APPENDIX D
Scenario Narratives as Provided by the NASA/TFG/SAIC Core Team



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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise APPENDIX D Scenario Narratives as Provided by the NASA/TFG/SAIC Core Team

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Pushing the Envelope U.S. Economic Competitiveness Worldwide Demand for Aero Products/Services Threats to Global Security and/or Quality of Life Global Trend in Govt. Participation in Society Strong High Growth Low Low Summary The malaise of the late twentieth and early twenty-first century seems like an unpleasant but distant memory. It is 2015 and the U.S., Western Europe, and Japan have reasserted their economic dominance over a world in which free trade, open markets, and democratic government (broadly speaking) reign supreme. A rising global economic tide is gathering many, if not all, ships, even former ''basket cases" in the developing world and the former Soviet Union. The World Trade Organization (WTO) and other multilateral organizations keep markets open and succeed in maintaining favorable conditions for cross-border commerce and finance. The information revolution is in a new, dynamic phase and corporations that have learned to leverage this power invariably lead their respective industries. Society is highly mobile, within the bounds of socioeconomic class and national origins. Highly skilled professionals enjoy extraordinary geographic mobility. The world is thankfully free of large-scale military conflicts. International rivalries tend to be played out in boardrooms and labs, not military battlefields. Competition is intense, with generally low entry barriers and ample venture capital available for promising new ventures. Consumers possess unprecedented opportunities for financial growth, but are time-impoverished and weary in this highly competitive, pressure-cooker world.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise The pessimists had it wrong. Those dreary, end-of-the-millennium predictions of the U.S.'s (and Europe's) demise were greatly exaggerated. The West was neither dead nor dying. It was troubled, economically, politically and socially. But, as events eventually proved, these problems were not intractable; we would overcome them and rebound with a fury. In fact, notwithstanding our huge debt, aging infrastructure, and slumping wages, the U.S. and Western Europe were rebuilding themselves in a way that would ensure economic growth, income recovery, and technological superiority far into the twenty-first century. But I am getting ahead of myself. In 2000, it was easy to overlook our underlying competitive strengths. The U.S., as well as Western Europe and Japan, had not yet come to grips with the big problems confronting society, particularly those related to debt, long-term funding of entitlement programs, and unemployment. Existing programs were expensive, rife with inefficiencies, and fiscally insupportable. Political systems were mired in what we call "gridlock" with politicians pursuing votes via painless "solutions" (like restricting immigration, raising minimum wages, etc.) that were at best irrelevant, and often counterproductive. Markets were edgy. Wall Street looked no further than the next quarter's earnings, knowing too well that the status quo was unsustainable. The twentieth century ended on a troubled international note. Concern centered mostly on Asia. Japan experienced an acute financial crisis and near total economic meltdown that would require several years of debt write-offs and bank restructurings to correct. Substantial growth pains afflicted China. The nation was forced to come to grips with the realities of a globally integrated marketplace in which its participation was desired, but not required. Moreover, its rapid economic growth and modernization increased the flow of knowledge throughout society, fueling discontent especially in urban areas over limits to freedom and political action. Authorities chose stability over democracy. Consequently, China moved toward a form of authoritarian capitalism, which combined highly centralized government control over an increasingly decentralized and private economy. Meanwhile, as the new century was launched, the Emerging Markets were doing generally well. Korea was, in effect, a developed market and within a few years would be admitted into the Organization of Economic Cooperation and Development. India, Brazil, and Indonesia were among the fastest-growing, most dynamic economies anywhere, with rapidly expanding middle classes and affluent populations. Not all were doing equally well, however. Again, China was an inconsistent performer and investors feared that it could suffer political turmoil and a major economic setback. The Middle East was still politically unstable, leaving global energy markets constantly on edge. Japan's financial market meltdown in 2001 was a crystallizing event — a rallying cry for visionaries who had long argued for fundamental reform. Had the Group of Ten (G-10) central bankers not offered immediate and effective support, Japan's economy would have plunged into a long, deep recession or depression — probably taking the rest of the major markets down with it. But coordinated G-10 action in the form of instant liquidity and commitments of long-term credits staved off a disaster. All was not well, however. Even as Japan's situation began to

