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February 2019: Kashmir conflict

Although the Kashmir region knows a long history of turmoil between Pakistan and India following the partition of British India in 1947, the conflict has intensified over the course of the last months. After 40 Indian military personnel were killed after a bomb attack in Kashmir, India sought retaliation for terrorist activity in the region and crossed the line for the first time since the 1971 war. India carried out a so-called pre-emptive strike against one of the largest terrorist training camps in Pakistan and claimed that 300 people died in the attack. However, the Pakistan government claims the attacks had not affected anyone and Prime Minister of Pakistan Imran Khan stated that “Pakistan shall respond at the time and place of its choosing”. The bold rhetoric and the fact that both India and Pakistan ratcheted up involvement in the conflict is due to compelling domestic reasons. While for Khan, the revived conflict is a first test in foreign policy, the conflict is of relevance to Prime Minister Modi as he is preparing for elections in May and the conflict is a chance to project himself as a strong leader. Modi sent out the message that India is safe in his hands, boosting his muscular image in the electoral strategy of Hindu nationalism in order to climb in the polls. This is very much needed, since his party already lost three regional elections, and since the nation struggles with stagnating job growth and agricultural crisis in the country.
Next to new escalation in the conflict between the archrivals and nuclear powers, the region is subject to great power play. Tibet is among the bordering countries of the disputed region. Pakistan has collaborated with China extensively on the China–Pakistan Economic Corridor (CPEC). While Pakistan sees China as a counterweight to India, Pakistan has served as a channel for China’s influence in the Muslim world to China. And thus, although China is calling for de-escalation of the conflict, it defends Pakistan against India. For instance, China continues to protect Masood Azhar, the leader of the Jaish-e-Mohammed group believed responsible for the Kashmir attack killing 40 Indians. Moreover, the U.S. is another superpower keeping a close eye on the unfolding conflict in the region, as it has been clashing with China over Belt And Road Initiative projects in Pakistan. Pakistan is replacing the U.S. with China as their key power in the region and following the removal of U.S. military from Afghanistan, Pakistan is opening and hosting talks with the Taliban. The developments unfolding in Kashmir thus already looks more like a proxy war than a regional conflict.
Another factor that is shaping the conflict between the bordering countries is water. As India and Pakistan were torn apart at Partition, this included critical water resources that had been shared under British India. In an interview with Foreign Policy, the writer of ‘Unruly Waters’, expert in how water has shaped South Asia’s history and politics, Sunil Amrith, the conflict is describes as the ‘mother of all transnational water conflicts’. He says the water conflict over the Indus River, which runs straight through Kashmir, is an intense one since the control of water has long been central to many visions of nationhood in India and continues to be so under Modi. Although a conflict over water is too risky for both parties, if the tensions in the region and the slide towards unilateralism continues, local people on both sides of the border will be carrying the real costs. However, Pakistan is a water-stressed nation and thus this is the weak spot India can hit its rival. It is in this light, that India’s recent move to fund the building of a dam near Kabul could be seen as a way to reduce water flow to Pakistan.
Although the developments in Kashmir are fast-moving and the underlying reasons span wider than regional ones, the conflict is unlikely to be resolved anytime soon. However, chances are small that it will escalate into a war again. The superpowers active in the region have their own interests in keeping the region stable. The U.S. has a strong interest in trying to prevent the use of nuclear weapons, India is its major defense partner and Pakistan has been a longtime partner. For China, the CPEC requires a stable region. Both superpowers will use the threat of diplomatic and economic sanctions in order to avoid escalation.

Possible implications:

  • More violence in the Kashmir region with Modi increasing aggression as an electoral strategy
  • Unfolding tensions between superpowers China, U.S. in the region
  • Water crisis in Pakistan

 

