Friday, December 18, 2020

The Top Ten Risks and Opportunities for 2021

 

 December 16, 2020

The top ten risks and opportunities for 2021

New Atlanticist by Mathew J. BurrowsRobert A. Manning

 

AfricaCoronavirusEconomy & BusinessEnergy & EnvironmentEurope & EurasiaIndo-PacificInternational OrganizationsMiddle EastNational SecurityNuclear NonproliferationPolitics & DiplomacyResilienceSecurity & DefenseTechnology & InnovationUnited NationsUnited States and Canada

 

Photo by JJ Ying on Unsplash

It’s not being called the “year from hell” for nothing. The pandemic, the kind of “grey swan” event that is predicted but never pinpointed in time, finally came calling in 2020, aggravated by deepening political division and tribalism. International institutions continued to fragment, with the United States withdrawing from the World Health Organization right in the middle of the plague and engaging in obstructionist behavior in other multilateral organizations. 

Yet there were rays of light even in the abyss. Democracy prevailed in the US presidential election, even as the US political system remains polarized and dysfunctional. In a surge of spectacular innovation, aided by artificial intelligence and big data, scientists created COVID-19 vaccines with stunning alacrity.

It’s tempting to say that in 2021, there’s nowhere to go but up. But there will be further unanticipated shocks and no shortage of risks. Drawing on years of foresight experience at the US National Intelligence Council, we’ve assessed the knowable and drawn on our best judgment to identify the top ten risks in the new year for the United States in particular, but with global implications. We’ve attached a probability to each potential scenario, with “medium” denoting a 50/50 chance that it will occur in the coming year. The ordering of the risks is by importance for the United States and the rest of the world.  

And in the spirit of optimism for the new decade—hope springs eternal, after all—we’ve made an addition this year: ten opportunities in the coming year for the new US administration, beginning with the most important and using the same probability scale for each potential scenario.  

 

Top risks

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The COVID-19 crisis deepens amid a slow vaccine rollout

 

COVID-19 will continue spiking in the United States, the European Union (EU), and Russia, with the consequences from holiday travel, gatherings of family and friends, and widespread pandemic fatigue likely extending into 2021. Many could further let their guards down in anticipation of receiving vaccines. Vaccine distribution could encounter unexpected production and logistical problems, pushing back the timeline for when the bulk of the public can be vaccinated. In the United States in particular, polls show that 42 percent of Americans won’t take any vaccines, which could lower the chances of stopping the contagion until well into the second half of 2021. International travel restrictions will remain in place for much of 2021 since distribution of the vaccine overseas, particularly in developing nations, will likely be spotty. The virus also continues to spread and mutate, potentially limiting vaccine effectiveness. 

Probability:

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Source: Daniel SchludiUnsplash

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The Biden presidency is stifled

 

Joe Biden’s ability to govern will be constrained, especially if Republicans retain Senate leadership. In his last days, President Donald Trump is making it as difficult as possible for his successor: Treasury Secretary Steven Mnuchin has returned $455 billion in recovery funds to the government, while Trump threatens China with additional arms sales to Taiwan, warns Iran of additional sanctions, and withdraws the United States from the Open Skies Treaty in a further dismantling of arms-control measures. Polls show some 70 percent of Republicans believe the election was stolen from Trump and that the Biden presidency is illegitimate. Trump could be a thorn in Biden’s side for the next four years, particularly if he announces another run for the presidency. Meanwhile, progressives will pressure Biden from the left, draining support for his administration among moderates.

Probability:

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Another global financial crisis, driven by debt, breaks out

 

Global debt from emergency COVID-19 spending, especially in developing economies, is exploding. Total debt increased by $15 trillion in 2020 and is expected to reach 365 percent of global GDP by the end of the year. The International Monetary Fund (IMF) has had to disburse pandemic-driven financial aid to eighty-one countries already, and capital flows to low-income countries are projected to drop by $700 billion from 2019 levels in 2020. Developing economies need $7 trillion to repay debt by the end of 2021. Zambia is the sixth nation to default in 2020. Such financial distress could spark yet another global financial crisis. In an effort to stem the growing crisis, the Group of 20 (G20) has created a “Common Framework” (including China) to manage debt relief, but US congressional reluctance to approve any new resources for the IMF could undermine G20 efforts.

Probability:

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Western countries struggle with a slow economic recovery

 

The International Monetary Fund (IMF) and Organization for Economic Co-operation and Development (OECD) recently reduced their original estimates for 2020 of downside economic damage to the United States and other countries from COVID, but most of the world won’t get back to pre-2020 GDP even by the end of 2021. Only one major economy—China—will experience significant growth (almost 2 percent) in 2020, ending up 10 percent larger by the end of 2021. The situation could become worse for the West if there’s inadequate fiscal stimulus. Many economists believe the slow US recovery from the 2008 financial crisis was partly due to the premature withdrawal of stimulus and an emphasis on deficit-reduction starting in 2010. In Europe, post-2008 austerity measures exacerbated the problem of slow growth. Keep in mind as well that the 2008 financial crisis spawned the ongoing populist surge in the United States and Europe. Once again, the darkening financial prospects of millions of citizens, pushed down just when they started to get back on their feet, could lead to even worse longer-term political repercussions. 

Probability:

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Once again, the darkening financial prospects of millions of citizens, pushed down just when they started to get back on their feet, could lead to even worse longer-term political repercussions.