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise stabilize, global currency and equity markets were rocked by near-panic buying and selling. More extensive G-10 central bank cooperation ensued with the objective of achieving coordinated stabilization of key currencies. To make this work, all the major countries had to agree to some fairly aggressive fiscal targets. By 2002, the plan was in place and most of the G-10 stuck to their commitments. Politicians in effect told their respective constituencies, "Look, do this, or we'll end up like Japan, or worse." Most went along, however grudgingly. Constituents deeply feared what would happen if strong medicine were not swallowed. And to a point they were willing to follow the politicians. The results were startling and far more positive than anyone could have imagined, especially for the U.S.. The Chief Executive and Congress hammered out a far-reaching restructuring of government spending programs, including entitlements like Social Security. The idea was to seize this window of opportunity while it was still possible and restructure the entire business of government in the most politically neutral, socially responsible way possible. The process was anything but silky smooth. Medicare reform was predictably a political minefield. But in general most everyone perceived the process as fair. Everyone had to give; few gained outright. There were very few loopholes in which the wealthy could take shelter. Consumer advocates kept the lobbyists at bay and the politicians reasonably well behaved. Privatization attenuated economic dislocation, as it provided instant revenue and therefore meant lighter spending cuts. Moreover privatization proceeds covered the investment needed in critical infrastructure, including satellite communications and fiber-optic backbone. These were pitched as exceptional activities, actually, designed to "jump start" markets before fully liberalizing them via privatization. A mix of market and fiscal incentives helped the public swallow the harsh reform medicine. (In truth, subtle anti-rich appeals helped a lot, too, for the wealthy had the most to lose from the proposals being debated). The tax structure rewarded savings and penalized frivolous consumption. Tax credits were granted for eldercare at home. Various user fees were reviewed and, if necessary, changed to ensure that fees for government goods and services reflected true costs to the public. Conservatives' dream of school coupons succeeded in not only providing choice but also quality education for middle income and (most) children from disadvantaged backgrounds. In major U.S. cities, much public education was effectively outsourced with the help of Catholic and other religious schools. In retrospect, the sum effect of these major policy shifts would have been limited had U.S. industry not been primed to exploit the improved business environment. In fact, the much maligned "reengineering" and "restructuring" trends of the 1990s proved to be the boot camp of the emerging global business environment. By the late part of the decade, productivity gains were appearing in spades, not only because work forces were slashed to the bone, but because companies were finally growing skilled in applying information technology to all phases of the value chain, from design to distribution. Each wave of new workers was more and more inclined to embrace and innovate information solutions.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Naturally, the Internet was an extraordinary enabler of this "takeoff." Its impact by 1998 was clear even without the rather significant broadband investment that took place in the U.S. and then later in Germany, England, and France after 2000. By 2005, nearly every U.S. household and commercial center was fiber optically connected. The same was true of Europe (by 2010). In both instances, coordinated government-industry investment engendered relatively efficient and harmonious development, with ample commercial space for private entrepreneurial activity and, of course, profits. These broadband development projects were exceptional in the sense that they were not indicative of a more general move to industrial policies in the U.S. or anywhere. Even socially liberal politicians did not advocate a return to generous welfare policies or state capitalism. Yet, at the same time, there was broad recognition that without the government setting the rules and directing the information infrastructure that either the big, capital intensive work would never get done or it would be badly done, in staccato, and probably chaotic fashion. By 2005, the market-based restructuring of the U.S. economy was nearly complete. Japan was deep into its own post-crisis restructuring program and the major European countries had their own programs under way. The success of the international organizations during the post-Japan currency scare greatly increased the stock of the WTO. In fact, the WTO played a critical role when the major trading nations could easily have turned protectionist. The WTO not only staved off protectionism, it also accelerated market liberalization as the major trading nations got firmly on their feet. IT and telecom innovation and expansion accelerated after 2005, as bountiful venture capital fed countless start-up companies offering new products and services for constantly evolving and changing technologies. Businesses ever hungry for efficiency enhancements kept demand high; so did households seeking the latest and greatest and interactive educational and entertainment software that broadband communications could provide. With nearly all U.S. households wired by 2010, two in five white- or pink-collar workers now work from home full time; many more do so part-time. High levels of global trade drove the development of globally harmonized product standards. Trade itself was global and multilateral in focus. Regional trade groups were not really trade blocs at all; they were more like halfway houses to global trade for newly reforming countries. By 2010, only a handful of significant trading nations had significant tariff and nontariff barriers. Offsets were now second generation — for example, Vietnam requiring them of Chinese companies wanting to sell aviation equipment locally. China pared back its own offset requirements; with its booming economy, China no longer needed them. Free-trade conditions and the Internet facilitated technology transfer to the new manufacturing and knowledge-based economic zones. Workers on multiple continents were now able to work closely on common (design, engineering, for example) projects. Language and time zone differences were trivial complications to these cross-national, cross-cultural collaborative efforts. U.S. and European-based companies discovered that creating cross-national development teams

