Teneo Insights

Lord Hague of Richmond

Senior Advisor, Teneo Holdings

A Systematically Less Stable World

Political movements of great power can arise quickly, fueled by a demand for accountability and responsiveness in government. This is a product of the changed habits and expectations of a digitally connected world.

In February 2011, I was the first foreign minister of a European country to set foot in Tunisia after the revolution that overthrew the autocratic government of Ben Ali. Tunis that night was an eerie scene: with a curfew enforced on the streets, I saw only a solitary cat on my journey from the airport to the British ambassador’s residence.

The next morning, my first meeting was with ‘revolutionaries’ – people who had played their part in the downfall of a feared dictatorship. Not so many years ago this would have meant a Lenin-type figure in a secret headquarters, or battle-scarred young men with their rifles on the table, but the revolutionaries of 2011 were something quite different; crucially they were something no security service could fully monitor or control, for these were normal-looking young people with no weapons or wounds; they were mainly women, and their method of overthrowing the entire apparatus of a state had been to sit at home on their laptops.

Proudly, they told me of how they, along with tens of thousands of others, had used the internet to plan a ‘couscous party’ on a vast scale, knowing that the day of the party would be the time for their brothers and male friends to take to the streets in mass demonstrations. They had been one part of a movement which came together suddenly, without a leader or any conventional organisation, and yet which initiated the most significant change in world events of the 21st century so far – what was then optimistically called the Arab Spring.

The information revolution has had countless side effects, and one of them is that political movements of great power can arise very quickly without being planned or designed.

Such movements are fueled by a growing demand for accountability and responsiveness in government, itself another product of the changed habits and expectations of a digitally connected world. They are at their most explosive when provoked by sustained corruption and mismanagement, especially when combined with a denial of economic opportunity to a young and expanding population. Far beyond the Arab world, similar factors can be seen at work in massive demonstrations in Brazil, localised discontent when incompetence causes public anger in China, and the rise of populist parties across Europe’s most struggling nations.

A Systematically Less Stable World

The information revolution is having a massively beneficial effect on the quality of human life and our capabilities. Its political effect is likely to be positive too, except when misused by authoritarian rulers to try to control minds rather than liberate them. But it is important to recognise that it can also bring increased instability, along with a reduction in our likelihood of predicting it.

This is one of several factors likely to make the world in the next quarter of a century less stable than the same period since the end of the Cold War. That means the period to come will be even more systemically unstable than the time of 9/11 and the wars in Iraq and Afghanistan.

The second factor is one that has become all too obvious since 2001: the rise of religious intolerance in the Middle East. The roots of this are vast and complex, but its poisoned fruits can be seen clearly in the sectarian violence and destruction that plagues Iraq and Syria. When combined with the information revolution, this intolerance spawns the rapid rise, successful recruitment and sinister mass communication of a group such as ISIL, able to broadcast its message and its evil deeds to the entire world in grim detail. Trying to ignore such events is not an option, they make new interventions in the Middle East unavoidable, but interventions of a new kind, in support of local forces on the ground and accompanied by a counter-narrative in social media.

The effects of both these causes of instability are likely to intensify in the years ahead, and the effect of a third is certain to do so, too. This is the huge divergence in population trends around the globe – trends which are the tectonic plates of all human affairs – all of politics and economics rests on them, their movements are sometimes too gradual to notice, but the ultimate effect of their moving changes the entire shape of our world.

Global Demographic Trends

That shape is changing and moving apart with unusual speed. It may be well understood in the world that the global population is still growing rapidly and looks likely to reach more than $9 billion by 2050. However, everyone in business and government needs to think hard about the implications of the vast changes within that total.

While the world’s population booms, 48 countries are expected to see their own numbers decline, many of them in Europe. At the same time, half the total increase will be in Africa. Looked at another way, half the total increase will be in only nine countries, with five of them in Africa. The other four are India, Indonesia, Pakistan and the United States.

The populations of many emerging economies are ageing much more rapidly than happened in societies which industrialised earlier, leaving them much less time to create the financial and social infrastructure of a fully developed economy.

There are important divergences within continents. For instance, the UK is forecast to overtake Germany as Europe’s most populous nation by the middle of the century.

Many countries now face steep falls in their populations, particularly Russia, which is set to lose an average of 250,000 people a year for the next 35 years; Japan, which is set to lose one quarter of its total by 2050, and many of the Eastern European states.

The modern world has little experience of populations in structural decline, independently of war or natural catastrophe. It is clear that this will have a profound economic effect, with large ageing cohorts dependent on their squeezed younger generation. The effect that a shrinking nation will have on innovation, insecurity, and social attitudes is unknown and will be different in each country. We can be sure, however, since this shrinking will occur in the third and fourth largest economies of the world and in the country with the largest nuclear arsenal, that whatever the effects are they will be of massive importance.

Of course, the most obvious impact of diverging population trends is on migration. For centuries migration has been a central driver of social and economic change. In Europe and the United States, the scale of immigration and its consequences are likely to become still larger political issues, and the number of people trying to migrate to these richer and freer parts of the globe will become greater than ever before contemplated.

Economic Volatility

It might be easy to conclude from reading this far that the outlook for the next few decades is a terrifying one. And of course it is overlaid with the serious economic uncertainty that flows from the global financial crisis of 2008 and the faltering performance of some of the largest ‘emerging’ markets. Cheap money has fueled renewed growth but is no guarantee against a future downturn. It is important to remember that today’s central bankers and finance ministers are no more able to abolish economic cycles than their predecessors throughout history.