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North Korea manufactures a crisis

 

When it comes to addressing the nuclear threat from North Korea, Biden will inherit the failed diplomatic legacies of the last four presidents. Despite Trump’s three meetings with Kim Jong-un, North Korea now boasts an even more capable nuclear-weapons arsenal, including some twenty to thirty bombs and intercontinental ballistic missiles that may soon be able to reach the US mainland. The pattern in the past has been for new American presidents to be greeted with a North Korean provocation in the form of either a missile or nuclear test. Expect one in the first quarter of Biden’s presidency. Such a demonstration will lead to pressure on Biden in the media and in Congress to do something, raising tensions and likely leading to a pseudo-crisis that could spin out of control. Kim is not suicidal; US deterrence still works with him, though it needs to be strengthened in the face of new and emerging North Korean capabilities. The Biden administration will be most effective in this regard if it avoids saber-rattling and instead pursues multilateral opprobrium and works with South Korea and Japan to enhance deterrence. 

Probability:

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Source: Reuters

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The confrontation between the US and Iran intensifies

 

Israel’s suspected assassination of Iran’s top nuclear scientist plus Trump’s possible heaping-on of sanctions before leaving office could poison the well with Iran, thwarting Biden’s hope of rejuvenating the nuclear deal. In Iran, there is widespread anger at the United States and Europe, and a debate over next steps ahead of presidential elections scheduled for June. Should Supreme Leader Ayatollah Khamenei follow through on his vow to retaliate—against Israel, the United Arab Emirates, or Saudi oil facilities—before January 20, it could trigger a strong reaction from the Trump administration, such as bombing the Natanz nuclear facility. This could, in turn, spark an escalatory cycle between Washington and Tehran, undermining Biden’s diplomatic aspirations. A US return to the nuclear deal is based on an Iranian reversion to the status quo ante plus a willingness to expand the old agreement. A “more-for more” negotiation to extend timelines on halting Iranian nuclear activities, freezing missile development, and halting missile sales, along with a winding down of the war in Yemen, in exchange for easing UN sanctions against Iran, could begin to rebuild a modicum of trust among the parties to the nuclear deal. But that scenario is far from a certainty. 

Probability:

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Israel’s suspected assassination of Iran’s top nuclear scientist plus Trump’s possible heaping-on of sanctions before leaving office could poison the well with Iran, thwarting Biden’s hope of rejuvenating the nuclear deal.

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The US and China clash over Taiwan

 

Taiwan may be where tensions in the US-China relationship reach a denouement. A negative dynamic has escalated over the past year or so: Each move by the United States to show support for Taiwan—such as arms sales, high-level official visits, and military exercises—has led China to ratchet up pressure on Taiwan with near-daily air and sea intrusions. Taiwan is an existential issue for the Chinese Communist Party. If the US-China confrontation worsens, Xi Jinping may feel compelled to move toward unification of Taiwan with mainland China. This will not necessarily mean a Chinese military invasion, though inadvertent clashes are a risk. More likely is a Sun Tzu-type, frog-in-boiling-water strategy of squeezing Taiwan’s economy, putting the onus on the United States to escalate. Any US military intervention would trigger an outright conflict between the world’s two superpowers.

Probability:

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Source: Military News Agency, ROC, Wikimedia Commons

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The worst food crisis in decades ravages the World

 

The United Nations (UN) has warned that the world is on the brink of its worst food crisis in at least fifty years. The pandemic has disrupted global food supply chains. And with more people falling into extreme poverty as a result of the economic damage inflicted by COVID-19, rising food prices could not come at a worse time. The UN forecasts that more people will die of COVID-related malnutrition and its associated diseases than from the coronavirus. That doesn’t take into account the toll for those who survive; childhood malnutrition has lifelong health and mental repercussions. The World Food Program believes that Yemen, South Sudan, Nigeria, and Burkina Faso may already be suffering famine conditions. Afghanistan, Cameroon, the Central African Republic, Congo, Ethiopia, Haiti, Lebanon, Mali, Mozambique, Niger, Sierra Leone, Somalia, Sudan, Syria, Venezuela, and Zimbabwe are not far away from it. Even in advanced economies, the poor are suffering from higher food prices at a time of high unemployment. In the United States, more than one in five households are now food insecure.  

Probability:

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The expansion of the global middle class comes to an end

 

Perhaps the world’s top achievement of the last three decades was the rise of millions out of extreme poverty and the growth of a global middle class. This may be jeopardized unless there is a strong recovery from the COVID crisis in 2021 and beyond. Experts believe that for the first time in half a century, the middle class has started to shrink—potentially by 52 million people in Latin America alone. At the same time, the World Bank predicts that by the end of 2021 up to 150 million additional people will fall into extreme poverty, defined as those living on less than $1.90 a day. Lower than expected economic growth next year would increase that figure. Historically, the erosion of the middle class correlates with political instability, democratic backsliding, and greater conflict. 

Probability:

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Perhaps the world’s top achievement of the last three decades was the rise of millions out of extreme poverty and the growth of a global middle class. This may be jeopardized unless there is a strong recovery from the COVID crisis in 2021 and beyond.

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Neo-Ottoman Turkey goes more rogue

 

Increasingly authoritarian, Islamist, and expansionist, Turkey under Recep Tayyip Erdogan has either intervened militarily or has placed troops in Somalia, Qatar, Libya, Iraq, Syria, and the Balkans. Ankara has been confronting Russia in Syria, Libya, and Azerbaijan while attacking US-allied Kurds that are fighting ISIS. Turkey is deploying the Russian S-400 air-defense system, which poses a threat to NATO and has prompted US sanctions. And it has conducted naval provocations in the Eastern Mediterranean, contravening the Law of the Sea Treaty and threatening Cyprus. Many Arab states see Turkey as a threat, while Erdogan is also provoking France over its handling of recent terror attacks. Ankara’s multi-front military assertiveness could spark more conflict and force a reckoning within NATO, which counts Turkey as a member.

 

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