Last month, Martin Feldstein (professor of economics at Harvard University) predicted that the growth of global economy will be threatened more by the geographical risks. He listed four major threats which include Russia, China, the Middle East and Cyberspace. The Chinese economy has lost its momentum, conflict continuing in the Middle East and Russia coming back to power arena and probably the intensification of war in cyberspace – are the eminent threats for the global economy.
Putin can’t go long on his adventure
With the demolition of Berlin Wall in 1989 – Russia was disintegrated into 15 countries and its ideology of communism lost in the face off with capitalism. It’s still a marginalized economic power but a military power that can project warfare in the any part of this world. Russia is heavily dependent on oil and its vast resources of natural gas, but falling oil prices in the world market made Russia vulnerable and to divert the attention of its citizens from the staggering economy by forging war against Syria and previously annexation of Crimea from Ukraine. President Putin has already warned its citizens to be ready for the austerity measures.
According to Andrey Movchan, an economic policy expert associated with Carnegie Endowment for International Peace says: “There is no reason to expect any serious changes in the Russian economy in 2016”. The economic competition between the oligarchs supported by Putin and others who see increase in FDI as a symbol of growth – will be intensified in the year 2016. Russian economy has fallen from its peak of $2.15 trillion in 2013 to $1.2 trillion in 2015.
Overall the proxy war started between Russia and the US over the Syrian Crisis will continue to derail the global economic growth in the long term. The Putin-policy of total control from media to economy can’t last forever and Russia might see a revolution rising in coming years.
Despite the slowdown, China will continue to challenge the West
The global GDP growth and Chinese economic growth have become synonyms for the last one decade. But last year 2015 saw Chinese economy on a negative trajectory, Yuan devalued and moving from export based to consumption based economy – have started to hurt the global economy and probably, will continue in 2016 too.
China despite its miraculous rise is still a poor country; its per capita income is one-fourth of the US (on Purchasing Power Parity). However, a modest growth rate of China will be better than the European and American growth. The growing GDP and current account balance puts China in a unique position and now with the inclusion of Yuan into IMF’s elite currency club will surely continue to put its weight on global arena. The recent escalation in South China Sea over the disputed area claimed by many countries including the Japan, Philippines and Vietnam, where it continues to create artificial lands and claiming the same – clearly an indication that rising China may start bullying its small neighbors. Secondly, the US has security agreements with many neighboring countries of China and it will be interesting to see how the US and China responds in future confrontations on the issue of free navigation.
China is making huge investments in Africa and Central Asia and it has successfully exploited the smaller countries by having bi-lateral deals that work more in the favor of Chinese interests. The creation of financial institutions such as Asian Infrastructure Investment Bank challenges the dominant institutions created by the West after the WW2. The mega programs – One Belt, One Road – which envisions connecting three continents of Asia, Europe and Africa through road and sea lane, if realized will challenge the US and its allies in unprecedented manner.
Middle East – No foreseeable future
The world’s attention in 2015 was mostly focused on ISIS – the eminent threat and its devastating effect on the world economy, will remain a threat even in 2016. The inclusion of 2 million refugees into the European society will be a Hercules task. Syria, Libya, Lebanon, Iraq and many other countries are still feeling the brunt of ISIS. However, the divide between shia and Sunni Muslims which dates back to thousands of year can’t be seen in isolation. The rivalry between Saudi Arabia and Iran will intensify in coming days. After the execution of Shitte cleric Sheikh Nimr al-Nimr execution in Saudi Arabia, the tensions will be heightened and it will become a tight rope to walk for the US foreign policy makers to balance it.
Cyberspace: War without borders
It is probably the biggest threat for the global economy as this war has no borders thus any controls. It can paralyze a banking system, extract secret information and government agencies can crumble at the hands of people sitting far from that country. The Chinese hackers stealing the technology information from American companies – forced both the countries to sign an agreement – neither government will support hackers in stealing the information.
The more serious threat comes from malware damaging critical infrastructure such as air traffic systems, electricity grids, oil pipelines and so on. Some years a Hollywood movie Die Hard-4 successfully depicted the threat by showing how a country can be crumbled under the few efficient hands of hackers. Future will see a tremendous rise in wars in virtual spaces.
Cyber weapons are cheap and even an individual can hire a hacker to attack any cyberspace. The cyberspace will give a rise to new kind of mafias working underground to destroy a country’s capabilities. Even the technological advanced countries like the US have failed to block the attack and identifying the source at a quick speed.
These four threats will continue to horrify the global economic arena in coming years.
|Nachiket Nishant loves to write on issues related to politics and international affairs. He has done his masters in international relations. Currently, he is a lead policy researcher at The Indian Iris.|
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of The Indian Iris and The Indian Iris does not assume any responsibility or liability for the same.