Finding a Path to the Future:
Four Possible Scenarios

Finding a path to the future is on everybody's mind. While the main thrust of this article is aimed at businesses, much of the content is applicable to economic development. I have been a fan of scenario planning for some time so I find the work described below to be particularly interesting. Bottomline: We need to evolve a series of scenarios regarding economic development over the next 2-3 years.

Dr. Yoram Wind, professor of marketing at the Wharton Business School, has teamed with his colleagues to anticipate possible economic scenarios for the upcoming year. The professors identified four possible scenarios, ranging from global recession to explosive global growth.

The Wharton group has identified two factors that are likely to drive the economic environment in the near future:

1. The extent to which “external events" that have the potential to affect economic activities are known and understood, or whether they are unknown and surprising.

2. Whether businesses have the culture, history and ability to be opportunistic in the face of rapidly changing conditions.

We might ask ourselves these same two questions regarding economic development.

Based on these two drivers of growth, the Wharton team identified four scenarios:

Paralysis/Survival: In this scenario unexpected and disruptive events will increase over the next three years, and companies (and/or countries) will react by pulling into a protective shell. Consumers compound the problem by reducing spending dramatically. The bottom line: "a long, global recession."

Slow Growth: Under this scenario, disruptive events with moderate impact continue, and while seen as normal, they result in an economic malaise. This scenario is marked by debt and currency problems in key global economies, though a recession is avoided. Companies accept the risks of terrorism and learn to cope with their losses, making only modest investments. The professors quip: “Life becomes an overpowering shade of gray.”

Thriving with Chaos: Here we find unpredictable external events continue, but corporate and national resolve to be successful in the face of adversity provides some momentum for modest prosperity. Companies search for opportunities amid the disruption and make increasing investments in areas that are potentially profitable. The bottom line: “Life could be better, but there’s money to be made if you know where to look.”

Global Growth: In the final scenario, countries recognize common goals and focus on economic development and peace as the route to permanent stability. The recession here is short-lived and the business cycle quickly returns to normal. Investments in new energy management technology reduce the role of oil in Middle Eastern politics. Through lowered trade barriers, developing economies would grow along with developed ones. Don't we wish!

Where are we today? To me, it sounds like we are somewhere between Paralysis/Survival and and Slow Growth. What's your take?

Lots to think about here, but my basic point is we need scenario-thinking in economic development.