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: Kashmir conflict

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

February 2019: Billionaires backlash

Last month, the debate about world’s growing inequality intensified. Just before the Annual meeting of the World Economic Forum (WEF) in Davos, Oxfam published a report showing that world’s 26 richest individuals own the same wealth as the poorest half, while in 2017 that number was ‘still’ 43. In 2018, the wealth of the world’s billionaires increased by 12%, while the poorest half of humanity saw their wealth shrink by 11%. At the WEF, critics like Dutch historian Rutger Bregman, Oxfam executive director Winnie Byanyima and ‘Winners Take All’ author Anand Giridharadas pointed to the participants’ responsibility for exacerbating inequality. Giridharadas has argued that many billionaires approach philanthropy as a kind of branding exercise maintaining the current system. Instead of talking about philanthropy, billionaires in Davos should be talking about taxes, Bregman concluded. Especially Bregman’s remarks on taxes stirred up debate. In February, billionaire Bill Gates tweeted a chart showing how humanity had made progress in terms of reducing poverty over the last two centuries. The tweet sparked an intense online debate about global poverty. Jason Hickel responded in The Guardian that the $1.90-a-day line is be too low and that the number of people able to afford basic necessities on a daily basis had actually decreased. As emphasized in a Bloomberg article, the question about what the world’s richest should do about the growing inequality has remained unanswered for over a decade now, with a possible social backlash against the rich becoming more likely.
In wealthy countries, life is precarious for a growing number of people. The problem of growing inequality in these countries is not so much the fact that a small group of individuals get wealthier, but rather that the most vulnerable are still struggling to obtain basic necessities. The effects of this struggle are becoming ever more visible. In the U.K., for instance, almost 20% of children under 15 live in a home where the parents cannot afford to put food on the table. And in the U.S., life expectancy has dropped for the third year in a row, but only for poorer people as they are more likely to be overweight, smoke, and drink than their wealthier counterparts. While last summer U. S. president Trump’s Council of Economic Advisers concluded that the country’s war on poverty “is largely over and a success”, that feeling is not shared by those who are experiencing financial insecurity, struggling to pay for costs of living, healthcare, quality housing and good food.
The precarious circumstances of the current young generation has led to the rise of Millennial socialism. This is remarkable in the U.S., traditionally a profoundly anti-socialist country. Especially the young generation is burdened with the financial insecurity resulting from the Global Financial Crisis, In the U.S., the wealth gap between generations is growing, younger generations are weighed down by student debt and stagnant wages. This feeds the feeling that that economic growth has mainly benefited the rich and that the global elite currently in power is not taking accountability for the growing inequality. Politicians like Bernie Sanders and Alexandria Ocasio-Cortez respond to this feeling saying that a system that allows billionaires to exist while some people don’t have access to public health is wrong. Alexandria Ocasio-Cortez has called for a 70% marginal tax rate on people who earn over $10 million a year. In addition, in the run-up to the 2020 elections, democrats are distancing themselves from the heavily funded former progressive candidate Hillary Clinton and from the self-funding billionaires (like Michael R. Bloomberg) who are considering a run for the Democratic presidential nomination. Moreover, similar to Labour in the U.K., they promise young Americans free college tuition in times of the student loan debt crisis.
In the future, technology may further drive inequality. At the WEF, panelists from the political and technological domain all agreed that 4IR technologies such as AI could further exacerbate inequalities and that such technology could better be harnessed to ensure welfare reached those who needed it. The rise of AI puts at risk the current jobs of low-skilled, uneducated workers, while creating prosperous new industries that don’t employ very many workers. Because the largest companies in the world by market value in 2018 are now tech giants, Californian governor Gavin Newsom has proposed a “digital dividend” that would let consumers share in the billions of dollars made by technology companies in the most populous U.S. state.
As measures to elevate those living in poverty or precarious conditions are not going to improve lives in the near future, the debate on inequality will intensify. The effects of living in such conditions become more visible; this will further feed the awareness that a large part of society is not experiencing progress. As a result, dissatisfaction with the wealthy elites who are in power will grow, something already embodied by the Yellow Vests movement. Anti-billionaires populism might rise and the growing popularity of socialist ideas, even in a liberal minded country like the U.S., could point to a future where the redistribution and wealth social safety nets will be introduced. The question of how further technological advancements will either divide or serve entire societies remains the big unknown.

Possible implications:

  • Growing unease with excessive wealth, polarization between different classes in Western societies
  • Social movements and unrest, backlash against global elites in the shape of national Yellow Vests like movements
  • Stricter tax policies, measures against tax-havens

 

RISKS MARKED ON THE RISK RADAR AS NUMBER 1: rising inequality

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

January 2019: A crucial year for Sub-Saharan Africa

Sub-Saharan Africa faces three potentially destabilizing forces in 2019.

