FIVE MEGATRENDS AND THEIR IMPLICATIONS FOR GLOBAL DEFENSE & SECURITY - PWC
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www.pwc.co.uk/megatrends
Five Megatrends
And Their Implications
for Global Defense
& Security
November 2016
Contents
What is a Megatrend? 1
Megatrend one - Shift in global economic power 2
Megatrend two - Demographic shifts 7
Megatrend three - Accelerating urbanization 11
Megatrend four - Rise of technology 15
Megatrend five - Climate change and resource scarcity 19
Feature: The “confluence” of global megatrends can intensify defense 23
and security challenges
Contacts 26
Endnotes 27
Foreword
Global megatrends are macroeconomic The depth and complexity of the resultant,
and geostrategic forces that are shaping and inevitable, security challenges posed
our world, and our collective futures in by the megatrends will demand “whole of
profound ways. The implications of these society” solutions. These solutions must
forces are broad and varied, and they leverage the technological, collaborative,
will present us with both tremendous and commercial benefits that the
opportunities to seize—as well as megatrends themselves will enable.
extremely dangerous risks to mitigate.
We must not fear the megatrends, or their
In this paper, PwC examines five key resultant defense and security challenges.
megatrends: Shift in Global Economic Rather, we should anticipate these changes,
Power, Demographic Change, Rapid take them seriously, and apply creativity Thomas Modly
Urbanization, Rise of Technology, and and resources to stay ahead of the critical PwC Global Leader, Government
and Public Services Sectors
Climate Change/Resource Scarcity. issues they will present.
We examine these megatrends with a
specific focus on the various disruptive We hope this paper will start a constructive
effects we anticipate these five megatrends dialogue in this regard--and a sense
will have on defense and security. of urgency.
Through this examination it is apparent
that these megatrends pose substantial
challenges that cannot, and should not,
be addressed in isolation.
4 Five Megatrends And Their Implications for Global Defense & Security
What is a Megatrend?
Megatrends are macroeconomic and Challenges for Defense
geostrategic forces that are shaping the and Security
world. They are factual and often backed The global implications of the megatrends
by verifiable data. By definition, they are are not limited to commercial enterprises
big and include some of society’s biggest and commercial interactions. Rather,
challenges— and opportunities. they will have profound and disruptive
effects on the defense and security
The concept of megatrends is not new. environments in which these enterprises,
Companies, governments, and non- their customers, and nations must
governmental organizations may call operate. This will require more agile
megatrends by different names, but the and accountable approaches from
most effective ones have organized their government institutions and greater
strategy in some way, shape, or form collaboration across the whole of society
around them. to mitigate risk. For some countries,
being able to anticipate and adapt to
Our Process the megatrends will be a matter of
Over the last few years, we have observed national survival.
that many of our public and private sector
clients have been studying global In the pages that follow we provide:
megatrends, and they’ve been adjusting
and refining their strategies in light of • A summary of the five megatrends
them. Those clients are driven not only as we have described them and the
by short-term performance but also a potential implications to management
desire to ensure their organization teams, directors, and other stakeholders
remains relevant for the long term.
Said differently, if an organization is • A specific examination of the challenges
not anticipating and addressing the that the five megatrends present with
opportunities and risks driven by the respect to defense and security
megatrends, they may become irrelevant
to a large part of society.
Five Megatrends And Their Implications for Global Defense & Security 1
Megatrend one
Shift in global economic power
2 Five Megatrends And Their Implications for Global Defense & Security
The focus of global growth has shifted. A realignment of global economic and Along with the growth and size of the
Western economic dominance is a business activity is transitioning BRIC emerging markets, it’s important to
relatively recent historical phenomenon and other growth countries from centers appreciate the interconnectivity of the
that is waning, and the developments of labor and production to consumption- trade and investment flows between
we see are essentially a rebalancing of oriented economies. As they become them, which are growing much faster
the global economies. exporters of capital, talent, and than the traditional routes from
innovation, the direction of capital developed-to-emerging and developed-
flows is being adjusted. to-developed countries. China is also
expanding its economic presence in the
West to include resource investments in
Africa and North Sea.
Figure 1: World GDP: 2016 forecast, % increase on a year earlier
2.3 2.6
E. Europe
N. America (including
Russia)
2.3
W. Europe
2.3
Middle East
/ N. Africa 2.6
Japan
2.7 5.4
World Total Asia
(excluding
Japan)
0-2%
2-4% 0.6 3.5
Latin
Sub-
>4% America
Saharan 2.6
Australia
Source: Economist Intelligence Unit
Five Megatrends And Their Implications for Global Defense & Security 3Industry examples Possible implications
There’s a major shift in India in
1 Decoupling from export-led growth the rise of the middle class and • The increasingly multi-polar world
in Asia-Pacific geographic dispersion, and we created by the shift from largely
have to meet the needs of our Western-led global organizations
The economies of China, Malaysia, to regional players may reshape the
clients there. That’s a global
the Philippines, Peru, and Chile grew competitive environment for companies.
