December 16, 2020
The top ten risks and opportunities for 2021
New Atlanticist by Mathew J. Burrows, Robert A. Manning
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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
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:
Source: Daniel Schludi, Unsplash
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:
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:
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:
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.
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:
Source: Reuters
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:
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.
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:
Source: Military News Agency, ROC, Wikimedia Commons
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:
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:
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.
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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