As I look ahead to what 2011 might hold for the global economy, there are a number of key threats that need close watching. Some are known and fairly predictable threats:
war in the Middle East
continued evidence of state sponsored cyber warfare
the economic crisis in the fringe countries of the Eurozone
more riots and protests as governments impose austerity measures (mainly in the EU)
increased protectionism
rising inflation
a ‘talent exodus’ and massive turbulence in labour markets (read previous blog entry on this here)
Zimbabwe having another sham election (not so much a global issue in itself, but rather a threat because of what it tells us about the toothlessness of the African Union and therefore the whole continent’s continued lack of emphasis on genuinely accountable governance)
the shift of political power in China as they continue to prepare for a new premier in 2013
currency wars
water wars – especially around the use of the Nile’s water resources
continued horse trading around environmental issues and global climate change accords.
There will be other issues that arise during the year which could not be predicted but should definitely be expected (and planned for):
travel disruptions due to weather and natural disasters
disruptive technologies (this is the year Virgin Galactic plan to put their reusable space craft into service, for example, but it is also a year that will see disruptions in medical science as well as how we process information)
limited access to energy (not enough energy to power a recovery)
regulatory changes
a major computer virus (and also targeted computer attacks on selected companies and governments) – FastCompany magazine recently called this “hacktivism” (read their article here) – it’s a big threat
medical advances that include significant shifts in how we understand and use genetics
a global pandemic (probably another variant of the flu virus) – but possibly big enough to have some ports and regions effectively quarantined.
But if I were to try and put my finger on just one issue that might define 2011, it would have to be America’s continued disinterest in dealing with their deficit. To be honest, I don’t think this will come to a head in 2011. It will continue to fester, and will probably only reach boiling point in 2013 (although there will be a lot of noise about it during the 2012 election campaign). This is a complex issue, incorporating a number of converging economic trends – each one more frightening than the next, for example:
Many of America’s States are even more badly run than the failing Eurozone countries that have received so much attention in 2010. They have huge deficits, massive unfunded pension liabilities and have growing debt with the Federal government. Their political systems are also in a mess.
Many of America’s municipalities are in dire financial difficulty. Read a Moneyweek analysis of this threat here.
America itself has a massive and growing deficit, with seemingly no appetite to slow the rate of debt growth at all. The most recent mid term election was fought in many cases on an economic ticket, with a promise to reduce the deficit. Yet, the very first thing a newly powerful Republican party did was to extend tax cuts to the rich, adding $ 130 billion to the deficit. (See an excellent Newsweek article here for more on this).
America’s bonds are going to become very unattractive in 2011.
The ageing Baby Boomers have been stung by the recession, and are likely to be much more risk averse in the next few years (that’s partly why they’re relying on government stimulus money rather than venture capital). This does not bode well for decisions that need to be made about long term economic health for the USA.
America is becoming increasingly protectionist and nationalistic, at just the time when they are losing their political and economic power in the world. Right now, most Americans are not noticing this, but when they do, there will be a huge backlash. History tells us that America flexes its muscles by waging war. I wouldn’t want to be Iran, North Korea or Palestine (or even Cuba or Venezuela) in the next few years (even more so if the Republicans regain the White House in 2013).
But 2011 will nevertheless be a critical year for the global economy. And America’s disinterest in tackling its deficit will be central to a year of turbulence and uncertainty.
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Glad that you put “War in the Middle East” as number one. The anti-Iran rhetoric in the corporate-owned media continues unabated. They have even been claiming that the Wikileaks files support “a consensus” that Iran is somehow a threat when it’s obvious that diplomats will write exactly what their masters want to read.
If the US-led military-industrial complex does attack Iran, they will get their asses soundly kicked, and if they resort to using “tactical” nukes, the whole planet is in deep trouble.
So, the spectre of nuclear war is the number one risk for all of us. This should be the top news item every single day. But of course, there’s a buck to be made by waging war, so the corporate media aren’t going to warn us about the risk, are they?