Depression era workers eating soup

And now for the bad news

At the First European Futurists Conference in Lucerne two years ago, John Casti shocked delegates by predicting a major global recession in 2008. Here he explains why the prevailing mood means the worst is yet to come for engineering and technology.

This year should see the completion of the world's new tallest building, Burj Dubai in the United Arab Emirates. Societies often feel compelled to show how good they feel about the future by erecting the world's tallest building. Construction begins on these behemoths as the social mood starts accelerating upward.

But skyscrapers don't appear overnight, and by the time construction is actually completed several years later, the positive mood has given way to a deeply pessimistic one. The troubles of property developers in Dubai are not at all surprising, at least to those who understand this 'skyscraper curse'. Bad things tend to happen in countries when they start trying to express their confidence by erecting the world's tallest buildings.

This curse leads one to wonder about the future of Saudi Arabia, which in late 2008 announced its intention to outdo Dubai by building a skyscraper in Jeddah vastly taller than Burj Dubai. And this is not to mention the fortunes of that darling of evangelists of globalisation everywhere, India, where an architect in Delhi announced plans to build the world's tallest building, making the statement: "It is about status. It is about glorification. It is high time that people started realising that we too are a great nation."

Breakthrough barometer

From 1966 through late 1968, as public sentiment skyrocketed with the increasing stock market, technological wonder ran rampant. Futurists with visions of colonies on the Moon, the sea floor and Mars were routinely quoted in the business press. Public fascination with such forecasts was reflected by famed futurist Herman Kahn in his book 'The Year 2000', which anticipated the conversion of sea water to drinking water and the use of artificial moons.

One project that caught the imagination of reporters was Probe, a think tank of 27 top scientists established by TRW Inc. The team used existing technologies to forecast more than 335 wonders. Not a single one came true. And six years later, the Dow was down 45 per cent with many of the most popular technology companies having gone bankrupt.

A similar story can be told about the Internet boom in the late 1990s. My belief is that we will see the same pattern unfold from the mini-boom of 2003-2007: Euphoria denied!

To test this hypothesis, have a look at Fig 1 (page 36) showing major technological developments over the period 1920-2001 plotted against the Dow-Jones Industrial Average in that same period. Do you notice anything unusual about this chart?

What's interesting are the three periods marked in red. During these periods, very few "breakthrough" technologies were introduced compared with the rest of the chart. And what are these times of low technological breakthrough? Exactly when the financial markets are either in freefall, like the late 1920s early 1930s, or going sideways with bursts of decline, as in the early 1970s mid-1980s.

Given what we see in the world today and can reasonably project to the world of the next decade, it's not too difficult to make the call that life-changing technologies are going to be thin on the ground during this period.

Patent problems

It doesn't take an undiscovered genius to know that advances in technology go hand-in-hand with innovation. Without new products, or at least new ideas for how to use existing technology, we'd still be riding on horses and communicating by smoke signals.

While it's difficult to measure 'innovation' directly, a good surrogate is simply to look at how many patents are granted, since patents necessarily involve something new and different. To get a feel for the way social mood impacts innovation, consider the diagram showing patents versus the Dow Jones Industrial Average (DJIA) for the 20th century (Fig 2).

We put this figure together bearing in mind that the social mood is always a leading indicator of social events and implying that we must shift the blue curve to the left by a few years to properly compare the two processes. You will therefore have little trouble forecasting the future of innovation. You will also notice that these stories of skyscrapers, technology and patents have all been set against movements in financial market indexes. Here's why.

Mood swings

On March 19, 2003 US forces rained "shock and awe" down upon the hapless residents of Baghdad, thereby initiating the Iraq War. While there is and will be much to say about this affair, it is enough here to note only that it illustrates perfectly the role played by the "mood" of a population in creating a social climate, a kind of Zeitgeist, within which actions, behaviours and events of all types unfold. And the nature and texture of those events are dramatically impacted by whether that mood is optimistic or pessimistic.
The concept of the mood of a population as setting the tone for collective social events of all types, ranging from tastes in popular culture to shifts in political ideologies to the rise and fall of civilisations, is the root cause of my pessimism about what we are likely to see in the coming years and decades. Put simply, the social mood represents how the population feels about the future - on all timescales.

And, as with the Iraq War, the potential represented by the population's sense of the future, its mood, is realised in vastly different types of events, depending on whether the mood is waxing positive or waning negative on the timescale appropriate for the type of event in question. But to make the notion of the mood of a population useful for either explanation or prediction, we need an effective way to measure it.


