26 June 2020

Ten Concerns About the State of the World in 2020

One doesn’t have to dig too deep into the news these days to realize that we are living in one of the most dangerous periods in recent history. On the health front, we are in the midst of what will likely be the worst pandemic to impact the world in a century, a pandemic that has caused unprecedented disruptions to the lives of billions of people around the world. Meanwhile, this pandemic has played a major role in the fact that global economic risk levels have risen to their highest levels since the 1930s, with global economic output forecast to fall at a faster rate than at any time since the Great Depression. Politically, risk levels are now likely at their highest point since the 1960s, with conflict risk rising dangerously and with internal political risks rising in most of the world’s most powerful countries. Taken together, these threats from a global pandemic, economic collapse, class strife and geopolitical tensions are making 2020 a year that will long be remembered, but for many of the wrong reasons. As we look around the world, here are ten of the issues that are causing the most concern right now.

The Spread of the Coronavirus: While the coronavirus has been dismissed by many as only a threat to older people, or people with pre-existing health problems, the fact is that the virus has caused massive disruptions to nearly all corners of the world. With more than seven million known cases of the virus worldwide, and with more than 400,000 fatalities from the virus, this is the worst pandemic since the notorious Spanish Flu. Now, after causing so many problems in hotspots such as Wuhan, northern Italy, Madrid and New York City, the coronavirus is rapidly spreading in less developed regions such as Latin America and South Asia. Given the fact that healthcare systems in more developed countries struggled to cope with this pandemic, the prospects for many emerging markets are dire indeed. Meanwhile, as the fatality rate for younger and middle-aged people is so low, there are fears that the social distancing measures that helped to slow the spread of the outbreak in many countries will continue to be rolled back, raising the prospect for a second wave of the pandemic in those locations.

The Threat of a Second Wave: To speak of a second wave of the coronavirus pandemic can be hard to discuss when so many countries are still in the midst of the first wave of this outbreak. Nevertheless, with the number of cases in many of the world’s leading economies now falling rapidly, their attention has already turned towards preventing just such a second wave. Some fear that the re-opening of these countries’ economies could be the trigger for a second wave of the pandemic, and there is some evidence to support this idea. However, it is more likely that the arrival of the next flu season in the Northern Hemisphere will be the catalyst for a second wave of the coronavirus. This holds the potential to cause significant economic harm, as it will stunt the economic recoveries that are expected to be underway in the latter part of this year and could result in a prolonged recession, one that will dwarf anything seen in most countries in recent decades. Furthermore, the re-imposition of lockdown measures that would accompany a second wave of the pandemic could dramatically increase public anger around the world, further raising political risk levels.

Q2 2020 GDP Growth Results: While the economic results for the first quarter of this year were quite awful for most countries, they were no worse than what many of these economies experienced during the height of the global financial crisis in late 2008 and early 2009. However, the figures that are coming for the second quarter will be staggering, with some countries expected to record their largest-ever declines in economic growth. For the moment, the forecasts for the second quarter vary greatly, but many of the world’s largest economies are expected to record declines in economic output of between 25% and 40%. In North America and Europe, the lockdown measures put in place there are certain to lead to massive declines in GDP, while the outlook for Asia remains poor. Likewise, many emerging markets are expected to see dreadful results in the second quarter, especially countries such as India and Brazil, which have been hit hard by the pandemic. One major concern is that these dreadful economic results will scare businesses and investors, further delaying spending and investments that will be needed to revive the global economy thus potentially prolonging this devastating economic downturn.

US Unrest: At this time of global peril and uncertainty, the world’s most powerful country has largely been absent from efforts to restore order and confidence. As no other country in the world has the resources possessed by the United States to combat pandemics, economic crises and geopolitical threats at the same time, each of these risk factors has risen substantially due to the lack of US leadership. Much of the blame for this has to go to US President Donald Trump, for not only has his divisive leadership hindered the US’ response to the pandemic, but it has reduced the level of global cooperation in the face of these global threats. Of course, it is not President Trump’s fault that the coronavirus outbreak became a pandemic, but swifter action on his part could have saved tens of thousands of lives in the United States and reduced the economic fallout from this crisis. Now, the US is facing more internal divisions than at any time since the late 1960s, with class, social and racial tensions all serving to distract the US from the many problems facing the world. With what might be the most important election in world history coming in November, it is unlikely that these tensions will dissipate, leaving the world without its most powerful actor as it faces some of its greatest threats in recent memory.

Chinese Revanchism: As the country at the heart of the coronavirus, and the first major power to emerge from the first wave of the pandemic, China is using the distractions caused by the coronavirus to improve its strategic position along its borders.  While China must bear a large share of the blame for this outbreak becoming a global pandemic, it has instead chosen to focus on the relative inability of rival powers to deal with the coronavirus in order to champion its own style of government.  Now, with the world distracted, China is moving quickly to rectify many situations along its borders that it feels are unfair to Beijing.  First, China is moving to assert its authority over Hong Kong, confident that the world is too distracted to prevent it from doing so.  Second, China is stepping up its pressure on Taiwan, hopeful that the United States will not be in a position to defend Taiwan from China’s increasing provocations.  Finally, China has moved armed forces into disputed areas along its border with India, raising tensions between the world’s two-most-populous countries.  Altogether, China sees the chaos caused by a pandemic as a unique opportunity to improve its strategic position, both regionally and globally.

