Global Trends 2025

National Intelligence Council, November 2008

Edited by Andy Ross

Relative Certainties

— A global multipolar system is emerging. The relative power of nonstate actors will increase.
— The shift in relative wealth and economic power from West to East will continue.
— The United States will remain the single most powerful country but will be less dominant.
— Continued growth will put pressure on energy, food, and water resources.
— The number of countries with youthful populations in the "arc of instability" will decrease.
— The populations of several youth-bulge states are projected to remain on rapid growth trajectories.
— The potential for conflict will increase owing to rapid changes in parts of the greater Mideast.
— Terrorism is unlikely to disappear by 2025, but its appeal could lessen.

Key Uncertainties

— Whether an energy transition away from oil and gas is completed during the 2025 time frame
— How quickly climate change occurs and the locations where its impact is most pronounced
— Whether mercantilism stages a comeback and global markets recede
— Whether advances toward democracy occur in China and Russia
— Whether regional fears about a nuclear-armed Iran trigger an arms race and greater militarization
— Whether the greater Mideast becomes more stable and whether the Arab-Israeli conflict is resolved peacefully
— Whether Europe and Japan overcome economic and social challenges caused or compounded by demography
— Whether global powers work with multilateral institutions to adapt to the transformed geopolitical landscape

Executive Summary

The international system — as constructed following the Second World War — will be almost unrecognizable by 2025 owing to the rise of emerging powers, a globalizing economy, an historic transfer of relative wealth and economic power from West to East, and the growing influence of nonstate actors.

Historically, emerging multipolar systems have been more unstable than bipolar or unipolar ones. Despite the recent financial volatility — which could end up accelerating many ongoing trends — we do not believe that we are headed toward a complete breakdown of the international system, as occurred in 1914-1918 when an earlier phase of globalization came to a halt.

The transfer of global wealth and economic power now under way — roughly from West to East — is without precedent in modern history. This shift derives from two sources. First, increases in oil and commodity prices have generated windfall profits for the Gulf states and Russia. Second, lower costs combined with government policies have shifted the locus of manufacturing and some service industries to Asia.

Growth projections for Brazil, Russia, India, and China (the BRICs) indicate they will collectively match the original G-7 share of global GDP by 2040-2050. China is poised to have more impact on the world over the next 20 years than any other country.

For the most part, China, India, and Russia are not following the Western liberal model for self-development but instead are using a different model, state capitalism. Other rising powers — South Korea, Taiwan, and Singapore — also used state capitalism to develop their economies.

Many other countries will fall further behind economically. Sub-Saharan Africa will remain the region most vulnerable to economic disruption, population stresses, civil conflict, and political instability. Latin America will continue to lag behind Asia and other fast-growing areas in terms of economic competitiveness.

Asia, Africa, and Latin America will account for virtually all population growth over the next 20 years. Europe and Japan will continue to far outdistance the emerging powers of China and India in per capita wealth, but they will struggle to maintain robust growth rates because the size of their working-age populations will decrease.

Resource issues will gain prominence on the international agenda. Unprecedented global economic growth will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so. Climate change is expected to exacerbate resource scarcities.

New technologies could provide solutions, such as viable alternatives to fossil fuels or means to overcome food and water constraints. However, all current technologies are inadequate for replacing the traditional energy architecture on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025.

Terrorism, proliferation, and conflict will remain key concerns even as resource issues move up on the international agenda. Terrorism is unlikely to disappear by 2025, but its appeal could diminish if economic growth continues and youth unemployment is mitigated in the Middle East. In the absence of employment opportunities and legal means for political expression, conditions will be ripe for disaffection and growing radicalism.

We believe ideological conflicts akin to the Cold War are unlikely to take root in a world in which most states will be preoccupied with the pragmatic challenges of globalization and shifting global power alignments. The force of ideology is likely to be strongest in the Muslim world.

The risk of nuclear weapon use over the next 20 years, although remaining very low, is likely to be greater than it is today as a result of several converging trends. The spread of nuclear technologies and expertise is generating concerns about the potential emergence of new nuclear weapon states and the acquisition of nuclear materials by terrorist groups.

A future use of nuclear weapons probably would bring about significant geopolitical changes as some states would seek to establish or reinforce security alliances with existing nuclear powers and others would push for global nuclear disarmament.