For those in Europe, there is an additional drain of energy and resources into the crisis in the Eurozone, a crisis that will occasionally sleep but will not die. The creation of the euro without the political and fiscal unity necessary to make it work is not one of the many crises we could not predict: it was predicted in some detail by many people fifteen years ago (including by me). My view is that the agreement reached between Greece and its creditors merely buys time, at great cost, and will prove unsustainable. The Greek crisis is likely to prove the first tragic symptom of the deep flaws in the design of the Eurozone, which will become even more apparent if the gap between the economic performance of its northern and southern members fails to close – a reasonably likely scenario.

Yet overall I would recommend retaining a sense of optimism about the ability of humans and their leaders to navigate through great uncertainty and instability, provided there is a good understanding of its causes and the need for resilience in the face of the unexpected.

More than ever, business and political leaders will need a deep understanding of local conditions and a presence in more of an expanding number of centres of decision-taking.

Our optimism should be strengthened by the sheer scale of expansion of higher education around the world, particularly in Asia, and the extent to which scientists have advanced the next potentially massive breakthroughs, in many fields from the storage of energy to ultra-lightweight materials.

In the same regions of the world as many failed states and festering conflicts, there are countries replete with economic and business opportunity, as the Middle East and Africa are demonstrating.

More than ever, business and political leaders will need a deep understanding of local conditions and a presence in more of an expanding number of centres of decision-taking. They will need to build an enhanced capacity to absorb unexpected shocks into their organisations or countries, while understanding that they will not be able to predict them all. They will also need to build in later flexibility to more of their plans so that they are not locked in to a single course of action.

Some Causes for Optimism

Our optimism should be further fortified by the record of successful diplomacy, even in the last few turbulent years. In the Philippines, the Mindanao Peace Agreement brought to an end one of the world’s longest running conflicts. In Colombia, President Santos has, against all odds and much opposition, brought an end to one of the others within reach. The changed policy of the United States towards Cuba should be counted as another important diplomatic advance, and the nuclear agreement with Iran removes for years to come one of the most serious and imminent possibilities of a new conflict.

Such diplomacy will become even more necessary in the world I have described, but it will also become more complex because of the more multi-polar nature of that world. A paradox of the globalised society is that success in it requires even more detailed knowledge of local trends and variations, themselves influenced by a mass of connections between individuals, businesses and civil society which are not confined by borders.

The multi-polar world is also bringing a perceived reduction in the willingness and capacity of western nations to intervene elsewhere militarily – a perception that is now accompanied by increased assertiveness on the part of some other powers.

In recent years one of these powers has been Iran, with its proxies engaged in conflict or fomenting instability in Iraq, Syria, Lebanon and Yemen. The nuclear agreement with the government in Tehran does not necessarily mean that there will be any change in its wider foreign policy, although it will provide the opportunity for it to change should it wish to do so. The use of strengthened diplomatic connections to Tehran by western and Arab nations will need to be a major foreign policy priority for them over the next few years.

Relations with Russia are likely to remain extremely difficult. Efforts to revive or ‘reset’ relations with Russia by the U.S., U.K. and others have come to naught in the last few years over Moscow’s obdurate defense of the Assad regime, and, even more damagingly, the annexation of Crimea and destabilisation of Ukraine. The economic retrenchment made necessary by a sustained fall in the price of oil is likely only to reinforce the need of the Russian leadership to show its strength abroad. The continuing casualties of this will be Ukraine, Moldova, and Georgia: each of them prevented from functioning normally as a sovereign country or making their own free decisions by Russian intervention on their territory.

Alarmingly, however, the countries of the western Balkans are also caught up in the new stand-off between Russia and the West. Their progress towards Euro-Atlantic institutions and greater stability is likely to be impaired by Russia’s reluctance to see them move away from its own orbit. Longer term, Russia’s declining population, excessive dependence on hydrocarbons and widespread corruption must raise serious doubts about its own political direction, but, for the foreseeable future, it is a powerful nation unwilling to cooperate with European or American diplomacy.

The Future of China

The next few years will be crucial in answering fundamental questions about the future of China and its relationship with the United States. Many of these questions are internal, but of vast importance to the whole world now that China is the second-largest economy. Internationally, can China pursue ambitions to drive greater prosperity in Asia – the concept of One Belt One Road – without reducing tensions with ASEAN countries over the South China Sea?

China has a tremendous opportunity to win support across the globe if it acts to visibly keep North Korea in check, helps to secure global agreement on climate change and encourages the sensible use of development aid. Such initiatives could allow China to build a strong partnership with the United States while still serving national interests. The alternative is rising tensions over maritime power and cyber-attacks. Such attacks, widely and publicly attributed to China, have already reached a scale sufficient to poison relations.

Vulnerability to cyber-attacks and increased controversy over them brings us back to the point I made at the start of this chapter: the transformation of international affairs by the information revolution. Many businesses and most governments still underestimate the scale of the cyber security challenge, and some will discover that their economic or physical security ultimately depends on rising to it. When millions of employee records of the U.S. Government itself can be stolen, and the U.S. Army’s own website can be briefly taken over by a group loyal to the Assad regime, few organisations in the world can afford to be complacent about their cyber defences. Alongside prosperity, freedom and extraordinary opportunity, the information age also brings instability and unprecedented vulnerability. That is the rich mixture that the successful enterprises and nations of the coming decades need to master.