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2016 has begun, as 2015 ended, amid a significant worsening of the global political climate and along with that, considerable volatility in financial markets. Investors and businesses are increasingly aware of the need to understand the drivers and the implications of a greater level of event risk exacerbated by shifting social patterns.
What’s more, we see little sign of this trend of political risk cutting across advanced and emerging economies reversing. We think it’s unlikely that the moderate global growth that Citi’s economists forecast as their central scenario will dampen these risks. If anything, the data we have analyzed for this report, combined with our combined expertise in comparative political science and international relations and security and defense analysis, underscores how, by many measures, these risks are on the rise and indeed could endanger even the already modest prospects for global growth
In our view, political and business leaders will need to be more attuned to the new shape of global political risk, a paradigm shift that means that previous policies will fail to keep pace and uncertainty will remain high, with the potential to interact in unexpected ways. Among the key implications of this more fragile and interconnected risk outlook is that so-called Black Swan events — in this case, geopolitical events producing instability spanning several orders of magnitude — may be both more likely and more difficult for leaders and global financial institutions to resolve.
Over the long-term, failure to devise policies to address middle class anxiety and declining living standards increases the likelihood that Vox Populi risk — including mass protests and government collapses — could move from being episodically disruptive to systemic, undermining globalization in the process. And we are deeply concerned that the political capital necessary to stem the refugee crisis and terrorist threat, perhaps best-characterized as the collision between previous foreign policy failures and current governance capacity, exceeds that available to government leaders, who have relied upon central banks to manage the lion’s share of global crises over the past several years. 2016 could be a very political year for markets.
originally posted by: FamCore
a reply to: SkepticOverlord
Is the author suggesting that fiscal policy and central banking has "lessened" the effects of Black Swan-events in the past, but that this is now unable to handle the stresses incurred from current global issues?
The United States, through diplomatic activism backed up by unrivaled military power, kept many regional conflicts under control (or pacified them), such as between Pakistan and India, North and South Korea, Israel and its neighbors, and the states of the former Yugoslavia. It did not dominate world affairs in a hegemonic way (which would have been impossible even for the US), but it served as the arbiter of last resort and the world’s reserve power. After 1989, most nations buying into the post-Cold-War surge of economic globalization consumed US stability services around the world, even those who openly or clandestinely opposed America’s relative dominance.
But this fortunate power structure has changed significantly over at least the last decade. The US position in global affairs has weakened. Other powers have gotten stronger. Some military interventions, such as the Iraq war, have eroded both US credibility and resources, an outcome supported by a host of global public opinion data. Less political capital is available in Washington to underpin America’s global role, leading to a “leadership from behind” culture that is considered to be ineffective and widely perceived as US weakness. Inward-looking, isolationist leanings have gained political traction in America’s political mainstream. The threshold of what constitutes US national interest has narrowed markedly in comparison to previous decades.
originally posted by: ketsuko
Obama's foreign policy approach is driven by the leftist idea that at the base of every problem in the world is America.
If this report is to be believed, then it was America that held the world stable, and our withdrawal to allow the world to be free of America and let the world sort itself out is directly to blame.
So was it evil for America's influence to have kept the world more or less stable and thus more peaceful or is it better to have the chaos we see?
I guess we're going to find out.