more than 5% in 2012, while also
trend, and our clients,
experiencing steep declines in exports particularly in the consumer • Competing versions of capitalism
relative to their GDPs, according to goods sector, have to focus on could arise as well as an array of
PwC’s 2013 Asia Pacific (APEC) CEO where the consumers are and planned economies. Planned
Survey. This trend could continue in how do you reach them. economies could create/support new
2016 as global GDP growth will likely global champions in strategically
exceed the rate of growth of global Michael I. Roth important business sectors.
trade— a reversal that has happened Chairman and Chief Executive
just twice during the past 20 years Officer, Interpublic Group • Mature markets may lose influence
according to PwC’s 2016 edition of this and capital and become less
survey. GDP growth in Asia-Pacific attractive for talent and business.
(excluding Japan) will be twice the Governments increasingly may
global average in 2016 despite the compete using tax and regulation
slowing growth rate of global trade. as well as investment support.
2 Steering to emerging markets • Competition generated from new
geographies and sources may create
Asia will represent 66% of the global different competitor profiles than
middle-class population and 59% of those historically faced.
middle-class consumption by 2030,
up from 28% and 23%, respectively,
in 20091. This could be a boon for
automakers: In India, there are about Figure 2: GDP of G7 and E7 countries (US$)
18 cars per 1,000 people, and in China,
there are about 60 cars per 1,000
2015
people2. That compares to 765 in $34.1 $18.8
the US3. G7 trillion E7 trillion
in GDP in GDP
$69.3 $138.2
2050
G7 E7
trillion in GDP trillion in GDP
US, Japan, Germany, UK, China, India, Brazil, Russia,
France, Italy, Canada Indonesia, Mexico, Turkey
Source: PwC analysis
4 Five Megatrends And Their Implications for Global Defense & SecurityChallenges for The focus of global growth has shifted to
the East and to the South, but international
Extensive and complex supply chains
seeking to maximize national economic
defense and
trade will continue to grow unabated. advantages that emerge during this shift
This will create more powerful national will become increasingly vulnerable to
economies in different regions with disruption from cyber criminals engaged
security greater resources to protect, and greater
resources available to invest in defense
in industrial espionage, theft, or terror-
based disruptive activities.
and security.
The shift could also decrease the
dependence of some nations on the
traditional power projectors such as the
United States for protection and increase
burden-sharing to ensure economic
trade routes and free navigation are
protected from hostile actors.
Figure 3: Western economic dominance is a recent historical development…that is now shifting to the East
3000 BC 2000 BC 1000 BC 1 AD 1000 AD 2000 AD
31 BC to
475 AD
Rome
1600 to 900 BC
Present to 31
BC 476 AD
W. Europe / Greece to 1600
America China
3000 BC
to 900 BC
Egypt
Source: PwC analysis
Five Megatrends And Their Implications for Global Defense & Security 5Critical issues 3
Increasing disruptive relevance
of North Korea Here, we see the future. As the
1 Strategic relevance of Pacific Dire economic conditions and world’s fastest-growing region
trade routes unpredictable leadership employing -- and home to more than half
Economic and population growth in bellicose language and actions will the global economy -- the Asia
the East will fuel expanded trade and contribute to regional instability. Pacific is critical to achieving
increase the significance of ocean North Korea’s nuclear and emerging
my highest priority, and that's
trade routes in the Pacific. Protecting ICBM capability poses substantial
creating jobs and opportunity
these routes will require greater threats to its neighbors and to other
resources and collaboration between nations thousands of miles away for the American people.
and among regional and global including the United States. With most of the world’s
maritime forces. nuclear power and some half
4
Declining capacity of western of humanity, Asia will largely
2 Transition of China from regional nations to exert power in Asia define whether the century
to global power projector Pacific region ahead will be marked by conflict
China’s greater assertiveness beyond Resource constraints and extension or cooperation, needless
its territorial waters and its of forces by western nations in the suffering or human progress.
investments in a more comprehensive Middle East and Africa will pose
force projection capabilities will challenges to their ability to exert Barack Obama
challenge the traditional balance strategic security influence. Greater President of the United States
of forces in the region. collaboration and burden-sharing
could characterize the future balance
of forces in the region.
Figure 4: Pacific and Indian Ocean Shipping Lanes
Source: Investment U
6 Five Megatrends And Their Implications for Global Defense & SecurityMegatrend two
Demographic shift
Five Megatrends And Their Implications for Global Defense & Security 7Explosive population growth in some Industry examples 2
CEOs are concerned about talent
areas against declines in others
contributes to everything from shifts in 1 Turning to robots to help growing Half of CEOs are planning to increase
economic power to resource scarcity to the elderly populations headcount in the coming year,
changes in societal norms. Countries have according to PwC’s 17th Annual Global
very different demographic trajectories. With the number of Americans over CEO Survey, and 93% recognize the
Some societies‘ populations are aging the age of 65 expected to nearly need to change or are changing their
rapidly, even shrinking, and their double to 72.1 million by 20304, strategies for attracting and retaining
workforces will be constrained many companies, universities, talent. Sixty-three percent are
as a share of the total population. and research facilities are looking concerned that the lack of key skills
to robotsto help with their care. could threaten growth prospects.