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise not only was attractive from a cost standpoint but also ensured high levels of local intellectual content — so critical for a truly global marketplace. The WTO evolved into an increasingly important international organization, respected by mature and developing nations alike for its fairness and efficient bureaucracy. The IMF became more involved with solvency problems of very poor countries, while the World Bank actively supported free-market infrastructure projects via investment credits and small, short-term equity positions in start-up operations. Private investment continued to be the driving force of infrastructure, however, among other things thanks to highly dynamic venture capital markets and ever-sophisticated risk management tools. The other major surviving international organization was the UN, whose traditional activities were pruned but continued nonetheless to supply a structure for international peacekeeping and humanitarian relief activities. The U.S. and Europe contributed high-tech weaponry to these police activities. Across the world, the U.S. military presence was significantly downsized and limited primarily to a residual presence in Southeast Asia and the Middle East, which remained subject to low-level instability. Globally, however, it was a time of low weaponry demand. Free trade and globalization had profound impacts on highly skilled human capital, which could move comparatively easy across borders as major trading nations embraced liberal immigration codes if they enhanced national competitive advantage. Scientists from developing countries trained in the U.S. faced difficult choices when their visas expired: Stay and live reasonably comfortably in the U.S. or go home and make perhaps a small fortune. The battlefield for power and influence in the world was no longer military but economic in nature. Only small, economically insignificant nations worked out their differences by taking to arms. For all other nations, power resided in the sum of their competitive economic advantages vis-à-vis their trading partners. This was not exactly just "good sport"; competition was typically cutthroat, in the extreme bordering on unethical and even unlawful. For the most part, the major economic powers maintained high intellectual property protection but below them there was widespread piracy and ripping off. The economic cost to the inventing nations was mitigated by the sheer speed of product innovation and the fleetingness of product life cycles. Nationalism itself was undermined in the global, information-driven economy through a combination of national-to-local "downloading" of funding and program responsibility, and because of the radical decentralization of institutions brought about by the Internet and advanced communications technologies. As goods, services, capital, and in many cases people flowed fluidly across national borders, subnational and cross-national economic zones evolved into the most important sources of economic growth. These New Economic Geographies (NEGs) lacked a formal, juridical identity, but they were real and increasingly important poles of new investment, technological innovation, and job creation. Here in North America, Silicon Valley was a high-tech precursor of the NEG trend. By 2010, there would be NEGs such as the San Diego-Tijuana manufacturing belt, the South Florida-Caribbean commercial area, and the Southeastern Brazil industrial (incorporating Northeastern Argentina) among dozens of others throughout the world. In the developing world, an important demographic result was the

