Global development's brave new world

The global development community must realize that “much of what we think about how the world works is increasingly wrong,” according to James Manyika, director of the McKinsey Global Institute and vice chair of the President’s Global Development Council. Manyika is the author of a new book, “No Ordinary Disruption: The Four Global Forces Breaking All the Trends.” On Wednesday he joined New York Times foreign affairs columnist Tom Friedman in San Francisco to discuss those trends in a conversation hosted by the World Affairs Council. Devex caught up with Manyika by email prior to the event, to dig deeper into what development professionals and organizations can do to harness trends, instead of combatting them. Here is an excerpt from our exchange: How would you say the trends you identify in “No Ordinary Disruption” have disrupted foreign aid? We are already seeing changes in aid and investment flows as a result of China and its demand for natural resources. The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012. Indeed, since 2005, China’s total infrastructure commitments in sub-Saharan Africa have exceeded the World Bank’s infrastructure commitments in the region. In the future, we may see foreign aid levels affected by coming shifts in the cost of capital. Thirty years of declining interest rates have created an expectation that capital will remain cheap, but a major shift is on the way. Investment is on the rise, as emerging economies continue to industrialize, urbanize and devote capital to much-needed infrastructure. All of this is likely to drive the cost of capital higher, while savings rates across the world will likely continue to disappoint. With no continued central banks’ intervention, by 2030 this could create a major supply and demand imbalance between the world’s desire to invest in ventures such as foreign aid, and its willingness to save. Also the shift east and the growing economic power of emerging economies has meant that countries like China can now contribute to global development, where for the first time, the U.S. and China are formally partnering in areas like global health security, humanitarian assistance, disaster response, agricultural development and food security, and rallying the world around the new Sustainable Development Goals. How can members of the global development community effectively "reset their intuition" as a result of these forces transforming our economy? It’s imperative for them to get a handle on the disruptive forces transforming our global economy in order to allocate funds and resources where they’ll be most needed in the coming decades, and this may very well be different than what has been required in the past. For example, a mass migration from countryside to city is underway throughout the world. These cities are turning the poor into more productive workers, and into global citizens and consumers. These cities in emerging markets are in dire need of infrastructure investment. Attention should also be paid to the aging of the world’s population. We predict that at some point over the next few decades, the population of most of the world will plateau for the first time in modern history. This will leave large swaths of the world with ballooning social programs, as well as aging and shrinking workforces. The global development community will need to account for this major demographic shift, and develop strategies to support and engage the world’s elderly population, as well as adequately train and prepare the shrinking workforce, especially in the developing world. The development community must also adjust to a greater number of actors beyond governments and traditional NGOs, including the private sector, philanthropists, and citizens acting directly. And the debt overhang facing many governments [means] the private sector will need to play a greater role and new innovative ways to finance development. There's also an enormous opportunity to leverage innovation and transformational technologies to get to scale fast and reach more people. How is the West Coast more broadly, or the Bay Area in particular, uniquely positioned to thrive in the face of these forces? Cities will be at the center of growth and innovation around the world. Compared with their rural counterparts, city leaders often have greater license to experiment with solutions to societal challenges, from school reform to the implementation of green tech. As a major urban hub, San Francisco has the added benefit of being in close proximity to one of the world’s most powerful tech hubs. This makes San Francisco a crucial microcosm for both private- and public-sector experimentation. One such example is how the San Francisco Municipal Transportation Agency partnered with tech companies and parking meter providers to develop SFPark, a parking solution that combines new meters with sensors, mobile apps, and dynamic pricing to reduce congestion and parking delays. This is just one example of the potential that a city like San Francisco holds. As the tech world continues to push toward solutions for the urban dilemmas of a new era, San Francisco and cities across the west coast will be crucial testing grounds for innovations that could soon improve the lives of urban residents throughout the developing world. What West Coast examples would you point to as potential leaders for the global development community given their agile, forward thinking, optimistic approach to the impacts of these trends? More than 60 percent of the world’s population remains offline. A number of Silicon Valley companies, including Google and Facebook, are moving quickly to provide access to those left behind. We think this is important. Our research shows the massive economic impact of the Internet in terms of making significant contributions to nations’ gross domestic product and fueling new, innovative industries. It has also generated societal change by connecting individuals and communities, providing access to information and education, and promoting greater transparency. Similarly, the Gates Foundation has been active in the area of financial inclusion, another area we think can be a critical accelerator for economic development. I would also point to technologies that tackle social, health and other global challenges at lower cost such as Theranos and social innovators like Kiva on microtransfers. To read additional content on innovation, go to Focus On: Innovation in partnership with Philips.