Other societies are young and growing, Georgia Institute of Technology
which will create ever larger labor forces researchers developed Cody, a robotic
and consumer markets. nurse that can help with bathing5,
and GeckoSystems’ SafePath™
Youthful, growing populations must be robotically assisted wheelchair uses
fed, housed, educated, and employed for navigation technology for situationally-
productive potential to be realized. aware, real-time obstacle avoidance6.
Proportion of the world population aged
60 years
Figure or moreof the world population aged 60 years or more
5: Proportion
Although a number of factors
contribute to contracting 25%
military spending across
Europe, demography— 20% 21%
particularly widespread,
massive populating aging— 15%
is among the most important 10%
of these causes.
10% 8%
5%
Mark L. Haas
Duquesne University
1950 2000 2050
Source: UN report World Population Ageing 1950–2050.
Source: UN report World Population Ageing 1950–2050
8 Five Megatrends And Their Implications for Global Defense & SecurityPossible implications
Challenges for National demographics set national
priorities for government spending. As
defense and
• As the population ages, and even populations in the West age, the demand
shrinks, in mature economies and for social services and healthcare will
the ability to use debt is limited, put severe pressure on budget priorities
governments may come under
pressure to raise taxes to maintain
security that could compete with or even crowd
out defense and security expenditures.
social programs.
On the contrary, the concomitant growth
• Shifts in longevity may affect business in the youth populations in emerging
models, pension costs, and talent The megatrend that really markets and LDCs could create increased
goals/ambitions. affects us is the aging of the radicalization and civil unrest, and
populations in most developed a greater likelihood for disruptive
• Societal and political pressure to countries. The implication of transnational movements to take hold
create jobs may increase, especially that onto healthcare costs and in these societies. This could create both
for older workers and the “have nots.” internal and external security issues
the ability to deliver healthcare
is quite profound. that will require greater investment,
• Health systems may need to be and innovative strategies, to combat.
re-engineered (and paid for) to Dr. Paul E. Jacobs
handle many more participants Executive Chairman,
in economies which will often see Qualcomm Incorporated
declining GDP.
• The workforce may need to be retooled
in all parts of the world: in the aging
economies, older workers will need
to learn new skills and work longer, Figure 6: Challenging Statistics for the World's Youth
and their work may have to be
supplemented by migrant populations.
In emerging growth markets, the gaps
between supply and demand for those
with university-level education will
have to be filled.
90
percent nine out of ten people between the ages
of 10-24 live in less developed countries
73.4 million 57 million
youth between the children are not
ages of 15 and 24 enrolled in school
are unemployed
Source: UN Population Fund’s State of the World Population, 2014
Five Megatrends And Their Implications for Global Defense & Security 9Critical issues 2 Youth Bulge as a destabilizing force
The rapidly growing demographic If a large cohort of young
1 Competition for Resources group of young men in developing people cannot find employment
As populations age in the West, nations with limited economic and earn satisfactory income,
government budget priorities are opportunities, access to education, and the youth bulge will become a
shifting to entitlements such as safety is creating significant security demographic bomb, because a
healthcare and other social costs challenges as these conditions breed
large mass of frustrated youth
associated with a retired population. social discontent, crime, violence,
and susceptibility to radical ideologies
is likely to become a potential
Entitlement spending as a share of
the budget and of overall GDP is and movements. The greatest growth source of social and political
competing with and crowding out of this demographic segment is in instability.
priorities for defense and security those nations least prepared to deal
Justin Yifu Lin
spending. The aging population is with the challenges from a governance
The World Bank
also limiting the number of military and/or defense and security
aged citizens eligible and interested perspective, specifically the North
in military service. African Tier, Sub-Saharan Africa,
Southwest Asia, and Latin America.
Figure 7: Annual population growth rate, 2010–2050 (medium variant)Megatrend three
Accelerating urbanization
Five Megatrends And Their Implications for Global Defense & Security 11In the 1950s, less than 30% of the Industry examples Possible implications
world’s population lived in cities.
Currently, that proportion has risen to 1 Citi’s 150 cities strategy • As megacities grow in breadth and
50% and, by 2030, the UN projects that number, many analysts believe that
some 4.9 billion people will be urban As part of Citi’s strategy, the company their aggregate power will rival that
dwellers. By 2015, the United Nations has identified 150 cities it believes will of national governments due to the
(UN) estimated that there would be 22 shape the world in coming years8. sheer size of their constituencies.
mega-cities—those with populations of It is active in 80% of them and plans
10 million or more—with 17 located in to enter the rest. The company has • Megaprojects will be required to
developing economies. By 2050, the often talked about its presence in build city infrastructure, support
world’s urban population will have more than 100 countries, but CEO new trade flows (airports, sea ports),
increased by some 44%7. Michael Corbat predicts more talk address education, health, security,
about cities in the future9. employment demands, etc.
