Threats to the future of democracy look overrated these days, given the glaring leadership weaknesses now evident in Russia, China, and Iran. Add relief that the U.S. midterm election came off with few of the stresses we saw in 2020. And don’t overlook increasingly strong cohesion in EU policymaking.
But there are still important (and growing) risks to preoccupy world leaders, business decisionmakers, and the rest of us in 2023. Here are the ten most important.
1- Rogue Russia
A cornered Russia will turn from global player into the world’s most dangerous rogue state, posing a serious and pervasive danger to Europe, the U.S., and beyond. Bogged down in Ukraine, with little to lose from further isolation and Western retaliation, and facing intense domestic pressure to show strength, Russia will turn to asymmetric warfare against the West to inflict damage through a thousand “paper cuts” rather than by overt aggression that depends on military and economic power that Russia no longer has.
Putin’s nuclear saber-rattling will escalate. Kremlin-affiliated hackers will ramp up increasingly sophisticated cyberattacks on Western firms, governments, and infrastructure. Russia will intensify its offensive against Western elections by systematically supporting and funding disinformation and extremism. Attacks on Ukrainian infrastructure will continue.
In short, Rogue Russia is a threat to global security, Western political systems, the cybersphere, and food security. Not to mention every Ukrainian civilian.
2- Maximum Xi
Xi Jinping now has a command of China’s political system unrivaled since Mao with (very) few limits on his ability to advance his statist and nationalist policy agenda. But with no dissenting voices to challenge his views, his ability to make big long-term mistakes is also unrivaled. That’s a massive global challenge given China’s outsized role in the world economy.
We see risks in three areas this year, all stemming from Maximum Xi. The ill-effects of centralized decision-making on public health will continue with COVID’s spread. Xi’s drive for state control of China’s economy will produce arbitrary decisions, policy volatility, and heightened uncertainty for a country already weakened by two years of extreme Covid controls. Finally, Xi’s nationalist views and assertive foreign policy will increasingly provoke resistance from the West and from China’s Asian neighbors.
3- Weapons of mass disruption
Recent advances represent a step-change in the potential of artificial intelligence (AI) to manipulate people and disrupt society, and 2023 will be a tipping point for this trend. A new form, known as generative AI, will allow users to create realistic images, videos, and text with just a few sentences of guidance. Large language models will pass the Turing test—a Rubicon for machines’ ability to imitate human intelligence. Advances in deepfakes, facial recognition, and voice synthesis software will render control over one’s likeness a relic of the past.
These tools will help autocrats undermine democracy abroad and stifle dissent at home, and enable demagogues and populists within democracies to weaponize AI for narrow political gain at the expense of democracy and civil society.
4- Inflation shockwaves
The global inflation shock that began in the U.S. in 2021 and took hold worldwide in 2022 will have powerful economic and political ripple effects in 2023. It will be the key driver of global recession, add to market volatility and financial stress, and produce disruptive effects on politics in every region of the world.
5- Iran in a corner
Nationwide anti-government protests continue. At the same time, Tehran has escalated its nuclear program in dramatic ways, all but ending any chance of reviving the nuclear deal. And now Iran is supplying Vladimir Putin’s military with deadly weapons. This year will feature new confrontations between the West and the Islamic Republic, as it faces convulsions at home and lashes out abroad.
6- Energy crunch
A combination of geopolitics, economics, and production factors will create much tighter energy market conditions, particularly in the second half of 2023, raising costs for households and businesses, increasing the fiscal burden on importing governments and widening the rift between OPEC+ and major consumers.
7- Arrested global development
Over the past two generations, global GDP tripled, almost every country grew richer, and more than a billion people escaped extreme poverty to join the ranks of history’s first global middle class. That progress has been thrown into reverse by mutually reinforcing shocks: the Covid-19 pandemic, the Russia-Ukraine war, and the global inflation surge. In 2023, billions of people will become more vulnerable as economic, security, and political gains are lost. The global middle class will shrink, and greater political instability, within and among countries, will follow.
8- Divided States of America
The 2022 midterm elections halted the slide toward a constitutional crisis at the next U.S. presidential election as voters rejected virtually all candidates running for state governor or state attorney general who denied or questioned the legitimacy of the 2020 presidential election. But the U.S. remains one of the most politically polarized and dysfunctional of the world’s advanced industrial democracies heading into 2023. Extreme policy divergences between red and blue states will make it harder for U.S. and foreign companies to treat the U.S. as a single coherent market, despite obvious economic strengths. And the risk of political violence remains high.
9- Tik Tok boom
Born between the mid-1990s and the early 2010s, Generation Z is the first with no experience of life without the internet. Digital devices and social media have connected them across borders to create the first truly global generation. And that makes them a new political and geopolitical actor, especially in the U.S. and Europe. Gen Z has both the ability and the motivation to organize online to reshape corporate and public policy, making life harder for companies everywhere and disrupting politics with the click of a button.
10- Water stress
This year, water stress will become a global and systemic challenge… while governments will still treat it as a temporary crisis. Water stress requires a transition from water crisis to water risk management. That shift will not materialize in 2023, leaving investors, insurers, and private companies to figure out how to handle this challenge on their own.
Western support for Ukraine will not fade in 2023 as economic conditions worsen in the U.S. and Europe.
The European Union will defy predictions of dysfunction this year to remain remarkably unified on priority challenges.
There will be no security crisis over Taiwan in 2023.
Domestic challenges in both countries will keep U.S.-China tech war tensions in check.
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