CURRENT POLITICS PUSHING OUR WORLD TOWARD DANGEROUS CONSEQUENCES

POLITICAL POLICY MAKERS ARE HEAVILY FOCUSED ON DOMESTIC ISSUES IGNORING GLOBAL PROBLEMS

The world is entering into a dangerous zone, where the ill-effects of the current government policies will be seen in the decades to come, reveals the Political Risk Outlook 2019 by Eurasia Group.

The New York-headquartered political risk consultancy identifies the most challenging political and geopolitical trends and stress points for global investors and market participants in 2019, as well as a few red herrings-issues that, despite media attention, are unlikely to pose a significant threat or drive instability in the coming year.

Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan presented this year’s report.

“The political risk outlook for 2019 is reasonably good,” said Eurasia Group President Ian Bremmer. “But nearly all of the geopolitical developments that matter are now trending in the wrong direction. That’s unprecedented in my lifetime. These issues, if left unaddressed, will lead to big trouble down the road. This is geopolitical climate change.”

Topping the list in 2019 is Bad Seeds: “The geopolitical dangers taking shape around the world will bear fruit in years to come,” write Bremmer and the consultancy’s Chairman Cliff Kupchan. “The world’s decision-makers are so consumed with addressing (or failing to address) the daily crises that arise from a world without leadership that they’re allowing a broad array of future risks to germinate, with serious consequences for our collective mid-term future.”

Below is the extract from the Political Risk Outlook 2019:

The geopolitical environment is the most dangerous it’s been in decades, and at a moment when the global economy is faring well. Markets are taking hits and (mostly) bouncing back. What’s wrong with this picture? Nothing…yet. The most serious geopolitical risks (a cyber confrontation with Russia, war with Iran, implosion in Europe, a true US-China trade war) are more plausible than they’ve been, but none are particularly likely to play out in 2019. But we are heading for serious longer-term trouble down the road. That’s the first of Eurasia Group’s ten Top Risks this year.

1. Bad seeds

World leaders are so busy dealing with local crises that they’re ignoring much bigger problems down the road. 2019 is the year “bad seeds” are being planted that will eventually threaten the entire global order.

Examples? Political institutions across the world’s advanced democracies, the transatlantic alliance, NATO, the European Union, the G20, the World Trade Organization, Russia and the West… none of these will explode this year, but every one of them is headed in the wrong direction.



2. US-China

The US-China relationship is broken, and even a truce in the trade war won’t fix it. Trust between the two sides is almost gone. Democrats and Republicans agree that China poses threats. The Chinese believe they can’t afford to back down. Both sides will work to make themselves less vulnerable to the other by reducing the connections that have so far bound them together.

Eurasia Group President Ian Bremmer

3. Cyber gloves off

Hackers build new skills, our digital dependency deepens, and there are still no realistic rules of the road to help avoid cyber-conflict. It’s hard to halt an attack. You can’t tell whether it’s a government, a thief, a terrorist, or anarchist who’s shooting at you. Your cyber-defenses fast become obsolete. And 2019 will be the year the US government goes on offense. The results will be dangerous.



4. European populism

The European Union will hold parliamentary elections in May, and populists will win more seats than ever before. They’ll also play more significant roles in the European Commission and European Council, helping them challenge current European policy on migration, trade, and enforcement of EU rules inside member states. Internal disagreements will also disrupt the EU's ability to react quickly to crises.



5. The US at home

Their majority in the House gives Democrats real power for the first time since Donald Trump became president, and though he’s not likely to be removed from office, infighting in Washington will be especially intense in 2019. Trump will face challenges from Democrats, the media, the courts, and a growing number of investigations of his administration, his campaign, his businesses, and his family. Trump will return fire, raising the risk of a constitutional crisis. Markets may remain volatile.



6. Innovation winter

Security fears persuade governments to avoid foreign suppliers in areas critical to national security. Privacy concerns lead them to tightly regulate how citizens’ data can be used. Economic worries lead them to build barriers that protect their tech companies against foreign competitors. We see these trends in US-China relations, but Europe and Japan are also imposing new restrictions. Brazil, India, and even California have adopted, or are considering, tough new data protection rules. Innovation depends on cooperation. Expect much less of that in 2019.



7. Coalition of the unwilling

Donald Trump now has imitators. Italy's Matteo Salvini and Brazil's Jair Bolsonaro used a playbook like Trump’s to win an election. Russia's Vladimir Putin, Turkey's Recep Erdogan, and North Korea’s Kim Jong-un have tactical reasons to promote the US president. Saudi Arabia's Mohammed bin Salman and Israel's Bibi Netanyahu need his support. These leaders don’t salute a common flag, but each will bolster Trump’s challenge to the international status quo.



8. Mexico

New president Andres Manuel Lopez Obrador is popular, and his party has big congressional majorities, but his bid to roll back the opening of Mexico’s economy, orthodox macroeconomic policies, privatizations, and deregulation threaten a return to the 1960s. In 2019, he’ll spend money Mexico doesn’t have on problems like poverty and security that resist straightforward solutions. And as he centralizes power, policy making will become more erratic.



9. Ukraine

Vladimir Putin will not compromise on Ukraine, Russia’s most important neighbor. He wants a decisive say in that country’s future. Ukraine will hold a presidential election in March, and parliamentary elections in the fall. Russia will interfere to a far greater degree than their involvement in US and European elections. Both governments have political incentives to pick fights with the other. Though both want to keep their battles within limits, conflict can take on a life of its own.



10. Nigeria

Nigeria faces its most fiercely contested election since becoming a democracy in 1999. President Muhammadu Buhari lacks the energy and skill to meet Nigeria’s needs. His opponent, Atiku Abubakar, wants mainly to enrich himself and his allies. If Buhari wins, much-needed reforms must wait, and militant attacks on the oil industry will worsen. His failing health could add to political infighting. An opposition win could lead to more predatory and populist governance. There’s also a wildcard risk: An inconclusive election result could create chaos.





RED HERRINGS

Brazil’s new president Jair Bolsonaro might be a nationalist and former army officer, but the public, the media, and Brazil’s political institutions won’t allow space for any dangerous centralization of power. Saudi Crown Prince Mohammed bin Salman has made many enemies in recent years but he’s not going anywhere, and neither he nor the kingdom he will lead faces serious risks in 2019. Iran’s need to endure US sanctions by protecting relations with Europe will limit the aggressiveness of its foreign policy, as it keeps its head down and tries to run out the clock on the Trump administration. Suspicion and competition between Russia and China will ensure they don’t move toward a genuine anti-Western alliance.