Much of the growth in urban population
will likely take place in Asia and Africa. 2
“Smart Cities”
Large scale migrations from rural areas
will power much of this growth. Cisco is one of several large IT and
The 2015 terror attacks in
telecommunications companies that
In developed economies and older cities have developed new solutions and
France and the 2016 terror
in the developing world, infrastructure initiatives for developing smart cities attacks in Belgium
will be strained to the utmost— around the world10. These “smart demonstrated the capacity of
and beyond—as populations expand. cities” will use cloud technology, terror cells to “hide in plain
Meanwhile, in emerging economies, new mobile devices, data analytics, and sight” in unassimilated urban
cities will rise rapidly and require massive social networks to automate and enclaves and coordinate attacks
investments in smart infrastructure to connect city departments and across national borders. Some
accommodate explosive growth. promote eco-friendly practices. of these enclaves were
considered dangerous ‘no go’
zones by the local police because
Figure 8: World urban population
of the impenetrability the local
social environment was
dominated by alternative
systems of governance.
44%
increase
The world urban population is expected to increase from 50% to 72% of total
population by 2050.
Source: UN report World Population Ageing 1950–2050
12 Five Megatrends And Their Implications for Global Defense & SecurityChallenges for The explosion in urbanization will
present tremendous challenges for law
non-state actors such as terrorists and
revolutionaries, who simultaneously
enforcement, intelligence and internal seek to “hide in plain sight” and inflict
defense and security agencies, as well as traditional the highest level of disruption and
defense organizations. The sheer growth destruction on a concentrated population.
security of urban populations may outpace
governments ability to provide basic The higher concentration of people
services that could, in turn, breed in these cities will increase the impact
the growth of radicalization and of natural and man-made disasters,
alternative governance structures and it will require a massive whole of
dominated by organized crime, and government approach to address the
non-state terrorist entities, which will humanitarian, defense and security
unlawfully force/subjugate the urban challenges that accompany them.
dwelling populations.
Providing adequate police and security
for these areas will be costly and will
require a higher level of interagency In a feral city social services are
information-sharing and collaboration. all but nonexistent, and the vast
majority of the city’s occupants
Defense organizations will also be have no access to even the most
challenged to respond to internal unrest basic health or security assistance.
and to monitor foreign influences that
seek to destabilize these populations for Richard J. Norton
political ends. The mega-cities that U.S. Naval War College
emerge and grow out of this trend will
also provide a more fertile ground for
Figure 9: 2015 Global Mega Cities
Millions (People)
40
35
30
25
20
15
10
5
0
Tokyo
Mumbai (Bombay)
Mexico City
Sao Paulo
New York
Delhi
Shanghai
Kolkata
Jakarta
Dhaka
Lagos
Karachi
Buenos Aires
Al-Qahirah (Cairo)
Los Angeles
Manila
Beijing
Rio de Janeiro
Osaka-Kobe-Kyoto
Istanbul
Moscow
Guangzhou-Foshan
Source: UN World Urbanization Prospects
Five Megatrends And Their Implications for Global Defense & Security 13Critical issues 2
Asymmetric Disruption 3 “Mega Slums” and “Feral Cities”
and Destruction Mass migration to cities leads to
1 Challenge to the Legitimacy Larger concentrations of people in overcrowding and poverty and
of Traditional Defense and smaller geographic areas present overwhelms a government’s ability to
Security Forces greater opportunities for terrorists provide basic services. Additionally,
As powerful mega-cities continue to and other non-state actors to inflict mass migration of foreigners without
proliferate, the legitimacy of national asymmetric disruption and destruction. assimilation may create similar
defense and security forces may be A terrorist act to impact the electrical dysfunctions and allow for the
challenged as power shifts to municipal/ or water supply in a city of 1 million proliferation of organized crime and
local rather than national government. does not require substantially more alternate forms of governance and
This portends a requirement for sophistication or resources in a city coercion. Already in some megacities
greater collaboration and information of 10 million. Large concentrated there are areas where police and
sharing between and among the populations create very large security forces dare not tread.
various agencies tasked with the vulnerabilities. These “ungovernable” spaces
defense and security of the nation and can be incubators for continued
the vast majority of the population. radicalization of whole segments of
the population and breeding grounds
for criminal networks/gangs, terrorist
non-state actors, and others who wish
to disrupt security and stability.