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise redirection of rural emigrants away from old, heavily congested urban areas, toward these booming NEGs. These NEGs required massive amounts of both hard (roads, bridges, rails, airports, power, water, etc.) and soft (housing, hospitals, schools, etc.) infrastructure investment. More than half of these projects were financed through build-operate-own/transfer-type privatization schemes. Consumers in the mature markets of the U.S., Europe, and Japan are economically healthy for the most part, but not secure. Paradoxically, there is little economic security in this strong, dynamic economic environment. Affluence is widespread but requires enormous time commitment to work and constant skill upgrading. Competition in the workplace is intense and unrelenting. Even in Europe, two-week vacations have become extremely rare; there is money but a paucity of time. Adding to time poverty, middle- and upper-class mature market consumers (which now count Taiwan, Singapore and Korea among their ranks) manage their own pension, insurance, and benefit programs. The plethora of international investment opportunities has made this much like a potentially lucrative sport — a very addicting one at that. In the absence of government or pension programs, savings rates are high as consumers realize they themselves must provide their own next retirement funding, with bare-bones government help. Mature market consumers (and to some extent professional/affluent classes in Emerging Markets) are environmentally aware, with strong quality-of-life feelings. Life is demanding, time is short, and few will tolerate having their precious little leisure time ruined by dirty air, polluted lakes, and noisy skies. At the international level, the United Nations Organization for Protecting Environmental Resources (UNOPER) manages a voluntary program in which member nations buy, sell, and barter CO2 "pollution rights." Pollution "credits" are allocated on the basis of industrial development and per capita income. It has the effect of discouraging highly polluting industries from producing in the developed world. Within mature market countries, market incentives take the form of privatized roadways and bridges, as well as "smart highways" in which automobile operators are charged differential rates for use of highways and bridges. This turns out to be a lucrative new business opportunity. A wide range of other market-based solutions are effectively applied as well. Meanwhile, the scope of the Environmental Resources Management Agency (formerly the Environmental Protection Agency) is radically reduced and different. ERMA now polices a much narrower range of environmental issues — groundwater pollution, for example, and others not handled by the market. The environmentalism is not ideological; it is personal (some say selfish) and practical in nature. Likewise, mature market consumers are concerned about infectious diseases, which the World Health Organization (WHO) data prove have been on the sharp upswing as many of the more remote developing world "hot zones" have been brought into contact (via commerce, travel, missionary and scientific work) with the more developed population areas. WHO has expanded surveillance of Ebola-type outbreaks in response to several major crises in Africa, South Asia, and even Europe.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Natural and man-made health threats encourage affluent consumers to live far from the sources of these problems. Communication technology allows many to live in safe, environmentally clean planned communities where urban and suburban problems do not have to be faced. Meanwhile, in the Emerging Markets, rapid economic growth and heightened consumption (gasoline, petroleum products, meat, etc.) have rendered natural resources (especially air and water) extremely vulnerable to contamination or depletion. With limited success, some Emerging Market elites and intellectuals pressure their respective governments to join the global Green movement by embracing high (if not First World) standards of environmental stewardship. Rapid economic expansion, political reform, and liberal global trade combine to accelerate the growth of Emerging Market middle and affluent classes. Consumption potential is enhanced by the deepening of financial markets and the availability of consumer credit, courtesy of new financial market players such as Citicorp, GE Capital, and Household Finance. The ranks of first-time car buyers expand tremendously. Emerging Market consumers show no loss of appetite for all kinds of consumer goods. And increasingly, especially in Asia, the new middle classes are discovering the wonders of Europe and the Americas. Hundreds of local travel companies now organize tours of London, Paris, Rome, and New York, among other prime destinations.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Scenario Matrix - Pushing the Envelope Drivers/Scenarios Pushing the Envelope World Economy and Market Environment Dynamic, global economy with highly integrated markets; overall finance stability at macro level, volatility at enterprise level; capital is available but risk adjusted cost of capital; high demand from mature and emerging markets; R&D = small r, Big D; short termism; a large affluent class, growing middle class world-wide; overall low unemployment and flexible labor markets (telecommuting at high end labor). International Trade Environment World Trade Organization kind of world establishes and enforces free and fair rules of the global trade game; second generation offsets between emerged & emerging markets (e.g., China & Vietnam); few residual regional preferences, EU, NAFTA; harmonization on navigation, environmental via strong ICAO; blurring of air line nationality (e.g., AA/BA/USAIR); market determines landing rights, with congestion based pricing in mature markets; privatization of ATC in mature and select emerging markets; development of internet based open market for airline seats; airlines move to leased aircraft and provision of air services. Political Instability Fairly Stable; some low level instability in Middle East (religious / ethnic) and Russia (little border tension); social tension between haves and have-nots. U.S. Military Requirements Low level US "police" role under UN auspices, US and Europe contribute high-tech weapon systems to police force; some US military presence in Middle East; problems are local bullies, civil strife; significant reduced basing around world; European unification limits need for strong NATO; some basing in South East Asia; rapid deployment forces; low level of global conflict leads to low armaments demand. Global Distribution of Power & Technology Increased number of effective actors; high level of rapid technology diffusion fed by global infonet; still have and have not states and groups; many niche economic powers; information security is problem, particularly in commerce. Fuels & Fuel Sources Oil is critical and some Middle East instability; plus

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Drivers/Scenarios Pushing the Envelope   environment quality issues lead to alternate fuels; market driven access to resources. US Policy Basic policy - laissez fair, (in both economic and social policy); tort reform combined with strictly enforced truth in labeling laws; anti-trust laws much more liberally interpreted due to dynamic high-tech information rich nature of economy; bankruptcy laws strictly enforced; tendencies to off-load social responsibilities to state and local governments; minimal government, privatization of services; no deficit/reduced debt, tendency not to subsidize industry; minimum body of law and regulation to support a dynamic free market economy; affluent charities for humanitarian work. Corporate Structure and Operations Trend to virtual, global decentralized structures, with mobile contingent labor; technology proliferation is high and dynamic; market share is dynamic, in general very hard to capture share for a long time; 24 hour operations; significantly reduced offsets (some still exist in excess capacity segments or in newly industrialized countries); alliances very important, but flexible, often short term; ownership patterns are dynamic with variable mix of capital sources; corporate governance is often global and virtual; labor competition is intense at high end, but less so at the low end; trend toward converging wage rates world wide. Environment This is key quality of life issue; attitudes and solutions to pollution vary across world ranging from don't care to highly engaged in prevention and clean up; often back yard issue that plays out in politics; generally this world is moving toward "green"; as a more affluent society the US is pushing market based environmentalism and marketing green technology world wide. Public Health General levels of public health are high and follow quality of life; very serious spikes in global infectious diseases due to high mobility; environmental epidemeology is well funded. Public Attitude to Technology Love that stuff; "anywhere, anytime" newness, whimsy, fads; seen as good, as a solution rather than the problem; popular support for "big science". Education Global meritocracy, in love with education; education is life long not in discrete chunks; multiple careers; in "sciences" its technical more than basic research; focus on business and

