Five forces are shaping political risks, from climate change to conflict. Here’s what to look out for.We see patterns everywhere — in nature, in physics and in the world we’ve created — economic booms and recessions; market spikes and crashes; social stability and revolution. But I’ve never accepted George Santayana when he said, Those who cannot remember the past are condemned to repeat it.” Recognizing patterns is one thing. Thinking they’re repeating themselves, that’s something else entirely.
When I think about global political risk going forward, I see five types of patterns we should watch for. They create very different types of disruptions
- First, patterns that occur consistently but are trending negatively, ultimately leading to crisis.
- Second, singular long-term events that hit with tremendous force.
- Third, patterns that bring greater and greater impact.
- Fourth, sudden events that happen so infrequently they aren’t considered patterns…until one transpires.
- Fifth, patterns that are speeding up, eventually happening so frequently that there’s little chance to prepare for or react to them.
The first three patterns we see coming, but for various reasons (incrementalism, collective action problems, the daunting nature of the challenge) tend not to be effective at planning for. The latter two are generally unrecognized until they become truly disruptive. Let me consider all five in turn.
Pattern 1 – Ever More Negative
Most of the world’s long-term social, economic and political factors are trending favorably — expansion of global education, reduction of poverty, improvements in the overall quality and duration of life, decline in the cost of commodities. As much as globalization has its disenfranchised (and, accordingly, its discontents), its overall long-term record remains strongly positive.
But I see two areas that are particularly dangerous. One is climate change: both global warming and more extreme climate conditions. Climate change skepticism has been sufficiently rebuffed that global warming is now near-universally recognized as one of the world’s most important challenges. But the science around its severity — given feedback loops in particular — is extremely complicated, making it difficult to reliably assess costs of mitigation. There, the data are open to multiple interpretations. It’s easy to obscure both the urgency of the problem and the utility of potential solutions — both useful avenues to vested interests aiming to stall, as they would be harmed by a move away from the status quo.
And, of course, climate change has become the world’s largest collective action problem, requiring coordination by a wide swath of actors that don’t tend to cooperate, especially not on matters fundamental to their economic well-being. Most problematic is that the people that will get hurt most in the near to medium term have little power (think small island nations). So there’s no incentive for the big players to move quickly.
That explains why little has been done at the state level. But it’s also true that non-state actors can (and increasingly will) play a role in transforming social response — in the energy field in particular. Further, climate change is playing out over a long time frame, with a logic that becomes increasingly compelling even as the costs are extremely high. It’s banal to say things will get much worse before they get better. But there’s also reason to believe that the biggest actors will eventually take the issue very seriously indeed (even as that comes too late for the most disenfranchised).
The certainty of further procrastination is the biggest concern around climate change, particularly given the coming impact of more extreme climate conditions on the least developed and most populated areas of the world, which are likely to experience far more violence and strife as a consequence. It may well be what ultimately stops Africa from developing (and, ironically, prevents the end to the demographic explosion on the continent, worsening the problem). That will lead to greater refugee flows and radicalism, and in turn create more extreme forms of governance both in the regions directly affected as well as through the reactions of those that aren’t.
A second significant negative trend is labor utilization. This is the issue of inequality which, of late, has been increasing in developed markets, where the world’s upper-middle classes have been hollowing out, largely at the hands of the global emerging lower-middle class (with cheaper productive labor) and the world’s upper class (with more efficient and disruptive technology).
If that continues and expands globally, it will erode the world’s emerging middle classes too, which are far less well insulated than the developed world’s against falling into severe and dangerous poverty — in countries far less insulated against social instability. French economist Thomas Piketty identified only the beginnings of this problem, most specifically felt in Europe: populism and xenophobia, eroding European institutions and lower growth. As the trend continues, it threatens the foundations of modern governance. Established middle classes have proven over history to be the world’s most potent stabilizing force. Insecure middle classes have more recently shown themselves to be powerfully reactionary…
Is this trend likely to continue? Absolutely. The good news is that it’s predictable and playing out over a sufficiently long timeframe that governments have the ability to effectively react. Some developing governments will use the pressure to improve efficiency and transparency, and in so doing redistribute wealth for more sustainable transitions. Others will turn towards authoritarianism. This will have greater consequences for global stability over time, because of the increasingly outsized impact that emerging markets will have for global growth as well as overall economic output.