Figure 10: Percentage of population in urban areas, 2030Megatrend four
Rise in Technology
Five Megatrends And Their Implications for Global Defense & Security 15Breakthroughs in such disciplines as Industry examples Possible implications
artificial intelligence, nanotechnology,
and other frontiers of research and 1 Plans for drone delivery • Technology will enable virtual
development are increasing productive versus physical business and
potential and opening up new In Australia, where commercial drone operating models.
investment opportunities. activity is legal, textbook rental startup
Zookal will start using drones for • Assets (and liabilities) will be
Entire new industries are being created, deliveries this year. In December increasingly accessed on flexible
which could have a significant impact 2013, Amazon CEO Jeff Bezos terms: where previously assets were
on the size and shape of the world’s unveiled its “Prime Air” delivery primarily available to own, adaptable
manufacturing and high-tech sectors and plan via drone-like aerial vehicles11. businesses now provide them for rent
the companies that operate within them. The FAA has yet to approve commercial in innovative ways.
drone delivery in the US.
The combination of the internet, network • Access to systems and information
capable mobile devices, data analytics, 2 A 3D liver is coming should enable management models
cloud computing, and machine and deep to flatten organizational structures.
learning capabilities will continue to San Diego-based bioprinting company
transform our world. Many companies Organovo delivered its first 3D printed • New competitors will emerge as
across all sectors are grappling with how human liver tissue to an outside lab technology and innovation create
these developments will affect consumer in January 201412. The liver model new competitive advantages and
expectations, the way they interact with will only be used for research and increase productivity across sectors
their customers, and the underlying drug testing, which could help drug and geographies.
business models that support this. companies combat the average $1.2
billion, 10- to 15-year process to • The ability to gather and analyze
develop new drugs13. data in real time may become a
requirement for doing business,
rather than a competitive advantage.
The “next big thing” in IT
never ends, but there are a few
fundamentals:
Figure 11: Dramatic increase in handheld computing power
One, it will be mobile.
Technology will be wherever
you are in the world of the
Internet, everything connected
together
Second will be the data that’s
analyzed in a free-form format 1985 2016
to find business and market
opportunities.
Cray-2 Apple iPhone 6
The next one is what I would Supercomputer Smartphone
call ease of use…Every vendor 1.9 GFLOPS 115
is going to make everything
2 GB Memory 128 GB
that they create simple to use.
244 MHz CPU Speed 1400 MHz
Robert M. Dutkowsky
Chief Executive Officer, Tech Data Source: Experts Exchange/PwC
Coroporaton
16 Five Megatrends And Their Implications for Global Defense & SecurityChallenges for While breakthroughs in nanotechnology
and other frontiers of research and At its very core, ISIS is a
defense and
development are increasing productive company that creates a product
potential for commercial enterprises of hate and terror, and it has
they are also enabling bad actors to
security advance their own capacity for
disruption and destruction.
found a horrifyingly effective
way to scale it. ISIS uses
technology better than most
With every new technological advancement tech start-ups. Ghost Security
that promotes even greater automation, Group, a counterterrorism
analytics, and communications, new organization, has noted in the
vulnerabilities will be created that will past that ISIS utilizes almost
challenge law enforcement, security, and every social app imaginable
defense organizations like never before. to communicate and share
its propaganda, including
The combination of the internet, mainstays like Twitter and
mobile devices, data analytics, drones, Facebook; encrypted chat apps
artificial intelligence, and cloud such as Telegram, Surespot,
computing will provide defense and
and Threema; and messaging
security organizations step-function
increases in capabilities to address and
platforms including Kik and
respond to threats that will be using the WhatsApp.
same, commercially available tools to Vanity Fair
do harm. Vendors will also make all
devices “secure to the user” which
will inhibit surveillance and evidence
gathering by intelligence and law
enforcement entities. The challenge
for defense and security organizations
will be to develop and adapt these tools
at the speed of business—not the
traditional speed of government.
Figure 12: Industrial Control System Cyber Incidents
39
656%
increase
(2010)
295
(2015)
in the number of cyber
incidents reported in 2015
compared to 2010.
Source: Experts Exchange/PwC
Five Megatrends And Their Implications for Global Defense & Security 17Critical issues 2 The Rise of the Internet
as a Radical Proliferator Our nation is at risk.
1 Cyber Crime/Cyber Warfare/ T he global reach of the internet and The cybersecurity vulnerabilities
Cyber Terrorism social media platforms has created a in our government and critical
In recent years there has been a substantial propaganda and recruiting infrastructure are a risk to
dramatic increase in unlawful cyber vehicle for radical groups seeking to
national security, public safety,
security breaches and infiltrations. spread their message to disaffected
populations around the world.
and economic prosperity.