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Environmentally Challenged U.S. Economic Competitiveness Worldwide Demand for Aero Products/Services Threats to Global Security and/or Quality of Life Global Trend in Govt. Participation in Society Weak Low Growth High High Summary After years of negligence and abuse the global ecology has turned against the industrialized world. Economically harsh measures are required if the now obviously destructive levels of CO2 emissions are to be reduced and global catastrophe avoided. Of all the world's major economic powers, the U.S. is among the least prepared — politically and economically— to make the needed sacrifices and is suffering accordingly. All hydrocarbon intensive industries are under merciless pressures: legal, financial, and social. Noncooperating countries, and there are a number of them among the less developed nations of the world, are risking military as well as diplomatic and economic sanctions if they do not similarly curtail their CO2 emissions. The World Environment Council has become a dominant force in world affairs surpassing in importance and power even the IMF and the WTO. Despite the considerable expansion of governmental and regulatory intervention to reduce the CO2 threat, public confidence is low and economic expectations are lower.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise The following excerpts are reprinted with permission of the Children's Education Project of the World Environmental Council, Brussels, 2021 … While all those requests have been more than flattering, the real reason I accepted this assignment sprung from an experience I had in my children's school last year. I deeply appreciate the confidence placed in me by the Brussels Commission, but the truth is I never would have undertaken this essay were it not for the discovery on my part that children take so much of today's life for granted, that they truly do not know how close we came (and still are!) to the extinction of our species. It is a story worth knowing. The ethics of our era are unashamedly global; but I will be forgiven, I know, if I begin this story from the perspective of the United States. After all, this essay is first intended for that school audience; and Americans are clearly the ones who need the most help in adjusting. To the surprise of all economic pundits of the 1990s, the U.S. gradually lost its global competitive position in business, technology, and sheer societal energy as the early years of the millennium passed. While many nations, especially in Europe and in the emerging markets, surged in growth, the U.S. economy stagnated as U.S. corporations wasted considerable investment capital and incurred huge debts in a takeover and merger mania. Wall Street's pressure for short-term profits resulted in significantly reduced funding for research and development across many industry segments. Moreover, increasing numbers of firms moved sourcing and manufacturing operations offshore to reduce costs and more effectively compete in the face of intense global competition. Many firms also were under pressure to maximize cash inflow to cover very heavy debt service obligations. Poor business decision making was not the only reason for a lethargic U.S. economy. After a brief and unsuccessful attempt at fiscal reform, the U.S. government (under pressure from an aging population) returned to high social spending mixed with regulatory invention and increasing tax burdens. Of course, the U.S. government was unable to reduce the debt under these circumstances. In fact, the U.S. debt increased as various administrations were unable to control escalating Social Security costs resulting from intense political heat applied by a powerful and extremely well organized aging population. Healthcare reform efforts suffered similar resistance. Schemes such as federal requirements for U.S. corporations to assume a greater share of healthcare costs further encouraged corporate flight from the country. Increased taxes for social programs resulted in low personal savings rates and less capital for infrastructure improvements and research. Efforts to reform education in the U.S. became embroiled in ideological disputes. As a consequence of offshore sourcing and inadequate training of the work force, unemployment among lower-skilled workers grew rapidly. Most new job generation was in the low end of the service sector. The only real improvement in the U.S. economy was in trade policy — it came as a Pyrrhic victory, however. The U.S. made some early progress in reducing its trade deficit but it had done so using strong-armed trade threats and nontariff instruments, particularly in dealings with Japan and China. It worked for a few short years (into the early 2000s) while the U.S. economy was

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise still the most attractive consumer market. However, as the consumption capacity of the U.S. economy waned (causing import demand to drop), the Japanese and Chinese retaliated with trade restrictions on of U.S. products. Antagonisms ran high, but the U.S. was powerless to do much more than live with reverse trade discrimination. There was limited public support for defense spending since there were few perceived threats other than economic disputes with Japan and China and some intractable terrorist issues, particularly Islamic fundamentalism. Several U.S. failures in supporting nation building experiments in Africa and Latin America fed a growing national mood of isolationism. The resulting reduced defense budgets led to a decline in DOD procurements. Limited orders caused a major decline in the defense industrial base; suppliers to the prime contractors were particularly injured. Other major economic powers did not share the U.S.'s problems. During this same period, Europe, Japan, China, and a number of countries on the Asian littoral experienced significant growth as a result of the improving efficiency of global capital markets targeted at investments in new and emerging global markets. As East Europe recovered from its depression in the 1980s and 1990s, it provided a major market for exports from the European Union (EU). Similarly, the growth of the middle class in such countries as India and China not only provided large internal markets but also provided major opportunities for Japan and other Pacific Rim exporters. In China alone, annual export earnings and GDP growth averaged 10 and 12 percent, respectively. Meanwhile, healthy economic growth permitted EU nations and Japan to make substantial progress in retiring the large social debt accumulated in the 1980s and 1990s. In Japan, for example, large corporate profits from increased exports permitted greater privatization of social services. In the EU, investment capital was available for infrastructure improvement. Japan, on the other hand, was able to divert money away from infrastructure projects having made heavy investment in the 1980s and 1990s. Japanese companies were therefore in a stronger position to take on long-term research and development projects. A perceived reluctance of the United States to perform its traditional role in world affairs resulted in expanded defense spending in Europe and Asia. Although many Pacific Rim states had good economic relations with China, they continued to fear Chinese expansionism. China avoided a succession crisis and continued along a path of heavy defense spending (both in absolute and relative terms). Chinese military equipment modernization was unmatched by any country during this period. Japan, in particular, found the U.S. withdrawal from Asia disconcerting as it increased the vulnerability of trade routes and oil supplies, and generally disturbed the balance of power in the region. Japan amended its constitution to permit up to 5 percent of its GNP for defense spending and invested heavily in advanced naval and long-range air surveillance and interdiction technologies and capabilities. Other Asian nations similarly decided that moderate to high defense budgets, particularly for acquisition, were prudent given Chinese capabilities. The EU, similarly, was disturbed by the seeming U.S. withdrawal from its traditional role in Europe. The potential for instability worldwide, possible threats to oil routes and oil reserves, and a requirement for a strong regional economic union motivated EU members to maintain a strong defense industrial base and dual-

