Today’s world is facing large-scale problems, from wars to water shortages to a looming global recession. It’s not easy to conceptualize accurately the risks posed by these issues. This is especially true when certain problems are overblown by the media while others are discounted, or when problems become so emotionally or politically charged that it seems impossible to work toward a solution.
That’s one reason why the Eurasia Group publishes a detailed analysis of the top risks facing our world each year. As political scientist Ian Bremmer explains, the top risks for 2023 include water stress, inflation shockwaves, and the uncertain future of a “rogue Russia.”
Bremmer is the founder of Eurasia Group, an organization that for 25 years has been using political science to help investors and corporate decision-makers better understand how politics impacts risks and opportunities in foreign markets.
IAN BREMMER: People are getting increasingly anxious about the world that we live in: I'm finding a lot of panic, people that are very online, spending too much time on cable news and social media, and maybe talking to their crazy uncle. This is meant to be a counterbalance, that you can keep the uncle but you can also spend some time thinking about deeper analytic trends of what really is an issue that's worth concerning yourself with, how we might be able to respond to it, and also all the things that, frankly, don't merit the screaming headlines. What we're talking about in the Top Risks Report are those risks out there, globally, that are going to have the most likely dramatic implications in changing the way the world works in ways that are unanticipated by all of the major actors in that world: the government actors, the business actors, and the citizens. And they're ranked in terms of impact, imminence, and likelihood- you put those three things together and you get the top risks.
I'm Ian Bremmer, president of Eurasia Group, and these are the top risks of 2023.
Number 10: Water stress. Around the world, so many people think of water as a sudden emergency that needs a quick and immediate policy response. Increasingly, this is an ongoing, real-time issue for everyone. Some people have too much water; massive floods in California. Some people have too little; huge challenges with shipping in Europe. Farmers having to consistently change the way they go about their basic productivity on a season-to-season basis because they do not have adequate resources to be able to plant a normal season. This is having the biggest impact on the Middle East and sub-Saharan Africa, but it's a global issue. There are global responses, just like the COP summits on biodiversity and on carbon emissions, there's a COP summit on water, but no one's ever heard of it because it doesn't really do anything, it hasn't become a priority, therefore, it's not getting the resources, and therefore it's getting worse every single year. 2023 is really the first year that I think we can talk about global water as being the kind of ongoing condition of stress that we've already come to learn about carbon, about biodiversity.
Number nine: TikTok boom. It's not actually about TikTok, it's about the generation that has grown up on TikTok. It's the most diverse generation we've ever seen in the West. It's also, by far, the most activist. At a young age, believing that they can do much more by getting online and by demonstrating, than they can by voting, and that has much greater impact, both in terms of driving agendas that are very important to them, like on climate, like on social equity- also in terms of changing outcomes for people in positions of power, and here I'm thinking not just about political leaders but also about industry leaders, CEOs, bankers, and the like. That is going to create big ripple waves across the global economy precisely because it's the most progressive generation, and as a consequence, it will cause more volatility, will lead to more political and economic change- much of which will eventually be welcomed- but the getting from here to there is, of course, gonna be a challenge.
Number eight: Divided States of America. Now, the fact that it's number eight, the United States, and the U.S. is the most powerful country in the world, kinda means it almost didn't make the list, means that we are not panicking about the future of the United States, but still, divisions in the United States, politically, are massive, they're much greater than those of other advanced industrial economies around the world, that makes it a lot harder to functionally govern. You saw this with 15 votes to get Kevin McCarthy barely over the line as Speaker of the House, and he's gonna have an impossible time actually holding that party together. You also see this with inability to even address fundamental issues like improving education, or dealing with immigration in the United States, even though we all know what the basic answers are. But the big positive in this risk is the fact that all of the people that were running for key positions of governor and Secretary of State to oversee upcoming elections, those that were claiming that this election was gonna be stolen and they had to stop the steal, they all lost. So as we look forward to 2024, the likelihood of a constitutional crisis in the United States is virtually zero.