Some of these have been orchestrated
by independent criminal actors, but Philip Reitinger
others are far more sophisticated and 3 Asymmetric Command, Control, U.S. Deputy Under Secretary of
coordinated, formally and informally, and Delivery Homeland Security
by government agencies seeking The “ease of use” of digital technologies
to disrupt or create competitive allows adversaries to take advantage
advantages. Network vulnerabilities of advanced capabilities with minimal
to such attacks creates national investment. Secure communications
security vulnerabilities that extend for extremist groups has been facilitated
beyond financial crime to the via commercially available apps that
crippling of key infrastructure and challenge intelligence gathering, law
access to classified information that enforcement, and military operations.
could compromise critical national
infrastructure in addition to ongoing 4. Maintaining an Adequate Pace
military and police operations. of R&D and Innovation
Undetected cyber penetration of Commercial technology product
critical commercial networks can lifecycles continue to contract,
allow adversaries to gather information while those in government defense
regarding defense supply chains that and security are elongating. This
could enable major disruptions during “innovation gap” must be breached
creatively, and with some urgency,
a time of crisis.
in order for intelligence, security,
and defense organizations to stay
ahead of their adversaries.
Figure 13: The growth of the network connected devices
World
6.3 billion 6.8 billion 7.2 billion 7.6 billion
population
Connected
500 million 12.5 billion 25 billion 50 billion
population
More
connected
devices than
people
Connected
devices 0.08 1.84 3.47 6.58
per person
2003 2010 2015 2020
Source: Cisco Internet Business Solutions Group, April 2011
18 Five Megatrends And Their Implications for Global Defense & SecurityMegatrend five
Climate change and resource scarcity
Five Megatrends And Their Implications for Global Defense & Security 19Scarcity of resources and the impact of Industry examples Possible implications
climate change are of growing economic
concern. Demand for energy is forecast 1 Plugging in on the road: an issue • Securing resources domestically
to increase by as much as 50% by 2030, for electric vehicle owners and internationally via strategic
and water withdrawals by 40%14. relationships becomes even more
More than 96,000 plug-in hybrid critical for governments and businesses.
Impacts may include increases in and electric cars were sold in the
extreme weather and rising sea levels, US in 201315, but only about 22,000 • Increased conflict and political tension,
which could make traditional methods public charging stations exist16. especially over resources, may occur as
of farming, hunting, and fishing difficult Companies such as electric vehicle food, energy, and water patterns change.
or impossible in some places. charging service and network
provider CarCharging Group and • Increased levels of regulation, both
The need for sustainable solutions electric vehicle services provider directly relating to environmental
may well be at odds with the need Recargo, whose PlugShare app changes and indirectly through
for resources to fuel growth and feed shows charging spots, see taxation and similar types of
populations. Time-honored traditions opportunities for innovation17. incentives/disincentives.
will be challenged by changes to the
physical environment. 2
Coca-Cola and the USDA team up • New industries created, or existing ones
to improve water resources revolutionized, in response to energy
scarcity, climate change and lack of
In 2013, the two announced a five-year resources; the pace of these changes
public-private partnership to restore will be accelerated by new technologies.
Sea-level rise will act as a and protect US watersheds. The goal:
threat multiplier in rapidly to return more than a billion liters of
urbanizing agglomerations, water to the National Forest System,
increasing political, economic, which provides more than 60 million
religious, demographic, and Americans with drinking water18.
ethnic tensions by causing land
and water to become scarcer.
Carnegie Endowment for Figure 14: With a population of 8.3 billion people by 2030, we’ll need...
International Peace
50% 40% 35%
more energy more water more food
Source: National Intelligence Council: Global Trends 2030: Alternative Worlds.
20 Five Megatrends And Their Implications for Global Defense & SecurityChallenges for Tensions between nations over access to
natural resources is nothing new. As the Given the growing involvement
defense and
global population continues to grow these of military actors in relief
disputes will become more acute, and more activities, humanitarian
critical to national survival particularly
security when it comes to very basic resources
such as food, water, and energy sources.
organizations have an
opportunity and, some argue,
a responsibility to engage more
This will undoubtedly lead to regional strategically with the military…
and potentially global confrontations in order to limit the risks
over water, oil, wind, fishing, hunting, inherent in their involvement
and other mineral rights. and maximize the potential
benefits to the disaster response
Megatrend Three exacerbates this system and affected populations.
problem by concentrating expanding The question for humanitarian
populations into cities and putting stress organizations is no longer
on the natural resource supply chain to whether to engage with the
deliver at much higher demand levels.
military, but rather how
It makes these supply chains more
efficient, but also, from a security
and when to do so.
perspective, far more vulnerable to Charles-Antoine Hofmann
disruptions with devastating impact to and Laura Hudson
vastly more people concentrated in British Red Cross
urban centers.
Global climate change will also impact
this vulnerability through its impacts on
sea levels, water scarcity, and farmable
land. Natural disasters will put
additional stress on traditional security
and defense forces to retain order and
provide non-traditional defense service
during a humanitarian crisis.
Figure 15: Nations that provided military support to Japan following the March 11,
2011 Tōhoku earthquake and tsunami
Source: Center of Excellence in Disaster Relief and Humanitarian Assistance
Five Megatrends And Their Implications for Global Defense & Security 21Critical Issues 2 Resource Scarcity as a threat
to national security As demand for water hits the
1
Defense Forces as Disputes over water and fishing rights limits of finite supply,
“First Responders” have become more common in recent potential conflicts are brewing
Due to the advancements in global years. Expect this trend to continue between nations that share
telecommunications natural as nations seek greater access to the
transboundary freshwater
disasters in any given nation are earth’s resources for both economic
growth and survival. According to the
reserves. More than 50
quickly elevated to international
Global Policy Forum, “More than 50 countries on five continents
disasters requiring a response.
