The first issue which needs to be considered is the geo-political uncertainty around the world. Beyond Russia’s invasion of Ukraine and the ongoing conflict, there is also the rise of China and mixed signals from the United States in terms of the role it is willing to play to ensure global security.
Peace and prosperity are essential pre-conditions for human development and there may be serious problems in different parts of the world over the course of the next five to 50 years.
Understanding what is going on in the part of the world you live in or do business with is increasingly important as the world becomes increasingly complex. That complexity, however, should not be an excuse to ignore these issues. Geo-political problems and opportunities do not happen overnight. They are the result of historical trends, economic and political rivalry, and political movements. As such, they can be studied, analyzed, and in some cases predicted.
The difficulty in doing such analysis is that most people in business did not study history or geopolitics and feel that these issues are beyond them. My opinion is that if you spend some time on it, you can acquire a working knowledge of the issues facing the parts of the world that you are most interested in. The framework I developed for this purpose looks at the geo-political situation of a country or region in terms of three ideas that are loosely based on accounting principles.
The fixed aspects include the location of a country, its history and traditional alliances and trade partners, the endowment of natural resources, etc.
Semi-fixed aspects are those that will, most likely endure for many years but will change during the course of history. The democratic system of government in the United States, for example, is unlikely to change in the next 50 to 100 years but is a relatively recent phenomenon in historical terms. Even more recent is the European Union in its current form. The EU is, however, still evolving adding countries in the East on the one hand and dealing with the implications of the United Kingdom’s decision to leave on the other.
Current aspects are those which may realistically play out over the next five years.
Russi’s invasion of Ukraine is an example of a current aspect of the situation although the broader tensions between Russia and the West after the collapse of the former Soviet Union have been playing out for a number of years and could be considered semi-fixed.
What I recommend is to look deeply at a specific place that is of interest and think through its geopolitical situation as part of thinking about our professional future. Failure to anticipate such issues can lead to tremendous upheavals in our lives.
- A turbulent world
Depending on what part of the world you live in and do business in, there are a number of critical issues being played out at the end of 2022 which are good examples of how current aspects of the geo-political situation interact with its semi-fixed and fixed characteristics.
In Europe, the most pressing current aspects are the war in Ukraine as well as the aftereffects of Brexit.
Although it is possible that once Russia fully occupies the Donbas region, it will agree to a cease-fire, The deeper issue is what will be the relationship between Europe and Russia as time goes by. Europe still needs Russian gas, especially in the North East. The Russian government, however, is deeply suspicious of the West and sees the expansion of the North Atlantic Treaty Organization to the Baltic States as a provocation.
The full impact of Brexit on The U.k., Ireland, and the rest of Europe is still to be determined but in any case, has transformed the geopolitical reality of Europe for the foreseeable future.
Turkey’s fixed geo-political reality is that it sits at the crossroads between Eastern and Western Europe and between Europe and the Middle East.
The biggest threat to peace in the Middle East is, in my view, the rivalry between Iran and Sunni Saudi Arabia which has been a semi-fixed aspect of the region for years. Many analysts see the war in Yemen as a precursor to an eventual fight between the two largest countries in the region. Iran has the biggest army but Saudi Arabia has consistently one of the highest military budgets in the world.
The situation between Israel and the Palestinian Authority does seem to be improving although permanent peace still seems years away and the conflict in Gaza continues.
In Africa, the situation has improved in the last 10-20 years although there are still enormous challenges facing many of the countries on the continent. Countries such as Somalia and Libya are barely functioning, North and South Sudan are still at war, and there are a number of groups such as Boko Harum and Al-Shabaab which continue to cause murder and mayhem.
On the positive side, the major wars of Central Africa are over and there are signs of economic development in many parts of the continent. The most important thing to keep in mind in Africa is the diversity of the 54 countries and the need to look at each one individually in terms of its history, mineral wealth, ethnic and political rivalries, etc.
On the other side of the Indian Ocean, India and Pakistan have settled into a kind of cold peace but the situation in Jammu and Kashmir is still a sore point. India’s charismatic Prime Minister, Narendra Modi recently altered the Indian Constitution to strip the region of its special status and create two new provinces with direct rule from Dehli. Another part of the historical region was incorporated into Pakistan in 1948 and yet another was annexed by China after its brief invasion of India in 1962.
On the Eastern side of China there is another potential flash point in the South China Sea which, like Taiwan, China claims as its own despite international law and opinion. China is also expanding its navy and launched its second aircraft carrier in 2018.
Part of China’s strategy is what it calls the one belt, one road initiative which involves financing infrastructure projects across the region in exchange for political support and access to markets for Chinese companies. The idea is to create a semi-fixed commercial and logistical networking firmly binding many of the countries in the region to China.
Probably the most pressing issue facing the world is the increasing tension between China and the United States which has mainly to do with trade but also with industrial espionage. According to Niall Ferguson, a historian who teaches at Stanford, we are already in cold war 2.0 between the U.S. and China. Unlike the cold war from the last century, however, this one will be fought in terms of trade, tariffs, telecommunications, and cyberspace. (see box 3.1)
Another potential flash point is between North and South Korea. My own view is that the threat of North Korea was exaggerated as was the promise of comprehensive peace after the summit meeting between Kim ill Jong and President Trump in Singapore in 2018. What would be important would be the unification of North and South Korea but that probably will not happen anytime soon, if ever.
South America is largely at peace although the economy of Venezuela is in total collapse and the regime of Nicolaus Maduro continues to hold onto power despite the challenge from the President of the National Assembly Juan Guaidó.
In North America, the Biden administration has signaled a sharp change in tone but still considers China an adversary and is, of course, arming Ukraine.
- Implications
The situations briefly touched on above all affect patterns of international trade as well as causing death and destruction when war breaks out. Besides the human misery involved, war has a devastating impact on a country’s economy wiping out savings, ruining careers, etc. Clearly, the biggest implication of geo-political change has to do with the choice you make about the place or places in which to live and work.
Geo-political tension also has an impact on space although this can cut both ways. War and the threat of war naturally stimulate spending in weapons and defense industries but can also negatively impact a wide range if industries such as tourism and commodities. Energy and cereal prices have skyrocketed, for example, as a result of the invasion of Ukraine.
The impact of geopolitics on role tends to be more specific such as increasing demand for cybersecurity experts or as a result of larger more direct impacts on a specific space which then hits the roles associated with that space.