First, this year will be a decisive year for politics in Sub-Saharan Africa. At least 20 nations will hold presidential elections. 2019 will be a crucial political year, as many new elections will be held: in South Africa, Nigeria, Senegal, Botswana, Cameroon, Namibia, Mozambique, Guinea-Bissau, Madagascar, Mali, Malawi and Chad. Three elections in particular are impactful on the course of the region as they will shape the struggle to institutionalize democracies in Africa. Political instability in these countries could easily spill over to their broader regions.

Earlier this month, the opposition leader Felix Tshisekedi won the presidential election in the Democratic Republic of the Congo (DRC). While many are happy to see the long Kabila dynasty coming to an end, the question remains whether anything will change, since the former president, Joseph Kabila, still has a hold on many levers of power. And as there is fear of election rigging, unrest remains and violence has erupted across the country. Africa’s fourth largest population already counts 85 million people and is rapidly growing. Given its location, size and pace of change, its destabilizing force could impact many countries as violence could spread to the nine border states.

Next up is Nigeria’s presidential election on February 16. In the biggest African country by population (200 million Nigerians), President Muhammadu Buhari is seeking re-election and will be running against Atiku Abubakar, who served as Nigeria’s vice-president between 1999 and 2007. While Buhari is campaigning against corruption, Abubakar is promising to address Nigeria’s disappointing economy and the country’s high unemployment. A promising message to most Nigerians who have not experienced decreases in joblessness and poverty since Buhari came to power. And these are likely to remain major challenges for the country. The IMF projects that growth will remain weak at an annual average of about 1.9% from 2019 to 2023 and the World Bank has estimated Nigeria’s poverty rate to be as high as 70%. Furthermore, as Nigeria’s voter base is young and wary of the political establishment, new voices from outside the establishment are challenging the two candidates.
A third major election is to take place in South Africa, Africa’s second largest economy, just after Nigeria. After ANC’s Jacob Zuma resigned, Cyril Ramaphosa announced a new dawn for the country. He will have to legitimize his power in May. Although Ramaphosa is likely to win a majority, this year’s elections may see an increase in populist rhetoric and constrain the ANC as it needs 55% to 60% to put Ramaphosa in a position to implement reforms and boost economic growth. As plans for such reforms still remain absent, it is considered likely that the country will be further downgraded by credit rating agencies, a key risk to South Africa’s economy.

A second and more structural risk is that key African countries will further see economic instability rise in 2019. In the Brookings report “Foresight Africa: Top priorities for the continent in 2019”, the key risk for the continent is a looming debt crisis and the major challenge of securing large-scale employment opportunities for youth and realizing the demographic dividend. Lack of jobs may further hinder gains in governance, the 2018 Ibrahim Index of African Governance indicates.

A third destabilizing force on the African continent comes in the form of climate risks. In sub-Saharan Africa, climate variability is projected to compromise agricultural production – including access to food, increase water stress and exacerbate poverty and political conflict.

Due to contentious elections in Nigeria and Congo, political instability could spill over to

their broader regions. Thus, combined with the more structural risks of a continued population explosion, economic instability and the challenges that come with climate change, the region remains vulnerable. Foreign powers such as China, India, France, Brazil and the U.S., which are already active in the region, will show further interest in the region, making Africa even more dependent on them.  Meanwhile, these risks could set off migration flows that will also affect the European continent.

RISKS MARKED ON THE RISK RADAR AS NUMBER 3: climate change, large-scale migration

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

January 2019: The global mental health problem

Mental distress is a global problem. According to the World Health Organization, today, 450 million people worldwide are living with mental illness. One in four people will experience a mental or neurological disorder during their lives. The Gallup 2018 global Emotions Report indicates that the levels of negative feelings people have, such as stress, anger or physical pain, have increased over the past five years. Although not all findings suggest a global rise in mental disorders, there are indications that younger generations are experiencing an increase: especially in the U.S., levels of depression have increased sharply for young individuals. Among mental disorders, depression is the leading cause of disability around the world and it represents the fourth leading cause of the global disease burden. And the WHO predicts that it will rank second by 2020.

One possible driver of this apparent increase in mental distress might be that the concept of mental health is changing due to increasing awareness of mental health issues and more attention to modern influences on our mental fitness. Modern societies are undergoing transitions that cause mental distress and might further exacerbate mental health issues. The mental effects of three transitions in particular have become more visible in Western societies over the last years.