Defense organizations, given their countries on five continents might soon might soon be caught up in
expeditionary nature, are often be caught up in water disputes unless water disputes unless they
called to be first on the scene. they move quickly to establish move quickly to establish
If climate change is accompanied agreements on how to share reservoirs, agreements on how to share
by greater frequency and intensity rivers, and underground water aquifers.” reservoirs, rivers, and
of storm and other natural disasters underground water aquifers.
responses by defense and security 3
Climate Change Impact on
forces will put an ever greater strain Coastal Populations Global Policy Forum
on traditional missions and defense As ocean water levels rise
and security resources. commensurate to increased surface
temperatures on the Earth, coastal
cities which attract population and
trade will require larger infrastructure
investments to ensure physical safety,
diverting resources from traditional
security and defense priorities.
Figure 16: Projected water scarcity in 2025
Physical water scarcity
Economic water scarcity
Little or no water scarcity
Not estimated
Source: UN Department of Economic and Social Affairs
22 Five Megatrends And Their Implications for Global Defense & SecurityFeature
The “confluence” of global megatrends can
intensify defense and security challenges
Five Megatrends And Their Implications for Global Defense & Security 23Economic shift, demographics, accelerating urbanization, Figure 17: Economic shift, demographics,
climate change. accelerating urbanization, climate change
Much of the world’s transportation demographics and the urbanization, 1
infrastructure (seaports, airports, and many coastal megacities and much their
Shift in global
rail and road terminals) will be located strategic economic infrastructure could Climate change economic
power
in or near megacities and will likely be heavily affected by the rise of sea
be affected by rapid urbanization where levels, potentially requiring trillions 5
we may find similar relationships as we in investment to cope with rising water 2
do today in Beirut where the airport is levels. This effect of climate change Text Demographic
controlled by Hezbollah, and other could fall with heavy impact on the Rise of
technology
shifts
transportation infrastructure is controlled Gulf States where so much of their urban
by opposing groups. In times of tension, and economic infrastructure is barely
transportation infrastructure could be above sea level. Accelerating
4 urbanization
substantially affected by fighting and
battle damage disrupting up-and
3
down-stream flow of imports and exports,
and supply chains. Apart from the
Figure 18: Accelerating urbanization, Accelerating urbanization, demographics, rise of technology.
demographics, rise of technology
Megaslums have the potential to become for terrorism, the lethality of attacks
1 “no go” zones, hindering, or effectively in or emanating from these enclaves,
preventing national, regional, and will be enhanced and magnified by
Shift in global
Climate change economic municipal law enforcement and security accelerating technology. Secure means
power
operations against non-state actors; of communications from commercially
5 criminal or terrorist. There will be a available applications will afford
2 greater symbiosis between criminal terrorists the capacity to plan and deliver
Text Demographic
and terrorist networks. Megaslums devastating attacks from cyber to
Rise of
shifts will effectively exist beyond the writ physical attacks that will frequently
technology
of national and regional governance, exceed the capacity of formal government
and intelligence collection in these to respond. As technology advances,
Accelerating “denied areas” will be enormously terrorists, operating from secure enclaves
4 Urbanization
3 more complex and challenging. With
megaslums becoming both incubators
will seek weapons of mass destruction
the application of which could bring
for radicalization and support platforms governments to verge of collapse.
24 Five Megatrends And
AndTheir
TheirImplications
Implicationsfor
forGlobal
GlobalDefense
Defense&&Security
SecurityWhat do these megatrends mean to you as
defense and security leaders?
Defense and security leaders have a responsibility for understanding the strategic
context in which they will be required to operate. Here are five things for leaders to
consider relative to how the megatrends will shape that context:
1 What is your organization’s purpose? 2 How is your defense/security 3 Are you engaging with outside
organization considering the parties to help shape your point
megatrends in the development of view on where the world is
Where does your organization fit
of organizational strategy, and going relative to areas outside of
within the overall national security how do leadership teams get traditional defense and security?
ecosystem? What role do your ready for these changes?
political leaders, citizens, other
government agencies, and allies For example, futurists, Silicon Valley
expect you to perform within that The “day-to-day” pressures are or other innovators, or different
ecosystem? A well-defined and significant, and leaders may need groups who can inform your teams
well-articulated purpose not only helps help balancing short- and long-term with outside perspectives and infuse
build trust with your stakeholders expectations and demands as they them with creativity? How seriously
but also helps assure your relevance take on the megatrends. Is the proper has your organization considered the
to society. incentive structure in place to reward threats posed by nontraditional
strategic thinking? adversaries?