Pattern 2 — Catastrophic Downturn
During the Cold War, it was the arms race. Massive nuclear arsenals were built out of an unyielding urge to prevail in competition without heed to the broader dangers posed to society. Utterly senseless in such a basic human way, yet completely calculated and rational at the same time. The big risk was the possibility that brinksmanship would get out of hand (most dramatically experienced during the Cuban missile crisis) and we’d end up in a thermonuclear war. It was unthinkable and yet…it could’ve actually happened.
Despite the fact that Americans and Russians still maintain the nuclear firepower to destroy civilization (though only about one-quarter of what both sides had at the Cold War’s peak), there’s not much threat of nuclear annihilation today. Fragmentation of the geopolitical environment, Russian decline and American indifference mean that the United States and Russia no longer threaten each other over every parcel of land. And while relations between the two are poor indeed, that’s playing out primarily in political and economic arenas, not as global military conflict. There’s a thin tail possibility of fighting over a NATO country that could cause military brinksmanship (say a Russian incursion/invasion in the Baltics). but I’d hardly bet on that.
Instead, I’d worry about cybersecurity. The destructive force of offensive cyber capabilities is expanding, while the number of actors wielding them is proliferating rapidly. Defenses are out of date even before they’re constructed. And the gap between the United States and other actors in offensive capabilities is diminishing.
Over the long term, this is fixable as long as it stays between state actors, for two reasons. First, most state actors are bought into the existing system, and therefore interested in relative advantage, not destruction for destruction’s sake. We’ll see more industrial espionage that “levels” the global playing field (and hurts the comparative interest of Western multinationals, reducing their profitability), but less development of so-called “integrity” attacks that seek to destroy core elements of other actors’ livelihood. Development of capabilities in the latter just leads to more mutually assured cyber-destruction, where core elements of infrastructure and other elements of national security for all actors are intrinsically vulnerable to the actions of the other side. While as regards economic attacks aimed at gaining comparative advantage, we’ll see more assertive deterrence/tit for tat.
But as cyber-capabilities move into the hands of non-state actors, integrity attacks become more likely. Most recently, the Ashley Madison hacks destroyed the viability of the company, and have the potential for meaningful disruption among powerful but data-vulnerable elites. These types of attacks come from small private actors that are impossible to dissuade in the present environment. As that trend continues, we’ll see governments taking a more significant role in coordinating their defenses (and punishments), creating more effective transnational cyber-regimes. But government mistrust and Internet fragmentation are obstacles to this trend, leaving room for things to get much worse before they get better. In the near term, multinationals are still strongly underspending on the risks posed in this environment; more so than, say, “sustainability” efforts on climate.
Pattern 3 — Increasing Impact
Uncertainty from a variable of ever-increasing importance: this is fundamentally the China story. China’s stock markets are almost wholly speculative, politically constrained and unmoored from the real economy. The Chinese government’s desires to transform its country into a more market-based and consumer-driven economy has led to greater experimentation and openness…which in turn has allowed for bigger short-term bubbles. None of that is breaking news; and none has a significant impact on China’s economic stability. But global markets were sent into turmoil on China’s recent market crashes, with many (including the United States) experiencing greater volatility than at any point since the 2008 financial crisis as a consequence.
Why? Because China is now the second-largest global economy, and well on the way to becoming the first. Sudden political intervention in China is nothing new; nor is near-complete opacity in Beijing decision-making. But market-moving impact owed to the fact that China is a larger trading partner than the United States for every single country in Asia…and that its decisions on commodities purchasing and reserves holding are what can push some of the world’s most important economies into or out of recession — that’s something the world hasn’t experienced before.
All of this is going to occur at the same time that China is itself attempting to make a politically unprecedented transition from a state-investment directed economy towards a consumer-driven one…while maintaining a single-party system of political governance. If there’s one pattern I’d bet on to dramatically change the way we think about the world economy in the next 20 years, it’s the heightened volatility (and lower quality of global growth) that comes alongside the continuation of China’s rise.
Pattern 4 — Rare, But Happening Now
This is the heart of the world’s geopolitical challenge. Creative destruction occurs in the geopolitical environment, but only very infrequently — the last time was the emergence of the U.S.-led global order after World War II. That allows us to believe the international system is more stable than it actually is. But we’re now at the beginning of just such a period, where we are moving from the longstanding U.S.-led global system to…something else. It’s not yet clear what that something is: regionalization; a more multilateral global concert; a G-2 between the United States and China; or an entirely different international order. But the old system isn’t holding.