First is the social structure of societies that have rapidly changed over the last decades. Earlier, we wrote about modern loneliness, of an increasingly disconnected society in the digitally connected era. Currently, many speak of a loneliness epidemic in the Western world, such as in the U.S. The issue is being taken seriously, to the point of appointing a minister for loneliness, as in the U.K., since studies indicate that loneliness can lead to psychological disorders and that it increases mortality risk.

Second, societies have to deal with rapid demographic changes. Feelings of anxiety and uncertainty in the Western world stem from a considerable change in demographics. One example of this is the growing fear of white majorities in the U.S. of becoming the minority. The perceived threat of demographic change is making mostly white voters fearful, giving power to nationalism and politicians responding to that fear. Tensions in Europe are also rising, as transformative demographic changes have threatened the majority. The latest refugee crisis has further intensified the fear and uncertainty of the majority of the population that they will become minorities. This is especially true for Eastern European countries that are facing a depopulation crisis. It is a fear of existence that leads to psychological stress.

A third strain on mental stability consists of the increasingly experienced effects of climate change. According to climate change psychology experts, the dire projections of climate change and experiences of extreme weather events, floods, wildfires and droughts lead us to feel anxious and uncertain. Furthermore, new research shows how air pollution has an emotional cost. A study published in Nature found that higher levels of air pollution are associated with a decrease in people’s happiness levels.

Although these transitions contribute to mental health issues, adequate treatment is missing in developed and developing countries. More than 40% of countries have no mental health policy and over 30% have no mental health program. Furthermore, the WHO warns of the mental health gap in developing countries. For instance, in most African countries, less than 1% of health budgets is spent on mental health care. Those living in poverty are more likely to be constantly exposed to severely stressful events, dangerous living conditions, exploitation, and poor health, contributing to their greater vulnerability and increasing the need for mental care.

Meanwhile, the increasing emotional and psychological strain that many people are experiencing is costly for societies. Already in 2010, as research by the WEF and the Harvard School of Public Health suggests, the global economic impact of mental disorders was US$2.5 trillion, with indirect costs (lost productivity, early retirement and so on) outstripping direct costs (diagnosis and treatment) by a ratio of around 2:1.72. Furthermore, the trend of mental distress is strongly connected to political polarization, volatile electoral results, and social unrest.

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: mental health issues

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

January 2019: Climate backlash

Although climate change is becoming a more acute global problem, adequate action remains absent. Last year was full of critical signs (e.g. droughts, floods, wildfires) and more scientific evidence (e.g. a new IPCC report) for man-made climate change. Agricultureinsurance companiescoastal property holders and military bases are already feeling the impact. Even though wind and solar energy kept getting cheaper last year and electric cars became the best-selling luxury vehicle in the U.S., global levels of greenhouse-gases entering the atmosphere increased steeply – and this remains the central measure of our contribution to climate change. As none of the warning signs have sparked any real (political) response and we are bound to hit the tipping points of global warming, this will render any further action by and large irrelevant. As a result, mankind is heading for the worst-case scenario and the chances of any radical turn-around scenarios are getting slimmer.

Currently, we are looking back on almost thirty years of climate inaction. In 1992, leaders of the world gathered in Rio de Janeiro and committed their countries to action by signing the UN convention on climate change. The most recent convention on climate change in Katowice, Poland, in December last year, was marked by rising despair that although the actions necessary to reduce global emissions have been clear for years, adequate response has remained and perhaps will remain absent. Although some action is taken, such as carbon pricing and clean power plans, this is often challenged by lobbyists, particularly by the fossil-fuel industry.

One risk of both climate change action and inaction has increased over the last month: both responses have stirred up diverging social movements and unrest. On the one hand, countries are undertaking efforts to decarbonize their economy, although some do more than others. A recent index published by Drax ranks 25 major world economies in their actions to make a transition to decarbonization. Although France is somewhere in the middle of the index, the country has attracted global attention with the social unrest climate measures incited. In an attempt to wean citizens off of fossil fuels and increase alternative energy use, French President Emmanual Macron has increased taxes on gasoline. The so-called Yellow Vest protests against this measure are illustrative of the violent protests that governments worldwide may face as they impose climate measures on their citizens. At least for now, the French President has refrained from implementing the fuel tax increase. Climate inaction, on the other hand, is also increasingly leading to citizens’ dissatisfaction with their governments. The most well-known face of this stance is Greta Thunberg. This 16-year old Swedish activist became depressed when she learned about climate change or global warming, started the first school strike for climate outside the Swedish parliament building, and therewith inspired countless others in many other countries.