Some years back, financial analyst Robert Prechter coined the term 'socionomics' for the way the social mood leads to social actions. He then proposed using the financial market averages as a way of measuring the mood. He called this measure a 'sociometer', as it serves much the same purpose for measuring social mood that a thermometer for measuring the overall motion of a collection of molecules.

The underlying argument is that a market average like the DJIA reflects bets that people make about the future on all timescales from seconds to decades. The financial markets collect all these bets and process them into a single number: a change of price. That price change then serves as a very effective measure of how people feel about the future. If they are positive, they tend to buy and prices increase; if they're pessimistic, the tendency is to sell and prices go down. And the stronger the collective sentiment, the larger the bets.

But just as a thermometer doesn't measure what every single molecule is doing, the financial market averages do not represent the feelings of every single person in a population either. However, experience shows that an index like the DJIA serves as a much better characterisation of the social mood than other types of measures of mood, such as opinion surveys, annual births, and the like. Moreover, accurate financial data is easy to find in every daily newspaper, and is available over quite long periods of time.

To illustrate this idea, consider the years 1930-2000. These seven decades divide into two completely different periods on a decade-to-decade basis: a 20-year span of negative global social mood from 1930-1950, followed by 50 years of increasingly positive mood that ended in early 2000.
During the pessimistic period, we saw events like the rise of dictatorships in Nazi Germany and the Soviet Union, the Holocaust, and the Great Depression, while in the post-war period the Berlin Wall came crashing down, apartheid ended in South Africa, and the European Union was formed. Note the qualitative difference in character between these events. Entirely different types of events tended to occur during the period of negative social mood than those taking place when the world, in general, was more optimistic about the future.

This difference is the crux of our argument for a rather more pessimistic view of what to expect over the coming decades. The global social mood started rolling over from positive to negative in about the year 2000.

My contention is that it will accelerate in the downward direction for at least a decade or more before we hit the bottom. As a result, the types of events we can expect will be of a decidedly different nature than what has been the case over the last 50 years. The examples of skyscrapers and patents illustrate the overall situation we face today. Here is yet one more to hammer home the point.

The decline of globalisation

Unlike skyscrapers, which are an inherently local phenomenon, physically confined to a particular geographical space, the once trendy idea of globalisation - the view of the world as of one gigantic marketplace perfectly structured to solve the ills of humankind, unfettered by the inconveniences of restrictions on the flow of capital, labour, materials or ideas - is another collective social phenomenon that is in the process of coming undone.

Since the driving forces behind globalisation are, to a substantial degree, American corporations, we look at the DJIA from 1970 as an indicator of the overall worldwide mood, since the New York Stock Exchange is still about the closest thing we have to a global financial market.

Every single milestone in the path to globalisation - from the launching of the basic idea at Davos in 1975 to the formation of the World Trade Organization in 1996 to China's joining of the WTO in 2000 - took place at a peak in social mood.

Since 1975, the global social mood has been rosy. In such times, the types of events we expect to see are ones that can be labeled 'unifying', 'joining', and 'expanding'. Sadly, the picture shows that this global mood is rolling to begin a decades-long decline that is likely to lead to just the opposite types of social events.

Globalisation will be replaced by localisation, unification will be replaced by fragmentation, and openness to strangers will be replaced by xenophobic behaviours. Distant early-warning signals of these types of behaviours are apparent in the pages of your favourite newspaper or on the Internet.

The juggernaut of history

When I recently presented this rather downbeat vision at an international symposium on 'the future', a member of the audience accused me of drafting a 'doomsday' scenario. It is far from any kind of doomsday, as it's easy to imagine futures vastly worse than this.

Humanity survived the 1930s and it will survive the 2030s. The situation is desperate but not serious. And part of minimising the pain of an unpleasant future is being prepared for it.

So whether you're managing a family, a company, or a country, if you don't plan for the future you'll be squashed by it. A rerun of the 1930s may not be the future you want. But the juggernaut of history doesn't care.

And how is the flow rolling for innovation and technology? The outlook for the next several years is for a period of polishing existing apples to a brighter shine, not one for the introduction of major, life-changing technologies like practical fusion power.

John Casti is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria, and co-founder of The Kenos Circle, a Vienna-based society for the exploration of the future

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