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise technology infrastructure. Europe increased its research and development budget. This effort to maintain a strong defense and advanced dual-technology base was partially funded through foreign sales, particularly to the Middle East and to emerging industrial powers in Southeast Asia. Many of these sales were through licensed production and technology transfer instruments. Accelerated industrialization in China, India, and Southeast Asia was among the most significant developments of the late 1990s and early 2000s. Manufacturing grew at unprecedented levels; many of the Asian Tigers' manufacturing sectors grew at levels above 10 percent a year. It required extensive infrastructure construction. But the new availability of highways, for example, resulted in major demand for automobiles, in turn increasing congestion and pollution. Similarly, economic growth among these nations had the effect of creating a large middle class. The middle class become the major impetus for a large demand for all forms of transportation, including business and recreational air travel. Russia did not experience the rapid growth of most of the industrialized or industrializing nations in Europe and Asia. Its government debt continued to grow, but it did make steady progress in resolving its massive economic problems and ameliorating social conflicts. Major European and Japanese investment in the manufacturing and resource extracting sectors was the primary reason for the steady improvement in the economy. Growing industrialization worldwide generated enormous demand for Middle East oil. Global supplies remained adequate, however, and the major producers were unable to reach agreements that would have permitted them to significantly increase the price of oil. The main causes of this were the militant policies of Iran as well as major arms procurement by that country. All other nations in the region were compelled to invest heavily in deterrent systems. Thus the Middle East arms market was a major customer for the European defense industries. Similarly, China found a major market for its defense equipment in exports to Iran. Iran itself remained a fundamentalist Islamic theocracy. This kind of militancy did not spread to other Middle East states, however. While global tensions were high, global business was expanding at a healthy clip, as evidenced by new factories, new trade and commercial relationships, and increased cross-border capital flows. This free-trade environment drove demand for truly efficient and global transportation systems. Predictably, living standards in the developing world improved as household income grew and physical and social infrastructures were developed. Diet and public health across the globe were moving toward Western standards and consumers everywhere (outside the U.S.) were feeling more confident about the future. On the other hand, congestion in cities was becoming a serious problem, water and air pollution were on the rise, and urbanization was compounding the development problems in large metropolitan areas. This rapid, worldwide industrialization resulted in unprecedented use of petroleum products. By 2007, many scientists across the globe were raising environmental concerns and predicting dire consequences from the emergent threat of global warming. An evidence debate occupied a surprisingly large place in the daily news media — especially in Europe, but on the Internet, as well. From 2008 to 2010, a very strong consensus emerged in the scientific community (and in many influential parts of the global political community) that the world was on the brink of an