The rising BRIC powers are unlikely to challenge the international system as did Germany and Japan in the 19th and 20th centuries, but because of their growing geopolitical and economic clout, they will have a high degree of freedom to customize their political and economic policies rather than fully adopting Western norms.

By 2025 the US will find itself as one of a number of important actors on the world stage, albeit still the most powerful one. Even in the military realm, where the US will continue to possess considerable advantages in 2025, advances by others in science and technology, expanded adoption of irregular warfare tactics by both state and nonstate actors, proliferation of long-range precision weapons, and growing use of cyber warfare attacks increasingly will constrict US freedom of action.

Current trends suggest that a dispersion of power and authority will create a global governance deficit. Reversing those trend lines would require strong leadership in the international community by a number of powers, including the emerging ones.

Long-Range Projections

The postwar period saw the establishment of a new international system. The development of a globalized economy has opened a new era.

Back to the Future

China and India are restoring the positions they held two centuries ago when China produced approximately 30% and India 15% of the world's wealth. China and India are set to be the largest contributors to worldwide economic growth.

According to projections, the eight largest economies in 2025 will be, in descending order: the US, China, India, Japan, Germany, the UK, and France, and Russia. China has emerged as a new financial heavyweight, claiming $2 trillion in foreign exchange reserves in 2008.

Over the next several decades, the number of people to be in the global middle class is projected to swell from 440 million to 1.2 billion or from 7.6% of the world's population to 16.1%. Most of the new entrants will come from China and India.

Globalization at Risk with the 2008 Financial Crisis?

Proactive fiscal and monetary policies probably will likely prevent an extended depression. Reduced economic growth could slow the pace of globalization. Developing countries have been severely buffeted. Western governments now own large swaths of their financial sectors.

World leaders will be challenged to renovate the IMF and devise a globally transparent and effective set of rules that apply to differing capitalisms and levels of financial institutional development.

Science and Technology Leadership

The relationship between achievements in science and technology and economic growth has been long established, but the path is not always predictable. More significant is the overall effectiveness of a nation's National Innovation System (NIS) — the process by which intellectual concepts are moved toward commercialization for the benefit of a national economy. According to a NIC-contracted global survey of scientific experts, the United States currently boasts a stronger innovation system than the developing economies of China and India.

China and India are expected in 10 years to achieve near parity with the US in scientific and human capital (India) and government receptivity to business innovation (China). Companies in China, India, and other major developing countries have unique opportunities to be the first to develop a host of emerging technologies.

Women

The explosion in global economic productivity in recent years has been driven as much by fostering human resources — particularly through improvements in health, education, and employment opportunities for women and girls — as by technological advances.

Higher Education

Education has become a key determinant of countries' economic performance and potential. The quality and accessibility of secondary and higher education will be important for determining whether societies successfully climb the value-added production ladder.

Demographics

World population is projected to grow to around 8 billion people by 2025. India is projected to reach over 1.4 billion people. China is projected to reach over 1.4 billion.

Western Europe could have 25 to 30 million Muslims by 2025. Ongoing tension over integration of Muslims is likely to make European policymakers increasingly sensitive to the Mideast.

Although the Western paradigm separating religious and secular authority may still be less compelling to Muslim publics, a greater emphasis on economics and greater participation of women in the work force may spur new forms of progressive Islam.

Conflict

Conflict will continue to evolve over the next 20 years as potential combatants adapt to advances in science and technology, improving weapon capabilities, and changes in the security environment.

Warfare in 2025 is likely to be characterized by the following strategic trends:
— The increasing importance of information
— The evolution of irregular warfare capabilities
— The prominence of the non-military aspects of warfare
— The expansion and escalation of conflicts beyond the traditional battlefield

Ideology

The force of ideology is likely to be strongest in the Muslim world. Religion-based networks may play a more powerful role than secular transnational groupings in exerting influence and shaping outcomes in the period out to 2025.

Finance

The dollar is vulnerable to a major financial crisis and its international role is likely to decline from that of the global reserve currency to a first among equals in a basket of currencies by 2025.

Security

The US ability to protect the global commons and ensure the free flow of energy could gain greater prominence as concerns over energy security grow. Many states will continue to view the US as the security partner of choice.