Get Ready for a Global Geopolitical Depression in 2018

2018 will be the geopolitical equivalent of the 2008 financial meltdown, forecasts Eurasia Group, a political risk consulting firm.

(Photo: iStock)

2018 will be the geopolitical equivalent of the 2008 financial meltdown, forecasts Eurasia Group, a political risk consulting firm.

Its president and well-known political scientist, Ian Bremmer, had correctly forecast some eight years ago that we’d be living in a G-Zero world. A world characterised by a decline in Western power and a leadership vacuum.

This year Bremmer teams up with the firm’s Chairman Cliff Kupchan to warn that the “global order is unraveling.”

The report starts with a comment that presents an uncomfortably real picture of our world.

“The scale of the world’s political challenges is daunting. Liberal democracies have less legitimacy than at any time since World War II, and most of their structural problems don’t appear fixable. Today’s strongest leaders show little interest in civil society or common values.”

It then warns that the decline of US influence in the world will accelerate in 2018.

After nearly a decade of a slowly destabilising G-Zero framework, the election of Donald Trump as US president has accelerated the descent into a Hobbesian state of international politics. The world is now closer to geopolitical depression than to a reversion to past stability.

Eurasia Group, Top Risks 2018

Top 10 Risks In 2018

The Eurasia Group reports lists them as:

• China loves a vacuum
• Accidents
• Global tech cold war
• Mexico
• US-Iran relations
• The erosion of institutions
• Protectionism 2.0
• United Kingdom
• Identity politics in southern Asia
• Africa’s security

Unsurprisingly China, its economic might and its hunger for political and technological might, permeates almost all 10 risks.

Xi Jinping, China’s president, left, gestures while standing next to US President Donald Trump, during a welcome ceremony outside the Great Hall of the People in Beijing,(Photo Courtesy: Bloomberg)

The Most Interesting Bits

China Loves A Vacuum

In describing the very first (or topmost) risk the report points to an inversion that has crept up on the world.

“For decades, many in the West have assumed that the emergence of a Chinese middle class would force China’s leaders to liberalize the country’s politics in order to survive. Instead, China’s political model, despite its domestic challenges, is now perceived as stronger than it has ever been – and at a moment when the US political model is weakened.”

Thus resulting in the opportunity for China to set international standards in global trade, technology and exporting the political value of “non-interference in other countries’ affairs”. But that very same last point could also limit it to being a regional power. And, that China plays no role in fighting global terrorism.

Asia’s largest and most developed countries—Japan, India, Australia, and to a lesser extent South Korea – will see Xi’s agenda as a threat to their democratic-capitalist model. This dynamic could lead to a lot more friction in the South China Sea, over North Korea, and in US-Chinese trade relations.

Eurasia Group, Top Risks 2018

Global Tech Cold War

These shifting political sands also impact the biggest global economic fight - technology.

It’s being fought on three fronts, says the report.

• A race for breakthrough technology
• A struggle for market dominance
• Fragmentation of the tech commons

The key contenders are the US and China but the report doesn’t quite detail how China might outdo the US here despite rivalling it in spends, technologists and using hard state power versus softer private-sector technology leadership in the United States.

US-Iran Relations

This could be the other big flash point this year. The report warns that “If the nuclear agreement fails, the world will enter a new and dangerous dynamic”.

In detailing the impact of such a failure the report raises the “most-likely scenario” of secondary sanctions. But at a time of rising crude prices China and India may not play along.

“The threat of US and/or Israeli strikes would again hang over the region and boost oil prices.”   

The Erosion Of Institutions

Risk number 6 in the report is the most dispersed, amorphous and yet toxic one.

“Ever-larger segments of the public and their representatives have lost faith in the exercise of bureaucratic functions, inviting the political capture of more organs of the state.”

While it speaks mostly of the decline of institutions in developed countries the mentions of politicised media, fake news, rigged elections could so easily apply across the world.

  Institutions are guardrails; strong courts and media lessen dependence for stability on powerful (sometimes erratic) individuals.  

Eurasia Group, Top Risks 2018

Protectionism 2.0

In reiterating the rise of protectionism, the report makes two noteworthy points. That “new rules are being written for the global economy without any overseer or shared norms, so checks and balances against a surge in protectionism are lacking”.

Due to this the “global regulatory environment will become more complex and contradictory”.

Eventually this could not just stem but reverse the gains of globalisation.

“Companies and investors will have to manage more complicated supply chains and navigate more restrictions to data flows and other barely discernable or invisible barriers. The cost of doing business will rise, and supply chains will be less reliable. Consumers will bear the brunt of losses.”    

Pedestrians walk past an illustration of Indian Prime Minister Narendra Modi, right, as Lord Krishna sitting on a horse in Muzaffarpur, Bihar.(Photo Courtesy: Bloomberg)

Identity Politics In Southern Asia

On Southern Asia, risk number 9, the report forecasts identity politics “threatens the future of these increasingly prosperous regions.”

It lists as key concerns

• Islamism
• Aversion toward Chinese and other minorities
• An intensifying Indian nationalism

“Hinduism (or Hindutva) will increasingly form the basis on which the BJP seeks to unite a majority of Indians,” says Eurasia.

In India, the danger is that Modi’s use of nationalism to consolidate his support ahead of the 2019 election could give cover to radicalized elements of society that want to target Muslims and lower caste Hindus, leading to risks of localized instability.   

Eurasia Group, top risks 2018

(This article has been published in an arrangement with Bloomberg Quint.)