. It failed to invite BRICs to strategic decision-making • IMF lost global mandate • Asian-African Monetary Fund was established, Asia-Africa became the new axis of power (populated by 7 out of 9 billion people on Earth) • TAFTA was created too late and had too little impact • The proposal to form Global Strategic Council in 2010 was rejected by rich countries

30. Europe 2038, a failed state • Energy shortages • Water problems • Climate disasters • Huge gettos of migrants, social unrest • Huge old population, very poorly taken care of amid funding shortages

31. Today we know the mistakes we made, some predicted it might happen already 30 years ago • Politicians did not listen, they were stuck in 20th century thinking, unable to think beyond 4-year election cycles • Alexandrian solutions were rejected • What a pity we cannot turn the clock back!