Everything is going to be terrible in 2015.
That’s the message that I came away with after listening to Time’s Rana Foroohar interview economist Nouriel Roubini and geopolitics expert Ian Bremmer. The three discussed global risk in the coming year.
There are major risks in China, Russia, Europe, the Middle East, and Nigeria.
Beyond just general terribleness, there are a few things to consider specifically:
The Global Economy
On the economy, Roubini said that he sees four major drivers of the global economy: the US, Europe, Japan, and China and other emerging-market economies.
The only one of the four currently on the upswing is the US. However, it’s questionable whether the American economy can distance itself from the rest of the world if there are economic headwinds everywhere else. The Federal Reserve’s ending of quantitative easing (QE) hasn’t hurt the US. But it has hurt emerging markets in the rest of the world.
The economy in Europe, meanwhile, is more or less a disaster.
“I’m more negative about Europe than even during the euro crisis,” said Bremmer.
In China, the question is how the president, Xi Jinping, moves forward with reforms.
Low oil prices will help the economy, but growth is slowing down. Roubini sees GDP growth at somewhere between 3% and 7%.
On the political side, Bremmer pointed out that while Chinese economic reform continues, political reform isn’t in the cards.
The internet and cybersecurity is a big deal. There are two sorts of issues here: First, after the Edward Snowden leaks, the rest of the world is very wary of the US internet. They don’t necessarily want to deal with US companies like Facebook and Google, and are trying to find ways around it. As they do that, major US companies want to get into the Chinese markets and are making moves to ingratiate themselves there.
Bremmer mentioned the fact that Facebook took down a post by a prominent Chinese dissident a couple of weeks ago. According to Facebook, it was because it contained nudity. But an editorial in China’s Global Times praised the move, saying that it shows “Liao [the dissident] doesn’t only have conflicts with the Chinese government. Western opinion mechanisms cannot bear his behaviour either.”
A tangential fear is that countries like Russia and China will build alternatives to the SWIFT financial-payments system, which is the existing global standard system for financial transactions.
The second big issue with the internet is cybersecurity threats. One of the biggest tail risks that Bremmer said he saw was a major cyberattack by Russia on the US, possibly hacking into a financial-services company. Cyberwarfare is only going to get worse from here.
The Middle East
Both Roubini and Bremmer said they didn’t think allowing oil prices to crash was a geopolitical move by Saudi Arabia. Even though it’s hurt Russia and Iran, the two think that the decision not to cut production in the Middle East can actually be taken at face value. It’s about Saudi Arabia preserving global market share.
The much bigger issue in the Middle East is political conflict. Bremmer says he thinks we’ve already seen the apex of the Islamic State’s power — it won’t be a functional state anytime soon. But it’s not going away, either.
Roubini more or less agreed. “The Middle East is a total mess, and it’s only going to get worse,” he said. After the Charlie Hebdo attacks in Paris, the question of terrorism spillovers into London and New York isn’t if, but when.
So … happy days ahead of us.
N.B. Roubini also wrote his own summary of the panel at Time.