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This document presents the scenario frameworks used in telling the Story of TERRA and thus to help European policy makers analyse the role of EU in the changing global context.

The basic idea here is to present “a big picture” of global transformations. The historical background includes current trends in the world economy, which provide a point of departure for the Story of TERRA. The information is provided mainly on the basis of the IFs for TERRA model and its databases , and is available (on CD) to all interested parties in order to give a common perspective for experiencing, using and extending scenario analyses.

Trend analyses and the scenario framework together provide the Story of TERRA meta-level framework.

Because scenarios are experienced individually, but identified and interpreted collectively, the relationships among a set of scenarios (or ‘scenario space’) distinguish scenarios from projections. Scenarios do not completely describe the future, but partially describe many possible futures. Ideally, scenarios should differ along a few dimensions or possibilities that highlight important features of the analysis.

Of course, the phenomena with which the propositions are concerned involve other important developments, especially technological progress, economic performance, welfare growth and environmental impact. These are not treated as uncertainties – to highlight the policy implications, they are largely treated as common factors (esp. technological progress), ways of describing policy levers (especially for the initial aggregate-level consideration) and performance indicators.

Globalisation: the process of ongoing and often rapid increase in worldwide flows of various kinds, including people, traded goods and services, finance and ideas. In particular, we recognise differences in globalisation patterns for:

Markets - which have global or local supply and/or demand sides?
Governance - which decisions are taken at which level?
Civil society - where are people’s identities and what is the scope of the groups through which they express themselves?

This necessarily leads to more possibilities, but they can be trimmed down using consistency and explained in the scenario narrative.

Integration : This is a complement to globalisation. Where globalisation talks about how much we affect each other, integration addresses:

Cooperation: are decisions collective and based on mutual interest, or are they non-cooperative or power-based?
Internalisation: Do our individual and collective decisions take (separate) account of spill over effects?

Division: there is much evidence of widening income, welfare, access to the information society, etc. divides. Rather than simply accepting these or rejecting them, we need to understand how they are linked, differentiating equality of opportunity/access from equality of outcome, and local (within-country, say) inequality from global inequality .

The logically possible alternatives are not all equally relevant – in particular, it seems likely that globalisation will proceed, although its equity, inclusiveness and efficiency are open to debate and analysis. Moreover, scenarios developed for specific thematic analyses (Human Capital, Growth and Equity and Information Age Sustainability) framed and interpreted these dimensions in slightly different ways. This is a natural consequence of the role of scenario space in highlighting relevant features.
Beyond more-or-less measurable factors lie other domains in which we can discern major trends that are not direct results of policy choices. Some can be treated as exogenous or at least common to all scenarios. Others may be used to define “scenario space.” These trends are briefly discussed below.
Liberalisation: reducing barriers to entry (market access liberalisation), deregulation (market conduct liberalisation) and/or controlling ‘tipping’ (which may, paradoxically, entail re-regulation in some form.

Market access liberalisation is related to globalisation - especially liberalisation of trade, which at the moment seems to be suffering severe setbacks in both the developed and developing worlds - but also the advancing liberalisation of labour and some other markets. Other specifics include IPR protection and universal access provisions.
Market conduct liberalisation is related to integration and such specifics as pricing, takeovers, standardisation and co-ordination or networking among firms.
Market structure liberalisation has to do with mitigating the winner-takes-all tendency and the concentration it engenders and also with the possible emergence of sectors involving a mix of public and private entities.

This is connected to the human capital and equity themes, as the following scenario description indicates: “High-friction … is a winner-takes-all economy where small knowledge elites capture most of the economic value. The economic structure rewards a few and leaves the great majority behind. The resulting social friction of a two-tier society consisting of ‘knows’ and ‘know-nots’ consumes much of the economy’s potential in a vicious circle.”

If liberalisation means laissez-faire, it is not obvious that it is (or should be) a trend; the income distributions in 'market dominance' countries are far more skewed than they are in the less-liberal 'social market' countries, especially after taxes and benefits are taken into account. Liberalisation varies in sub-scenarios - market liberalisation strongly affects the human capital theme (economic sustainability). In a way, it is part of globalisation, since market access can lead to global markets.

Dematerialisation, immaterialisation: these terms refer to the ongoing impact of ISTs in reducing the material input requirements of production and the substitution of immaterial (e.g. informational) goods and services for material ones in consumption. Particularly in the Information Age Sustainability theme, they are treated as drivers of impact indicators.

Demographics: the demographic transition and accompanying changes in age structures primarily form part of the underlying trends – while some analyses in the literature treat them as endogenous, this goes beyond the current scope.

Growth: It is true that the pace, scope and drivers of growth appear to have changed in recent times, particularly as regards productivity of different inputs, but the potential impact of policy justifies the decision to treat economic growth as an indicator of scenario development.

Linkage: This is a refinement of integration to represent the extent to which considerations arising in one sustainability domain are taken into account in others. Linkages to the economic dimension are of particular importance, since economic incentives and mechanisms exert such profound influences on GNKS development.

Network structure: Many aspects of the GNKS are sensitive to the way people are connected rather than simply the number connected. In particular, it is useful to distinguish three generic structures: a ‘fully connected’ single network in which (almost) everyone is connected to everyone else; a ‘small worlds’ single network in which local clusters of fully connected individuals are linked by the connections of a smaller number of ‘cosmopolitans;’ and a ‘virtual patchwork’ made up of overlapping multiple networks. This gives a more precise expression to the micro-level description of globalisation, and supports paradigmatic modelling that tests the logical consistency of assumptions about integration and division.

Satiation: We have grown accustomed to measuring success by increase – indeed, one axiom of neoclassical economic utility theory is that more is better, economic sustainability is often equated to rising production, incomes, and welfare. Though growth and change are ‘wired into’ the economic system, it is possible to imagine a world in which welfare levels have stabilised, rather than rising (or falling) inexorably. This is a characterisation of possible scenario outcomes.

Technology: the march of technology has proven so robust that we are reasonably safe in treating it as exogenous. We do, however, pay attention to different rates and directions of change across countries and sectors. This is clearly related to intellectual property rights, and more fundamentally to the relation between people and technology: whether technology serves us (well or poorly) or whether it transforms us (as individuals, as societies and in relation to the planet).