Number seven is arrested global development. For 50 years, the world has seen incredible human improvement in education, in health and lifespan, in economic growth across the world- it wasn't just a tiny group of rich people that were taking advantage, it was the emergence of a global middle class. We are now seeing that turn around: we're seeing more people driven into poverty, we're seeing more children leaving school, and particularly, a burden on women being driven into sexual trafficking, being driven into the informal economy, not being able to experience the basic human rights that they've worked so hard to achieve over the last 50 years. The United Nations estimates that five years of human development on the planet has been lost in the three years since the pandemic has begun, and in 2023, those losses will only accelerate. There are lots of structural reasons for that, some of it is, of course, the dangers of the pandemic, some of it is the challenges that came from the disruptions of the Russian invasion of Ukraine, all the supply chain challenges, and the inflation that came on the back of it, some of it is climate change. You put all of those things together and global development is changing trajectory.
Number six: Energy crunch. The Russian invasion of Ukraine means that the Europeans are no longer getting their gas and much of their oil from Russia, one of the largest energy producers in the world. But the Europeans need their energy, what are they doing? They're spending as much as humanly possible to get the energy from anywhere else they can, that drives prices up, but it also means that developing countries that don't have access to the same deep pockets that the Europeans do are really taking it in the teeth. So over the course of the year, the Europeans are going to experience another challenging winter, in many ways more challenging in 2023 than in 2022, because they don't have the benefits of all of that Russian energy that was coming in at the beginning of the year like they did last year, but also it means that the knock-on challenges for the poorer countries that are not commodity producers around the world, gonna feel very great stress this year.
Number five: Iran in a corner. Demonstrations across Iran erupted months ago with the killing of Mahsa Amini, a young woman who was not correctly wearing her head scarf, killed by the "morality police," so-called, in Iran, and it touched off the greatest demonstrations they've had on the ground since the 1979 revolution- and the Iranian government is only repressing in response, there's no willingness to have a dialogue or compromise. No, in fact, we see, increasingly, the Iranian government is willing to execute their citizens with no reason. At the same time as that's going on, the JCPOA, the Iranian Nuclear Deal the Americans stepped away from unilaterally, well, the Iranians are stepping away from it too, and they've now achieved 'nuclear breakout,' their willingness to engage in nuclear development enrichment that would allow them to build nuclear weapons when the inspectors aren't there. And finally, the Iranians are Russia's best friend on the global stage. Chinese aren't providing them with military support to invade Ukraine, but Iran is, that's angering the Americans, angering the Europeans. The likelihood we see regime change in Iran is relatively low, and even if it were to occur, it would probably be towards a military dictatorship, not to a democracy; it's not gonna help in resolving any of these issues. But the likelihood that we see military confrontation between Iran and a new Netanyahu-led right-wing coalition in Israel, Saudi Arabia, and even the United States, that's higher than at any point since the Iranian Nuclear Deal was signed.
Number four: Inflation shockwaves. Should surprise no one that, after a staggering contraction of the global economy that came with COVID, the global economy basically shut down, and an enormous fiscal outlay from every major economy in the world to ensure that all the people that were suffering, had their businesses closed, and lost their jobs, would still be able to get through while the economy contracted, and then the economies open up, but not at the same time, and the shipments and ships, they're not in the right place. So what happens is a consequence of all of that: While people are ready to spend money, supply chains are massively disrupted, costs go way up, and costs go way up around the world, doesn't matter if you were Biden, or you were the Europeans, or you were the Chinese, the Brits, the Japanese, everyone experiencing generational levels of inflation. Overall, global growth from 6% in 2021 to 3% in 2022, expecting less than 2% in 2023- that's a global recession. The implications of that around the world will be very serious, especially given levels of present inflation. The wealthy countries have the money to be able to continue to ensure that their working classes, their middle classes, are taken care of, but the real issue is for developing countries who don't have the fiscal space to be able to make these payments to the rest of populations; they'll put policies in place that will only make the much-more indebted dollar-denominated debt, in many cases, with higher interest rates that they will not be able to service, leading to collapse. The social instability, the political instability that comes from these economic challenges on much of the developing world, is at higher levels in 2023 than we have seen in decades.