That’s going to prove a serious challenge — the rise of emerging markets broadly, the rise of China more specifically, the decline of U.S. foreign policy influence, even as the United States itself is decidedly not in decline. Together with (and in some ways related to) more unilateral approaches on the part of both the United States and its allies, as well as the greater unilateralism of 21st century tools of coercive diplomacy (drones, cyber, the weaponization of finance) — all of which undermines the Americanization of the global system.
That leads to a growth in geopolitical conflict in many areas of the world. Most immediately in the Middle East, where many authoritarian systems come under pressure and become even more repressive — or become failed states — and where there is more fighting between countries that have mutually incompatible ideas for how their respective region should be governed/controlled (Saudi Arabia versus Iran being the most obvious, but by no means the only). Russia becomes more of a revisionist actor that seeks to subvert American gains, particularly as the Russian economy comes under greater pressure. And it means more regional security tensions in Asia as well, with the rise of China.
As with pattern 3, the biggest issue here is China. We’ll see a growing challenge to U.S.-led global standards. This will make the global system less efficient, leading to fragmentation in the global free market, the World Wide Web (and perhaps the Internet of Things, an interesting question), and eventually the role of the U.S. dollar. It will ultimately bring a transfer of wealth away from the United States. The question is how the United States will respond to that rebalancing, and to what extent we are likely to see fundamental conflict as a consequence of that dynamic.
It’s not clear. The desire to demonize China is emerging as a 2016 electoral issue, in part as a reaction to demand for populism and American “leadership” (when “make America great again” is a core slogan, you can’t very well sit by and watch China become the largest economy…). But i’d argue China is still a sideshow for American candidates compared to the more tangible immigration fight and, most importantly, directly domestic economic issues. Still, it’s likely to grow, especially as China itself gets more assertive. Neither the United States nor China has any interest in destroying the existing international system. But China is prepared to take risks to improve its position. And over time, I suspect the United States — to sustain its own status — will be as well. So there’s an intrinsic danger here.
Medium term, I find this to be one of the most significant global challenges — that the Americans and Chinese prove unwilling and therefore unable to accommodate their changing balance of power in Asia and (even more difficult, in my view) beyond; which could mean their present frenemy status tips into active zero-sum confrontation in economic relations, while relations deteriorate on the military front too. That creates a new Cold War with the world split into U.S. -led and China-led blocs, and balancing between them becoming ever more challenging for third-party states. It’s a dangerous security environment for sure, and a particularly problematic environment for global growth.
The good news is that it’s unlikely to persist for long. Within two decades, China’s own core challenges get far greater — both domestically, given demographic, environmental and social/political reform trends; and internationally, as India catches up and the world becomes much more multilateral. The bad news is it’s unclear how China reacts to those pressures when they occur. And at that point, as I’ve mentioned, China has become the world’s largest economy, so the volatility implications on the global economy will be severe. That’s the most definitive risk that comes from geopolitical creative destruction.
Pattern 5 – Faster and Faster
This is the acceleration of technology and its disruptive impacts. The destruction of privacy is interesting on this front. It’s something everyone sees happening, but the erosion is occurring at exponential speed, quickly outstripping political discourse, public outrage or the prospect of any potential response. Looking forward over the next decade or so, if quantum computing comes into existence, suddenly it puts an end to anybody (person or institution) being able to maintain anonymity.
Artificial intelligence is a related area. Stripping human agency over political, economic and social systems creates technological processes that may not easily be harnessed. At worst that’s the singularity or the “grey goo”/nanotechnology scenarios that end humanity as we know it — and I can stop writing updates altogether. But well short of that, AI could change the nature of individual life — super-empowering citizens against governments in a way that makes them impossible to govern, or super-empowering institutions (private or public sector; more likely both) in ways that create a much more authoritarian dystopias.
These are the most discomfiting patterns, because they’re the most disruptive. It’s hardest to identify patterns when the processes that create them are becoming ever-faster and more diverse. The optimistic view: history tells us that far more trends will be productive than destructive, creating evermore wealth and growth. The pessimistic view: it only takes one outlier to upset the apple cart.
(Top image: Courtesy of Vladmax, iStock Editorial)
This piece is based on a Eurasia Group post.
Ian Bremmer is the President and Founder of Eurasia Group.