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise environmental crisis because of high levels of CO2 emissions. New measurement techniques (available only in recent years) demonstrated emphatically that global warming was occurring. It was further revealed that a small increase in the arctic temperature was leading to permafrost melting in the tundra. Scientists had known for over a decade that the melting tundra would release CO2 and methane at levels so high as to seriously compound problems that had been created from industrialization. The political reaction to the global environmental crisis in Europe was more decisive than in other parts of the world. Green parties became very powerful in the EU and their concerns quickly dominated political agendas. The Europeans had had CO2 limits and CO2 emissions credits systems for utilities since the 1990s. These were expanded dramatically. The Union also established stringent CO2 emissions requirements on all emitting industries and vehicles. U.S. (and many emerging market) products that could not meet these standards were denied import licenses. Whereas, European products that could meet the new standards were marketed with growing success everywhere (even at somewhat higher prices). Initially, U.S. responses were weak and vacillating owing primarily to the political reality that job protection had become the bottom line of economic and social policy. However, mounting evidence of an impending crisis over about two years created a mood swing in U.S. public attitudes (especially among the baby busters generation that had always been ''green") that made a positive government response a necessity. U.S. industry driven by market concerns and export opportunities (the European CO2 standard was fast becoming global) put even greater pressure on the government for decisive action in setting targets for emissions levels, supporting research, and ameliorating the social and economic consequences of attempting to meet the targets. The most developed industrialized nations led several diplomatic moves for concerted global action. However, newly industrializing nations, led by China, were quite skeptical concerning the "Western" definition of the problem and were very reluctant to accept "Western" solutions. Some nations and many radical groups insisted that the CO2 scare was a conspiracy of the industrialized nations to prevent the emergence of competitors. Not satisfied with the global diplomatic malaise, the Europeans established very aggressive CO2 emissions targets by 2012. The U.S. and Japan followed this lead and also established strict time tables for lowering CO2 emissions. These targets and the regulations necessary to meet them became the progenitor for the development of new products and services across the globe. The rapid decrease demanded in CO2 emissions also had the predictable effect of seriously reducing economic growth. The world slid into a deep recession for four to seven years (depending on the region). By 2015 a complex mix of international cooperative and independent national actions was under way, within a constrained economic environment. These actions included: (1) national efforts in CO2 control, including major regulations, use taxes on fuels, significant government sponsored research and development and incentives and penalties; (2) private research and development for solutions that gain market share in a CO2 "limited" world; (3) international research and development efforts of corporations and nations; (4) international regulations agreements; (5)

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise national and international emissions targets; (6) the emergence of a World Environment Council that has been delegated authority to impose sanctions on offenders of emissions targets and regulations; (7) an international agreement with a phased set of targets to reduce world CO2 emissions significantly by 2040. The war on CO2 emissions resulted in major economic dislocations, significant unemployment, and major increases in national debts as governments and corporations attempted to implement national and international strategies. As more restrictions were placed on the use of hydrocarbon fuels, the global recession deepened. Internal combustion automobiles became seldom used; factories curtailed operations unless they reduced CO2 emissions; far fewer scheduled airliners flew and when they did it had to be with the most updated propulsion systems. As more and more countries "came on board" with CO2 limits (the physical evidence — including disruptive climate change — was simply becoming overwhelming), a fair adjudication of CO2 emissions limits evolved from the European experience. Across the globe, CO2 emissions "credits" were allocated to countries through multilateral negotiation based on a complex set of metrics including level of industrial development, size and density of population, number of forests, etc. Countries could buy and sell their credits — their ''rights to pollute." As had happened in an earlier time in the 1980s and 1990s in the U.S. and Europe, a futures market in CO2 credits emerged and global market forces pushed the sale, barter, and trade in credits as differing countries made choices about the approach they would take to meet global standards. Within countries the re-allocation of emissions credits was up to national governments. Some, as in Europe and many parts of Asia, chose strict highly regulated rationing programs. In the U.S. regulated set-asides for "nationally critical activities" were mixed with market mechanisms for private sector utilization of "emission rights." The world has entered into a period of considerable social crisis with inevitable political and economic instability. There is continuing tension over hydrocarbon limits and credits and over national regulations and targets which often seem to favor local industries. Many nations have increased their defense budgets and strengthened their military forces to back up economic sanctions for states not cooperating with CO2 reduction protocols and for the simple reason that the future has become highly uncertain. The dislocations associated with hydrocarbon limits have created civil unrest in many economies. Across the globe, these are very hard and acutely uncertain times. Stagnant and recession economics has become the expected norm, globally. While oil supplies have remained stable and wholesale costs have not increased drastically (under complex multilateral treaties), end-user costs of products derived from oil have increased dramatically. Along with emissions credits, rationing of oil has become one other means of controlling CO2 emissions. But this rationing has increased production costs as manufacturers invest heavily in alternative processes. Almost all nations are experiencing high unemployment, high inflation, high cost of capital, and major loss of net worth as stock markets stagnate and decline. Entire industry segments are now at risk, if they still exist. Corporations remain marginally competitive, if their markets are contiguous with their manufacturing location, but are in serious trouble if they must rely on long-range transportation.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Of all nations, the U.S. is among the worst off. Highly dependent on CO2 emitting industries, our resources are stretched very thin as we attack the problems. The poor business judgments of earlier times, combined with governments that recklessly pursued social spending and higher public debt, left the U.S. with few options in these very hard times of restricted petroleum use, high unemployment, and interminable recession. Government debt is high and private corporations are stretched to the limit; yet vast resources are necessary to find both immediate and long-term relief of CO2-related problems. Much of the U.S. population has shaken off its earlier lethargy; Americans generally rise to any challenge. Yet they find the most vigorous actions are centered in Europe, and many join those efforts through the Internet to make the most of their contributions to the global crisis.

