These Are the Top 10 Risks to the World in 2018
Markets are soaring, but divisions are deepening among citizens of both developed and developing countries. , Liberal democracy currently has less legitimacy than at any time since World War II, and the global order is unraveling. There has been plenty of turmoil in international politics over the past 20 years, but 2018 looks especially ripe for an unexpected crisisthe geopolitical equivalent of the 2008 financial meltdown. , The risk of a "geopolitical depression" forms the backdrop for the top 10 risks of 2018, according to the Eurasia Group, the political risk consultancy I founded and oversee. As usual, there are a few "red herrings," or risks we think are less than meet the eye. At a moment of policy incoherence in Washington, China's government has redefined the country's external environment, set new rules within it, developed the world's most effective global trade and investment strategy, and uses Chinese tech companies to advance state interests. Beijing invests and extends its influence by promising non-interference in the political and economic lives of other countries, which are now more likely to align with and imitate China. The global business environment must adapt to new sets of rules, standards, and practices. U.S.-China conflict, particularly on trade, will become more likely in 2018. There's been no major geopolitical crisis since 9/11, but there are now many places where a misstep or misjudgment could provoke serious international conflict. The likeliest risk of accident comes from competition and conflict in cyberspace, the fight over North Korea, battlefield slip-ups in Syria, growing U.S.-Russia tension, and the dispersal of ISIS fighters from Syria and Iraq. , The world's biggest fight over economic power centers on development of new information technologies. The U.S. and China will compete to master artificial intelligence and supercomputing, and will battle for market dominance. Governments in Africa, India, Brazil, and even in Europe must decide whom to trust and whose products and standards to embrace. Fragmentation of the tech commons creates both market and security risks, particularly as domestic companies battle global viruses. 2018 will be a defining year for Mexico as NAFTA renegotiation comes to a head and voters choose a new president. A collapse of NAFTA talks will not kill the deal, but uncertainty over its future will disproportionately harm the Mexican economy, given the country's deep reliance on U.S. trade. For the July 1 presidential election, public anger at government is running high, thanks to high-profile corruption cases, drug gangs, and sluggish growth. Demand for change favors Andres Manuel Lopez Obrador, who represents a fundamental break with investor-friendly economic policies. Donald Trump has it in for Iran. The nuclear deal will probably survive 2018, but there's a substantial chance that it won't. Trump will support Saudi Arabia and work to contain Iran in Syria, Iraq, Lebanon, and Yemen. The U.S. will more frequently sanction Iran for ballistic missile tests, perceived support for terrorism, and human rights violations. Iran will push back. If the nuclear deal fails, Iran would ramp up its nuclear program, and the threat of U.S. and/or Israeli strikes would again hang over the region. Governments, political parties, courts, the media, and financial institutions, which support and sustain peace and prosperity, continue to lose the public credibility on which their legitimacy depends. In 2018, the populism apparent in the Brexit vote and election of Donald Trump will create a toxic, anti-establishment populism in developing countries, as well. , The rise of anti-establishment movements in developed markets has forced policymakers to shift toward a more zero-sum approach to global economic competition. As a result, walls are going up. Protectionism 2.0 creates barriers in the digital economy and innovation-intensive industries, not just manufacturing and agriculture. New barriers are less visible Instead of import tariffs and quotas, today's tools of choice include "behind-the-border" measures such as bailouts, subsidies and "buy local" requirements. , Britain faces both acrimonious Brexit negotiations and the risk of domestic political turmoil. On Brexit, the principle that "nothing is agreed until everything is agreed" will encourage endless fights over details between and within the two sides. On domestic politics, management of Brexit could cost Prime Minister May her job. If so, she will likely be replaced by a more hardline Tory figure, significantly complicating the Article 50 negotiations. Or Labour Party leader Jeremy Corbyn will replace her after a new election. , Islamism in parts of Southeast Asia fuels local forms of populism, most prominently in Indonesia and Malaysia. Resentment of ethnic Chinese, who hold a disproportionate share of wealth in several countries, has made a strong recent comeback, particularly in Indonesia. Persecution of Myanmar's minority Muslim Rohingya has triggered a humanitarian crisis. In India, Prime Minister Modi may use nationalism to consolidate support ahead of the 2019 election, giving cover to radicalized elements of society who want to target Muslims and lower-caste Hindus. , In 2018, negative spillover from Africa's unstable periphery Mali, South Sudan, Somalia will spill over into core countries Cote d'Ivoire, Nigeria, Kenya, Ethiopia. The principle threats come from militancy and terrorism. Foreign partners who have helped stabilize weak governments in the past are distracted. Kenya, Nigeria, Uganda, and Ethiopia face increased security costs at a time when their governments need to reduce spending, and attacks would undermine foreign investor sentiment. , A besieged Trump administration has little ability to enact destabilizing, or any other kind of, policies. The Eurozone will shrug off political risk in 2018. Venezuela's political conflict appears frozen as President Maduro proves surprisingly resilient.