The transition to the new reality of climate politics as well as to a world affected by climate change is a painful one, which will stir up more social movements, protests, and polarization among voters in the future.

RISKS MARKED ON THE RISK RADAR AS NUMBER 1: climate change

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

December 2018: The Global ageing problem

Populations in advanced economies have been ageing for a while. The competitiveness of Germany, among other European countries, is compromised by an ageing population. Japan is a well-known example of a developed country dealing with the problem. In the Risk Radar of April, we wrote about the Eastern European Slow Implosion. Most developed economies have made a demographic transition as industrialization went hand in hand with lower population growth. However, declining birth rates and an ageing population are now affecting less developed economies, challenging whole regions to deal with a declining workforce, a higher old-age dependency ratio (ratio of people above 65 years of age per 100 people between 15 and 64 years of age) and the phase after the demographic dividend. According to the 2017 UN report on World Population Ageing, the dependency ratio has been on a rampant rise over the years. In the year 2010, this ratio was 11.7, and it is expected to reach 14.4 by 2020, and 18 by 2030.

 

In China, the ageing problem is becoming more acute. It still has a high proportion of citizens of working age. However, the country is slowly moving out of this favorable phase. The latest official statistics reveal that both China’s birth and marriage rates have dropped significantly over a long period of time. A quarter of the population is expected to be aged over 60 by 2030. To compare, the share of the U.S. population aged 65 or above is expected to rise from 13% in 2010 to 21% in 2050, while in China, it is expected to rise from 8% to 24%. After it officially ended its decades-long one-child policy in 2015, the Chinese started encouraging larger families. However, research suggests that three quarters of the fertility rate decline since 1970 was not formally related to the one-child policy. In turn, policies to ramp up birth rates are unlikely to be effective. Chen Youhua, a demographer from Nanjing University, doubts whether proposals to allow couples to have as many children as they want or tax incentives would help to stop or reverse China’s declining births. As a result, China’s population will continue to age rapidly for decades, and, in turn, its economic growth will be lower too.

 

Latin America is facing similar challenges. The region has a relatively young population, but populations in Latin American countries are aging rapidly. IMF research shows that today, Latin American women only have a third of the number of children they used to have in 1950, while the population is getting older. Thus, the demographic dividend that Latin America has been enjoying since the 1970s is coming to an end. Uruguay, Brazil, and Colombia only have a couple of years of dividend left, while the dividend is already over in Chile and Costa Rica. This new reality is challenging the fiscal sustainability of public pension and health care systems in the region.

 

This rapidly ageing world population seriously affects many domains, from putting a serious burden on healthcare systems and pension funds, to the lack of adequate nursing homes. The idea of a “global demographic time bomb” expresses the fear of future generations struggling to meet an ever-increasing number of retired workers and pension commitments. Ageing is a global problem and the pressure on the different domains and on the overall economic performance of countries will only increase as the world gets older by the day.

 

RISKS MARKED ON THE RISK RADAR AS NUMBER 3: Chinese / other EM’s economic slowdown, Eastern European Slow implosion

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

December 2018: European weak executives

2018 was the year of unending disorder in Europe. Even its core, which used to be considered a source of political stability, was affected by it: Germany, France and Britain, the three traditional powers of Western Europe. Currently, all three countries are governed by a weakened executive power and the problems at home make the executives focus inwards instead of on the European project.

Theresa May recently won a vote of confidence from Conservative MPs and, under party rules, she cannot be formally challenged again for another 12 months. However, what is more relevant is the crisis that Britain now faces. Theresa May has less than 100 days left to get the Brexit withdrawal agreement to pass her parliament. Chances are slim that she will succeed and the cabinet has already decided to ramp up preparations for a no-deal Brexit amid uncertainty over the fate of May’s proposed EU exit deal. A no-deal Brexit would have grave consequences for the U.K. economy. All trade deals the U.K. currently benefits from would be disrupted, the car industry would be affected, the financial industry would be hit as financial institutions would have to establish bases in other EU countries and tariffs and transaction costs could hurt profits of British companies, as 70% of FTSE earnings come from overseas. These challenges could lead to a U.K. recession.