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Scenario Matrix - Environmentally Challenged Drivers/Scenarios Environmentally Challenged World Economy and Market Environment Global recession; entire industry segments at risk, some segments doing quite well; lots of environmental rules; high unemployment, high inflation, high cost of capital; stock markets have tumbled, bankruptcies high among energy dependent companies; financial stability imposed by international government coordination. International Trade Environment Intraregional trade agreements prevail; cooperation within trading groups; global harmonization on environmental issues; landing rights and air space highly regulated and tied to emissions credits; environmental crisis forces international cooperation. Political Instability High political and economic instability; tension over hydrocarbon limits; trade tensions; civil instability in disrupted economies; the future contains very high levels of uncertainty; some rearmament (significant in some cases). U. S. Military Requirements Need to be able to threaten military sanctions for states not cooperating with CO2 reduction protocols; cooperative actions; tendency to want to find non-military solutions to problems; DOD pursues hydrocarbon free power systems; moderate relatively high-tech world arms market. Global Distribution of Power & Technology Japan, China, US, and the European Union are key powers; key to global leadership is intellectual capital (especially in science and research) - European Union may be leader in global science and research activity. Fuels & Fuel Sources Stable oil supplies; wholesale cost is stable and maintained through negotiated international agreement on fair price for suppliers; rationing of CO2 emission limits the use of hydrocarbon fuels; huge global effort searching for alternative fuels. US Policy Global environmental crisis results in bifurcated US policy responses including international scientific and environmental cooperation on the one hand and economic protectionism on the other; labor issues are highly politicized; in response to Europe's leadership in the reduction of CO2 emissions, pragmatic US cooperation emerges; no tort reform (possible reversal of earlier reforms); very US centric and populist policies tempered by

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Drivers/Scenarios Environmentally Challenged   strong regional (NAFTA +) links; lenient anti-trust interpretation and enforcement to buttress US industries; mixed pressures on bankruptcy decisions related to environmental issues, job retention, and existence of national industries; very high deficit spending and national debt; low humanitarian consensus even regarding Latin America (just trade, not aid). Corporate Structure and Operations Corporations are competitive if their markets are contiguous with manufacturing location but are not competitive if they rely on long range transportation; there are incentives for the proliferation of technologies impacting products or services that reduce CO2 emissions; developing countries leverage for requiring offsets is primarily limited to CO2 emission credits; environmental regulations result in high production costs and high unemployment; US job retention policies burden firms with high labor costs; interfirm alliances across geographic regions to optimize CO2 credits. Environment High sensitivity to all pollution issues, but spending focus is on CO2; long term effects of all products and activities are scrutinized; alternatives to hydrocarbons will have high threshold of acceptance. Public Health Carriers for many diseases have greater range with warmer climate; health problems from mass migration away from climate impacted areas; climatic shifts have huge impacts on public health globally; public health funding becomes serious competitor for public resources. Public Attitude to Technology Technology is the problem!; technology is the savior!; this debate may form the locus of political discourse; general anti-(new) technology bias. Education US public education is under-funded; the funding that is available flows into focused university research and global work in environmental science; independent and private funding is in applied science and technology; non-science education gets very little support; virtual education is finally being supported. Geographic (Living) Dispersion Bicycle world; huge disincentives to disperse; clustering near work/stores. Communications and Information Technology For about the first decade, strong global growth in communication, but US growth in communications and information systems tended to lag even as US companies

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Maintaining U.S. Leadership in Aeronautics: Scenario-Based Strategic Planning for NASA's Aeronautics Enterprise Drivers/Scenarios Environmentally Challenged   helped drived global development; in last years communication is leveraged in all ways possible to substitute for transportation; significant computer-controlled energy management. Production Cost Performance Cost of manufacturing goes up as policies to reduce CO2 are implemented, driven by pollution credits; alternative fuels crucial; manufacturing location decisions must consider local pollution credits and transport costs. Technology development and Application Very unidimensional technology development - focused on detecting, modeling, and forecasting CO2 plus energy conservation (demand and supply side), alternate fuels and sources of energy, technology to "absorb" carbon and store in benign forms; science is done globally and technology is done locally. Time Poverty Leisure Time, Entertainment Time poverty is not a serious problem for most people; very local leisure and entertainment; home entertainment is very important; town picnics, county fairs, and tree planting outings. Global Transportation Infrastructure Integrated infrastructure designed to reduce CO2 emissions; regulated access to infrastructure; trend toward smart infrastructure (e.g., metered auto access to highways). Safety and Security Other issues overshadow safety; security threat (including data security) is moderate, disbursed, and comes from nations and groups dissatisfied with limits to growth and development. Access to space Very hard to justify unless attached to solution to CO2 problem, such as space based sensors or energy source.

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