As I look out over the next year I am encouraged by a variety of emerging trends: improving economic conditions broadly in Japan, Europe, and the United States; increased dispersion of global energy sources as fracking comes on line; innovation in biology and information; and progress on a variety of difficult geopolitical challenges.
However, there exists a handful of pressing global risks on the horizon. These risks cut across a variety of disciplines and will require bold initiative and courageous diplomatic effort to address in the year ahead. I am pleased to present—in conjunction with The Fletcher Forum of World Affairs—an analysis of the top global risks for 2014. Here are the five issues that have my attention in the year ahead:
My top concern is cyber. Governments and commercial institutions are at increasing risk to cyber attack as cyber espionage capabilities rapidly advance in sophistication. In 2013, we saw a number of sustained cyber attacks on financial institutions in the United States. The Distributed Denial of Service, or DDoS, attacks were not aimed at stealing information, but simply disrupting commerce, and they cost the financial industry millions of dollars to combat. Additionally, cyber theft of intellectual property is an enormous threat to global industry. As nefarious cyber actors continue to expand their networks and capabilities, these attacks are likely to grow in volume and impact. Though not kinetic in nature, cyber attacks on global financial institutions and commercial industry have the potential to have significant economic impact.
The Growing War Within Islam
Turning to the Middle East, the spread and intensification of sectarian violence in the region is of grave concern. As the Syrian conflict rages on, Iraq, Lebanon, Jordan and Turkey all face increasingly dangerous situations. The Iraqis and Lebanese have seen a wave of sectarian clashes envelope their countries in recent months and the violence is showing no sign of abating; if anything, it is likely to intensify in the year ahead. Yemen is also contending with a string of intense clashes, while other Gulf States, like Bahrain, are worried about flare ups of sectarian violence in their countries as well. The spread of sectarian violence in the Middle East, as well as in parts of North Africa and of Southwest Asia, threatens to further destabilize the region in the year ahead.
A Credit Bubble and Economic Slowdown in China
In Asia, economic instability in China could have substantial international impact. For years, local and provincial governments have been amassing debt to pay for central government-mandated initiatives and to fuel local economic growth through major infrastructure and new city construction. Halfway through 2013, local government debt had reached a level equivalent to about thirty percent of the country’s GDP, making for an unstable economic outlook for the world’s second largest economy. At the same time, China is facing a potential economic slowdown. Growth in manufacturing has already slowed in 2014, and there are potential cuts coming to major infrastructure projects—historically used to simulate growth and create jobs—as the Central Government tries to transition to a consumer-led economy. Economic instability in China can have not only domestic impact—due to popular unrest and frustrations with stunted social mobility—but reverberations worldwide through lower overall demand for commodities and rising prices on exports.
The Unraveling of Africa’s Economic Boom
On the African continent, intra-state conflict, regional instability, and disease jeopardize recent economic growth. Conflict has disrupted economic activity in many parts of North and West Africa, including many oil producing countries. Direct foreign investment, tourism, and trade are all stunted by ongoing conflict. Neighboring states and those who trade with countries in conflict, such as Kenya, are also feeling secondary economic effects from hostilities. African Swine Fever—a disease which can kill livestock in one week’s time—is rampant. Though steps are being attempted to contain its spread, its pervasive impact affects many businesses, particularly in Southern Africa. Furthermore, the continent’s largest economy, South Africa, is facing a potential slowdown in 2014 due, in part, to ongoing strikes in the nation’s mining industry. China’s aforementioned economic issues will impact commodities exporters—such as South Africa, Angola, and Nigeria—who will face both falling demand and falling prices. The confluence of these factors will present a challenge to economic development for many African nations in the year ahead.
A Breakdown in Climate Negotiations
The final risk of these five is the international negotiations surrounding the environment. We are only twenty-four months away from the Paris Climate Change Conference, the international community’s deadline for a binding replacement of the Kyoto Protocol. If the recent Climate Change Conference in Warsaw is any indication, reaching agreement on an effective international treaty on climate change seems an unlikely prospect. Rifts between developing and developed countries paralyzed talks at points and resulted in a watered down roadmap to the 2015 Conference in Paris. Failure to take aggressive action on any new agreement will be problematic as climate change accelerates and we near the depletion of our carbon budget. Though positions have been articulated and stakes put in the ground, inspired diplomatic efforts must be made to get behind those hard lines, find areas of common interest and cooperation, and sow the soil for the negotiation of an effective agreement in 2015.
In the coming months, we look forward to convening conversations around these five pressing issues here at The Fletcher Forum. We encourage you to read the conversations, participate with written responses or on social media, and help us work together to produce constructive ideas that will reduce the aggregate risks we face.