The French leader Emmanuel Macron finds himself in the midst of the biggest political crisis of his presidency. While his 2017 election victory temporarily outshined the divisions in the country where almost 50% of people backed extremist candidates, the end of 2018 confronted Macron with a month-long revolt against his reforms: demonstrations by Yellow Vest protesters. This month, his approval rating fell to 23%. In order to defuse the crisis, he offered tax reductions and wage increases to the working class. These budget concessions haven’t abated the anger of the protesters and, what is more, with these concessions, Macron risks budgetary indiscipline as France is already barely able to follow the EU 3% guidelines. Not only does this cloud over hopes of Macron providing decisive leadership at home, but likewise for Europe.

The French-German alliance at the heart of European integration is in trouble, as Merkel is also in a position of weakness. She is stepping down as leader of her party and will not stand for reelection. She is already officially a lame duck. Thus, Europe’s longest-serving democratically elected leader is forced to decelerate her efforts on European affairs.

Weakened political leadership in the U.K., France and Germany especially complicates region-wide coordination and decision-making. This will mean a weaker bloc in the wider international arena. For instance, it compromises transatlantic affairs. Unstable leadership in the three countries during a time of global challenges such as a trade war, a resurgent China, an assertive Russia, and a possible new crisis in Libya sparking a wave of migration to Europe, poses a risk for Europe. The deteriorated positions of Merkel, Macron and May and the fact that they are urged to look inward instead of operating in unity, point to the beginning of a fragmentation scenario.

However, the theme of weak executives transcends the traditional Western leaders. In Spain, government majority is thin and popular anger is rising over issues of migration in the form of an upcoming far-right party, Vox. In Sweden, after more than three months of political deadlock following elections, no new government will be formed in 2018 anymore. Earlier this month, Belgian Prime Minister Charles Michel signed the Marrakesh pact, despite losing four ministers from former coalition partner the New Flemish Alliance and could be forced to hold elections in February if he fails to win parliament’s backing after his decision to back the deal brought down his ruling coalition. In the meantime, in Hungary, thousands took to the streets of Budapest. Prime Minister Viktor Orbán’s Fidesz government faces protests against a “slave law” allowing employers to force employees to work overtime. But aside from a repeal of that law, the protesters are also demanding independent courts and free media and opposition parties are collaborating on a joint strategy to put further pressure on Orbán. Furthermore, the Czech Prime Minister Andrej Babis survived a no-confidence vote amid corruption allegations in November, but several thousands of protesters demanded that he step down. Finally, Italy will be Europe’s biggest problem child for the coming year in terms of financial risks. Italian Prime Minister Giuseppe Conte, who is not even the leader of his own government, has had to give in a little to avoid sanctions from Brussels and reach an agreement with the European Union to allow Italy to run a budget deficit of 2.04% next year. However, according to Valdis Dombrovskis, the EU’s most senior official dealing with the euro and financial systems, the deal “is not ideal”. The agreement is rather a pause than an end to the risk of a clash between Rome and Brussels. Europe’s weak growth, especially Italy’s weak economy, is seen as the biggest risk for Europe in 2019.

The next test for Europe will be the European Parliament elections in May next year. Eurosceptic alliances might use this momentum to organize, such as the Alliance of Conservatives and Reformists in Europe that was established last month. This month, a poll revealed that one in four Europeans support populist parties, a number that has tripled over the past 20 years and a force that will challenge the established political order across the continent. Establishment parties have already been struggling to present a compelling case for European unity over the last years. It makes life more difficult for pro-European politicians wanting reforms and would mean a break with the four-decade rule of European social democrats.  

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: weak Southern European Economies, large-scale migration

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

December 2018: Food insecurity

In 2019, conflicts and extreme weather events such as enduring droughts will increase food insecurity in many parts of the world, pushing refugees to start moving. This food insecurity could be accelerated by disruptions in trade due to trade wars. In 2018, millions of people globally experienced food insecurity already, largely as a result of conflict and political instability or extreme weather events. Food security denotes the accessibility (including the affordability) of food for individuals. Unreliable access to food can lead to undernutrition, which can result in conditions such as childhood stunting and anemia in women of reproductive age, or – and this appears paradoxical – in overweight and obesity, as we explained earlier.