Number three: Weapons of Mass Disruption. The United States, back in 1989 when the wall came down, was the leading exporter of democracy around the world, not always with successful outcomes, frequently hypocritically, but nonetheless, that's how the wall came down, that's how the Soviet Union was defeated. In 2023, only 30 years later, the United States has become the principle exporter of tools that destroy democracy. That's not the intention of the U.S. government, it's not even the intention of the technology companies that have these algorithms, it is an unintended consequence of the business model and the AI capabilities. But we are seeing the exploitation of these tools by bad actors. With deepfakes in video, and other tools that are used both politically and economically to achieve changes in your behavior, both in the marketplace and in politics, will pose great dangers to representative democracy, as well as the proper functioning of the free market. That's why Brazil had their January 8th events that looked an awful lot like those in the United States in January 6th: without Instagram, without Facebook, without all of these algorithms driving all these conspiracy theories, you don't get tens of thousands of Brazilians that believe that their election was stolen, and are prepared to throw away their futures in order to occupy these buildings. We're gonna see a lot more of this, Brazil's not about to fall apart, just as the United States was not, but around the world democracies are becoming more vulnerable because these tools are being exported, and no one is able to stop them.
Number Two: Maximum Xi. Xi Jinping is now the undisputed leader of China, he has rid himself of term limits, he can be president for life. He has also surrounded himself, in the Communist Party, the entire hierarchy, with only loyalists. That don't have checks and balances, and as a consequence he can make mistakes. Those mistakes can be big, they can have major implications for how the world actually works. This is not the way China was run 10 years ago, there was a lot of differentiation between hardliners, on the military, and people that wanted more pragmatic economic outcomes- technocrats, the Shanghai Clan, Beijing, you name it- but today you are with Xi or you are out. We saw that with the treatment of the former president, Hu Jintao, forced removal in front of the entire communist party leadership was an extraordinary display of the unique power that Xi Jinping was prepared to exercise, and every person in that room understood that there but for the grace of God, or Xi, go there. We saw that with the sudden turn from zero COVID to maximum COVID, made by a snap decision of the Chinese president at the end of the year. That level of uncertainty does not just involve changing the path on COVID, it also involves treatment of technology companies, engagement in the global economy, even issues of fundamental national security. Now, the good news is that the United States and China are not in a cold war, they don't want a cold war. Indeed, after the G20 in Bali, Xi Jinping and President Biden put a floor underneath the relationship to ensure that it couldn't continue to deteriorate in ways that would be damaging to both countries, but many companies around the world see Maximum Xi and are discomforted by it. As a consequence, they are themselves taking decisions to start to decouple further from the Chinese economy, unwinding globalization, decreasing global market efficiency, and creating challenges for the global economy.
And number one: Rogue Russia. Over the course of one year, Russia has gone from a global power, standing as the most important friend, without global limits, with China's Xi Jinping, to becoming a rogue state, isolated from the entire group of advanced industrial economies, cut off economically from Europe, their most important trading partners, and facing staggering losses on the battlefield in Ukraine. There is no way for Putin to turn this around under any circumstances, he cannot achieve the status quo ante of February 23rd, before he decided to invade the independent Ukraine. Rather, NATO is enlarging, with thousands of troops forward deployed, Ukraine has become one of the most powerful military states in the continent of Europe. The Europeans have moved away from their energy supply from Russia, and they'll never return to it, and from a political perspective, the Russians have become seen as war criminals by the United States and all of its critical allies around the world. Russia is not going anywhere: Putin is not going to be forced out of office in the foreseeable future, and as a consequence, the question is what is he going to do? Because the reason Putin's losing is because he's fighting not just Ukraine, but NATO. This is essentially a proxy war where the Americans and all of their allies are doing everything they can to provide the training, the intelligence, and the military support to ensure that Ukraine can defend itself, retake its territory, and bloody the Russians after their illegal invasion. The Russians have taken this war thus far to Ukraine, but it's hard to imagine that it'll stop there. Remember, Russia has 6,000 nuclear weapons, more than anybody else in the world, and so they feel that they have the ultimate deterrent to stop a third World War, which means that asymmetric attacks like cyber, like fiber, like proxy strikes, like pipeline attacks, like terrorism, into NATO states, much like what the Iranians have done in the Middle East over the past years, does lead to a consolidation of the allies: We saw the Abraham Accords between Israel and the Gulf states, you're seeing NATO becoming much stronger, but it also means much more danger for these countries going forward as well. The potential for mutually-assured destruction because of accidents and miscalculations in and around the battlefield will be higher in 2023 as a consequence of this war, than at any point since the Cuban Missile Crisis in 1962.