European Economic Weakness: So far, no region of the world has been hit harder by the pandemic than Europe.  Almost 45% of the worldwide fatalities from the coronavirus have been found in Europe, with some of the region’s largest countries suffering significant numbers of casualties.  Meanwhile, the damage caused to the region’s economy by the pandemic and the measures used to slow its spread could end up causing irreparable harm to some European economies.  When one considers how much damage the global financial crisis and the subsequent Euro crisis did to many European economies, it is easy to see how this much greater threat could cause so many troubles for the European economy.  Furthermore, despite efforts to combat the crisis, Europe’s ability to do so is relatively limited as two decades of weak growth have left the region with few tools to offset the impact of this latest crisis.  In fact, by the time this year is over, Europe’s economic output is expected to be smaller than it was 12 years ago, a terrible performance for an economy that accounts for more than one-fifth of total global economic output.  In fact, most signs point to Europe now being in the midst of a period of permanent stagnation, much like Japan has been stuck in for the past three decades.  Worse, for some European economies, this latest crisis may worsen economic declines that began more than a decade ago.

A Lack of Political Leadership: Amid all of the uncertainty caused by the coronavirus crisis, one thing that was present in many of the other great crises to face the world over the past 100 years was noticeably missing this time around, credible world leadership.  This is due to the fact that the leaders of the world’s most powerful countries are either incapable of dealing with crisis situations or are too focused on their internal situations to rally the world behind them.  The leader of the world’s most powerful country, United States President Donald Trump, has by nearly every measure done a very poor job in both managing the pandemic at home and in failing to use the US’ immense power to rally the world behind it in an effort to mitigate the impact of this crisis.  Meanwhile, Chinese President Xi Jinping bungled the early stages of the pandemic and has since used the distractions that it has caused to further Chinese interests at the expense of others.  Many leaders of other large powers have also struggled to come to grips with this crisis, including Indian Prime Minister Narendra Modi, Russian President Vladimir Putin, Mexican President Andres Manuel Lopez Obrador and, more than anyone else, Brazilian President Jair Bolsonaro.  Finally, Europe was the region from which the virus spread to many other areas of the world and this was due, in part, to the never-ending uncertainty over who manages such crises in that region, the European Union or national governments.  Simply put, when the world needed strong leadership, it wasn’t there and that made this crisis so much worse than it could have been.

Angry Youth: While there have been losers in the coronavirus crisis, it has to be said that no one has lost more than the world’s youth.  Despite the fact that there is relatively little threat to the health of younger people from the coronavirus, their lives have been put on hold as they have been subjected to strict lockdown measures.  Worse, many of the events that should be among their most cherished memories have been wiped out by the response to the pandemic.  Meanwhile, many younger people have had their futures put in severe jeopardy.  For example, there could be no worse time for younger people entering the job market or in the early stages of their careers, than during an economic crisis of this scale.  Meanwhile, the burden of paying off the massive debts that are being incurred by most economies as they combat the impact of the pandemic is certain to fall most heavily on younger generations.  As they see a system that has been designed to benefit older generations now failing them, it is easy to understand why today’s youth are so angry.

Big-Power Flashpoints: For much of the past few decades, those flashpoints that involve two or more major powers had been relatively calm.  However, this is no longer the case as many dangerous flashpoints are heating up.  One that was already mentioned here was the disputed border between China and India.  Another is Libya, where Turkey’s support for that country’s internationally-recognized government has turned the tide against rebel forces backed by Russia, Egypt and the UAE.  Syria too is home to competing outside powers that also are pitting Russia and Turkey against one another.  In fact, as the economic situation in many countries continues to deteriorate, such flashpoints could be used as a distraction by some governments to turn their populations’ attentions elsewhere.  On the other hand, the popular frustration that is rising as a result of the coronavirus pandemic could raise support for military action against rival states.  Overall, the threat of a conflict between two or more major powers, including the world’s two superpowers, is now greater than it has been at any time over the past 30 years.

The Threat of a No-Growth Future: Of all of the threats facing the world in the early 2020s, one of the greatest threats has to be the potential for the global economy to no longer be able to generate economic growth as it has done for much of the past 200 years.  In wealthier economies, this downwards trend has been evident for some time, as rich-world economic growth has fallen from more than 4% per year between World War Two and the 1980s, to less than 2% per year so far in the 21st century.  Worse, two massive crises in the past 12 years means that many large economies, including Japan, Italy and Spain, have lower levels of economic output today than they did in 2008.  Meanwhile, many emerging markets are also finding it increasingly difficult to generate steady economic growth, particularly those with undiversified economies.  With the world’s demographic situation becoming more unfavorable for economic growth, with trade and investment in decline, and with productivity growth dangerously low, the outlook for the global economy is worse now than at any time in recent history.  If we cannot return the global economy to growth, the ramifications will be massive, not only in terms of economic health, but in terms of a range of issues such as living standards and global security.

Each of these issues would be a major challenge on their own, but with all of them posing a severe challenge to the world at the same time, it is easy to see why we are in the midst of the most challenging period in recent world history. Over the near-term, how the coronavirus pandemic develops, and how the world reacts to this changing pandemic, will play a major role in how these challenges manifest themselves.  However, many of these issues will remain in place long after the pandemic is over, and so far, we are far from finding solutions to most of them.  As a result, the world’s leading powers must do more to ensure that these challenges are addressed in a manner that is befitting of their importance.  However, there are many reasons to believe that these threats will remain in place for many years to come, as the coronavirus pandemic has exposed many of the weaknesses that have emerged around the world and now threaten to usher in a period of more economic uncertainty and higher political tensions.