First, the strong link between conflict and food insecurity is illustrated in the 2019 Emergency Watchlist by the International Watchlist Committee. This annually published watch list names the top ten countries that run the greatest risk of experiencing unprecedented humanitarian crises over the coming year. Food insecurity is a major factor in nearly all of the top ten countries. In 2018, crisis levels of food insecurity have been reported in parts of Yemen, the Democratic Republic of the Congo, South Sudan, Afghanistan, the Central African Republic, Nigeria, Ethiopia and Somalia. Severe food shortages have also been reported in Venezuela and Syria, caused by internal chaos and conflict. Over three million Venezuelans have fled their country’s soaring hyperinflation, food and medical shortages, expected to reach 5.3 million by the end of 2019 in what has become the largest exodus in modern Latin American history.

Next to conflicts and mismanagement (in the case of Venezuela), extreme weather events were a major contributor to food insecurity, depleting food stocks. The FAO Early Warning Early Action report on food security and agriculture provides a forward-looking analysis of major disaster risks to food security. It lists a climate-related phenomenon among the biggest threats: El Niño. El Niño is a climate cycle in the Pacific Ocean with a global impact on weather patterns. El Niño events occur naturally every few years and stem from abnormally high ocean temperatures in the eastern Pacific. There is a 75-80% chance of a climate-warming El Niño event by February 2019. In 2016, the last El Niño event took place, and in combination with the heating caused by humanity’s carbon emissions, 2016 became the hottest year ever recorded. El Niño disturbed rainfall and temperature patterns and threatened the food security and livelihoods of some 60 million people globally.

Finally, as food insecurity rises globally, many countries will increasingly depend on open markets for their national food security. IFPRI’s 2018 Global Food Policy Report reminds us that global trade has played a crucial role in rapidly decreasing levels of undernourishment and improved nutrition and that trade wars threaten food security as they undermine food systems. The major geopolitical event in 2018 affecting agriculture and food security was the unfolding of the trade war with China started by U.S. President Trump. Since the beginning of the trade war this year, U.S. overseas sales of agricultural products have suffered, while net farm income is already near 15-year lows in 2018 and it is predicted to further decrease in 2019, Trump thus provided farmers with $12 billion in emergency aid. Brazilian soybean farmers are the principal beneficiary of the trade war, as China is a major soybean purchaser.

Based on these outlooks and the political environment and climate change-related weather events that have already been seen this year, 2019 will bring us global risks of more food insecurity, food shortages, food-fueled unrest, and migration due to hunger.

 

RISKS MARKED ON THE RISK RADAR AS NUMBER 1: food insecurity

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.
Click here to see the context of this Risk Radar.

Retroscope 2018: Disruption in the making

Dear reader,

The end of the year is a time for contemplation. In this Retroscope, we look back and reflect on the ideas and insights we have published in The Macroscope throughout 2018. We have covered a wide range of events and developments in technology, global politics and society. The Macroscope is marked by our team’s diversity of perspectives, ranging from philosophy, economics, history, sociology, political sciences to engineering. Combining this interdisciplinary approach with scenario thinking and cyclical thinking, we aim to assess current affairs from a comprehensive and long-term perspective. Our retrospect of 2018 is therefore about how this year’s events tie in with or deviate from larger trends in technological, hegemonic or socio-cultural cycles. Our mission is to unlock society’s potential by decoding the future.

The hyperlinks in this Retroscope refer to the underlying Macroscope publications of 2018.

We hope you enjoy our reflection!

FreedomLab Thinktank

Click here to see the full Retroscope of 2018.

Disruption in the making

This year, we have written extensively about four domains of everyday life that are being disrupted by digital technology. Mobility, health, food and education have to adapt to changing consumer preferences and societal challenges and new technologies will shake up existing value chains. Below, you’ll find our take on these changes.

1. Mobility

Many car manufacturers made bold promises, under the pressure of regulators (and Elon Musk) to mass-market their own battery-electric or hydrogen vehicles. One of the questions looming over the automotive industry is, however, whether consumers will continue to buy and use cars to the extent they do today. Policy makers are seeking ways to get people out of their cars (often in order to improve local air quality) and improve public transportation, through Mobility-as-a-Service initiatives, for instance. Insofar as people will continue to get around by car, the question is whether they will still drive themselves. Despite several accidents, both carmakers and tech companies are busy developing and testing their autonomous vehicles. While most analysts have talked about safety and the infamous trolley problem, we have asked how these vehicles may change our everyday lives. Autonomous cars are bound to change the layout of our cities and, in a similar vein, other technologies (e.g. cheaper and faster tunneling) may lead to vertical cities and the comeback of supersonic flight could lead to a handful of hyper-connected, and hence hyper-attractive, global cities.

