From Eurasia Group:
Welcome to the Geopolitical Recession
This is Eurasia Group's annual forecast of the political risks that
are most likely to play out over the course of the year. This year's
report was published on 3 January, 2017.
Overview
IT'S BEEN SIX YEARS since we
first wrote about the coming G-Zero world—a world with no global
leader. The underlying shifts in the geopolitical environment have been
clear: a US with less interest in assuming leadership responsibilities;
US allies, particularly in Europe, that are weaker and looking to hedge
bets on US intentions; and two frenemies, Russia and China, seeking to
assert themselves as (limited) alternatives to the US—Russia primarily
on the security front in its extended backyard, and China primarily on
the economic front regionally, and, increasingly, globally.
These trends have accelerated with the populist revolt against
“globalism”—first in the Middle East, then in Europe, and now in the US.
Through 2016, you could see the G-Zero picking up speed on multiple
fronts: the further deterioration of the transatlantic alliance with
Brexit and the “no” vote on the Italy referendum; the end of America's
Asia pivot with the collapse of the Trans-Pacific Partnership and the
Philippine president announcing a break with the US; the Russian victory
in Syria after backing President Bashar al Assad through nearly six
years of war.
But with the shock election of Donald Trump as president of the US, the
G-Zero world is now fully upon us. The triumph of “America first” as the
primary driver of foreign policy in the world's only superpower marks a
break with decades of US exceptionalism and belief in the
indispensability of US leadership, however flawed and uneven. With it
ends a 70-year geopolitical era of Pax Americana, one in which
globalization and Americanization were tightly linked, and American
hegemony in security, trade, and promotion of values provided guardrails
for the global economy.
In 2017 we enter a period of geopolitical recession.
This year marks the most volatile political risk environment in the
postwar period, at least as important to global markets as the economic
recession of 2008. It needn't develop into a geopolitical depression
that triggers major interstate military conflict and/or the breakdown of
major central government institutions. But such an outcome is now
thinkable, a tail risk from the weakening of international security and
economic architecture and deepening mistrust among the world's most
powerful governments.
And the recession starts with…
1. Independent America
Trump's “America first” philosophy and his pledge to “make America
great again” build on the most core of American values: independence.
2. China overreacts
China's scheduled leadership transition this fall will shape its political and economic trajectory for a decade or more.
3. A weaker Merkel
This year will bring another wave of political risks in Europe, and
some of them will surely materialize amid a weakening of the leadership
of German Chancellor Angela Merkel has faced a series of challenges that
continue to undermine her leadership.
read the risk
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