4 What is your acquisition and 5 Do you have an articulated focus 6 Does your national security
retention strategy as it relates on driving agility as a key strategy provide the necessary
to talent? organizational characteristic? breadth to address the megatrends,
particularly their 'confluence'?
Does it consider the expectations of When considering the rapidly
the millennial generation and/or the evolving threat environment, National security strategies often focus
emerging markets? Technology is and its enablement/acceleration on defense and domestic security
advancing rapidly: have you planned by the megatrends, what are you challenges without emphasizing the
for science, technology, engineering, doing to create the rapid, adaptable, required economic and industrial
and math (STEM) skill sets or others innovative, collaborative, and outcomes or outlining the wider people
to help you keep up with the transparent organization that will issues and security contingencies.
proliferation of technology for be required to defend your nation What are you doing to help shape
destructive and disruptive purposes? and protect your citizens from harm? that strategy, and your organization's
role in support of it, in order to
ensure the strategy's relevance,
flexibility and responsiveness?
Five
FiveMegatrends
Megatrends And Their Implications for Global Defense & Security 25Contacts
To have a deeper discussion about how these topics might impact your business,
please contact Tom Modly or a member of PwC’s Global Government Defense
About PwC’s Global
and/or Security Networks.
Government Defense
and Security Networks
PwC Global and Asia-Pacific-Americas PwC Global Government We support defense and
Leader, Government and Public Services Security Network Leader security leaders around the
world develop and implement
effective strategies to address
Rollie Quinn George Alders
emerging threats with greater
+1 703 762 7252 +31 88 792 32 85
efficiency and agility.
rollie.quinn@pwc.com george.alders@nl.pwc.com
Our purpose is to build
trust in society and solve
important problems to
PwC Global Leader, Government PwC Europe-Middle East-Africa Leader, create a safer world.
and Public Services Sectors Government and Public Services
Thomas Modly Alfred Höhn
+1 443 253 3554 +49 30 2636 1270
thomas.modly@us.pwc.com alfred.hoehn@de.pwc.com
26 Five Megatrends And Their Implications for Global Defense & SecurityEndnotes
1 Mario Pezzini, “An emerging middle class,” OECD Observer, 2012.
2 The World Bank, World Development Indicators, 2010.
3 Ibid.
4 “Aging Statistics,” Department of Health and Human Services Administration on Aging, retrieved April 16, 2014.
5 “Robotic Cody Learns to Bathe,” Georgia Tech College of Engineering, retrieved April 16, 2014.
http://www.coe.gatech.edu/content/robotic-cody-learns-bathe.
6 “Personal Assistance Robots: Not Just Science Fiction,” GeckoSystems, retrieved April 17, 2014.
http://www.geckosystems.com/markets/personal_assistance.php
7 The United Nations Department of Economic and Social Affairs, Population Division.
8 “New Citi-Commissioned EIU Report Projects Competitiveness of 120 of the World’s Major Cities in 2025,” Citigroup, June 4, 2013, retrieved February 19, 2014.
http://www. citigroup.com/citi/citiforcities/home_articles/n_eiu_2013.htm.
9 “Remarks by CEO Michael Corbat at Citi’s 2013 Annual Meeting,” Citigroup, April 24, 2013, retrieved on February 21, 2014.
http://www.citigroup.com/citi/news/ executive/130424Ea.htm.
10 Used with the permission of http://thenetwork.cisco.com/, retrieved February 18, 2014.
11 “Amazon Prime Air,” retrieved February 19, 2014, http://www.amazon.com/b?node=8037720011.
12 “Organovo Announces First Delivery of 3D Liver Tissue to Key Opinion Leader,” Organovo, January 29, 2014, retrieved February 19, 2014.
http://ir.organovo.com/news/ press-releases/press-releases-details/2014/Organovo-Announces-First-Delivery-of-3D-Liver-Tissue-to-Key-
Opinion-Leader/default.aspx.
13 Pharmaceutical Research and Manufacturers of America, 2013 Profile: Biopharmaceutical Research Industry, 2013.
14 National Intelligence Council: Global Trends 2030: Alternative Worlds.
15 WardsAuto.com, January 3, 2014.
16 US Department of Energy, “Alternative Fueling Station Counts by State,” www.afdc.energy.gov, as of April 3, 2014.
17 “Car Charging About Us,” retrieved February 19, 2014, www.carcharging.com;
“Recargo PlugShare Overview,” retrieved February 19, 2014, www.recargo.com.
18 “USDA and Coca-Cola Partner to Replenish One Billion Liters of Water to Nature,” United States Department of Agriculture, September 13, 2013,
retrieved February 18, 2014, http://www.usda.gov/wps/portal/usda/usdahome?contentid=2013/09/0180.xml&contentidonly=true.
Five Megatrends And Their Implications for Global Defense & Security 27At PwC, our purpose is to build trust in society and solve important problems. PwC is a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com/UK. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2016 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. The Design Group 30117 (11/16) www.pwc.co.uk/megatrends
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