2. Health

A future in which genetic modifications give us enhanced physical and cognitive capabilities came a bit closer in 2018. Eventually, this will give us the possibility to rethink our human design, but much sooner, genetic data will allow us to unravel our personalities. Along with advanced genetic research, new insights regarding our health have also led to a return to traditional thinking and more holistic approaches to health. The latter related to an increasing focus on prevention instead of care, for example by critically reexamining our diet, the growing awareness of the importance of mental health and the development of digital tools to detect early signs of illness. Even the importance of (urban) infrastructure in stimulating healthier lifestyles was taken into account in 2018.

Despite this broadening perspective, medical care will be needed in the future and it is thus no surprise that Big Tech showed ambitions to disrupt the healthcare value chain. At the same time, a real breakthrough for e-health has not taken place in 2018. Still, initiatives to make e-health applications more user-friendly and introduce gaming elements, could drive its adoption in the coming years and even boost digitalization in other fields as well.

3. Food

2018 has shown growing concerns over food security and ways to feed a growing population in a world of climate change. For instance, rising carbon dioxide levels in the air may make plants grow faster, but it also makes them less nutritious, i.e. the “nutrient collapse”. And, while maintaining biodiversity is crucial to the health of our ecosystems and varied diets are key to our wellbeing, food supplies around the world have become more similar, resulting in expansive monocultures for the intense cultivation of a few select staple crops. Indeed, whether the UN’s Sustainable Development Goals will be met depends largely on the sustainability of the global food system. As we have discussed over the year, in an increasingly urbanizing world population, the city is becoming an integrated landscape for both people and agriculture. Moreover, emerging digital technology is not only making cities smarter, it is also enabling the digitization of the food chain. Biotechnological advancements, such as the gene-editing tool CRISPR, and advancements in the field of genetics are leading to possibilities in crop improvements, disease control and other ways to transform selection processes in agriculture and first steps to the holy grail of personalized food and medicine.

4. Education

This year, preparing ourselves and future generations for the Fourth Industrial Revolution has become an even more pressing topic, as a skills gap in future graduates is still on the rise. Education systems are being reevaluated around the world, and Technical skills and a set of “soft skills” are top requirements on the list of future-proof education.  Although we have always thought that at least our emotional and social qualities would be safe from being replaced by computers, A.I. has been shown to carry out many social and emotional tasks. Furthermore, we have seen an increasing acceptance of these systems doing so. As globalization is moving forward, the knowledge and skills that are required become less related to specific cultures and more alike in each community. These developments increase the popularity of tech solutions that transcend country borders, the one-size-fits-all model of current education systems or the limitations of classroom lectures, such as K-12 online tutoring, personalized learning, online education in the corporate sector, YouTube as a learning tool and VR in the classroom. Whether the current changes that education is going through (e.g. schoolification) are taking place fast enough to keep up with new tech-savvy generations is unclear and the looming skills gap seems to remain in the foreseeable future. As a consequence, kids might increasingly turn directly to companies or start their own business instead of pursuing higher education, in order to develop themselves in a way that resonates with their lifestyle and offers a more solid perspective on a job/income.

Retroscope 2018

Dear reader,

The end of the year is a time for contemplation. In this Retroscope, we look back and reflect on the ideas and insights we have published in The Macroscope throughout 2018. We have covered a wide range of events and developments in technology, global politics and society. The Macroscope is marked by our team’s diversity of perspectives, ranging from philosophy, economics, history, sociology, political sciences to engineering. Combining this interdisciplinary approach with scenario thinking and cyclical thinking, we aim to assess current affairs from a comprehensive and long-term perspective. Our retrospect of 2018 is therefore about how this year’s events tie in with or deviate from larger trends in technological, hegemonic or socio-cultural cycles. Our mission is to unlock society’s potential by decoding the future.

The hyperlinks in this Retroscope refer to the underlying Macroscope publications of 2018.

We hope you enjoy our reflection!

FreedomLab Thinktank

Click here for our Retroscope of 2018.