It’s the economy, stupid (plus geopolitics, trade, the environment, data and AI)

February 12, 2020

Those who hope that the dawn of a new decade will unleash a period of peace, growth and sustainability should probably look away now. In its latest Global Risks Report, respondents to the World Economic Forum’s annual survey paint a downbeat picture in which a fog of geopolitical and geo-economic uncertainty contrasts with the need to act quickly and with purpose on issues such as the environment, technology and public health.

For much of the post–Cold War period, the WEF notes, all but a few societies shared the aspiration of stable development in the context of agreed (if not always observed) rules governed by multilateral institutions. But new dynamics are causing states to re-evaluate their approach to geopolitics.

Rising powers are investing more in projecting influence around the world and digital technologies are redefining what it means to exert global power. As these trends are unfolding, a shift in mindset is also taking place; from multilateral to unilateral and from co-operative to competitive.

Underlying this analysis, the global economy is showing signs of vulnerability. When published in January, the IMF expected growth to be 3.0% in 2019 – the lowest rate since the economic crisis of 2008-2009 – before the outbreak of the Coronavirus.

The WEF noted progress towards the end of the US-China trade war, but also the OECD’s warning that “escalating trade conflicts are taking an increasing toll on confidence and investment, adding to policy uncertainty, aggravating risks in financial markets and endangering already weak growth prospects worldwide”.

Geopolitical turbulence related to trade tensions and technological rivalries is part of a larger risk for the global community; that of the United States and China decoupling. Together, these two countries account for over 40% of global GDP, and are the world’s leading innovators. They are also the world’s top two emitters of greenhouse gases.

Expanding the global economy, addressing climate change and realizing the full benefits of technology, therefore, depend on their ability to coordinate as part of a common global system that is capable of including other stakeholders.

However, the trend today is not one in which these two countries are just competing across common domains but one in which each is looking to design its own systems, its own supply chains, communications networks and investment institutions.

For the first time in the history of the survey, climate-related issues dominated all of the top-five long-term risks by likelihood. Despite the immediate multilateral and multi-stakeholder co-ordination required to address global warming, instead global fracture and a growth in nationalist policies risk is preventing meaningful action.

States are adapting to one of the most dramatic effects of climate change – the melting of Arctic ice – not by redoubling efforts to prevent further environmental degradation, but by exploiting the region for geostrategic advantage. The Arctic Council, which for more than 20 years has served as an important multilateral mechanism for collaboration among the eight Arctic States, is under stress.

A new cold war is developing as countries including China, Norway, Russia and the United States compete for food, gas, the use of new shipping lanes and to establish a strategic footprint in the region.

Russia and China have prioritized developing the Northern Sea Route, with the latter dubbing its initiative the ‘Polar Silk Road’. The U.S. Department of Defense released its Arctic strategy in July; that document did not mention climate change but did present a strategy in which the “end-state for the Arctic is a secure and stable region in which U.S. national security interests are safeguarded.”

Respondents to the survey identify cyber-related issues, such as cyberattacks and data fraud or theft, within the list of top 10 long-term risks. Indeed, while the growth of digitalization offers opportunities that can best be captured through co-ordinated approaches among stakeholders, it also creates a need for co-ordinated solutions.

One such area is Artificial Intelligence (AI). According to the UN International Telecommunication Union, it will take “massive interdisciplinary collaboration” to unlock AI’s potential but because AI can also bring significant risk, multilateral co-operation is needed to address challenges such as security, verification, mass surveillance and advanced weaponry.

Despite the need for a common set of global protocols, AI has become a new frontier for competitive geopolitics. In 2017, Russian President Vladimir Putin said, “whoever becomes the leader in this sphere will become the ruler of the world.” China has strongly encouraged companies to invest in AI, making it a national security priority; AI is a pillar of its current five-year plan for science and technology development and its “made in China 2025” industrial plan.

In the US, the Defense Department’s Joint Artificial Intelligence Center recently requested that its budget be tripled to US$268 million, citing the rapid development of AI capabilities by China and Russia as a reason for urgency.

But here at least, there is some progress. Already, stakeholders are coming together to design shared protocols for AI. The World Economic Forum’s Centre for the Fourth Industrial Revolution has worked with the government of the United Kingdom to formulate guidelines for more ethical and efficient procurement of AI.

These guidelines will be piloted in countries across Europe, the Middle East and Latin America. And, in May 2019, the OECD’s 36 member states adopted Principles on AI – the first common set of principles that governments have adopted – to promote AI “that is innovative and trustworthy and that respects human rights and democratic values.”

However, as our recent post also pointed out, challenges remain. Standards for the governance of data used across organisations and institutions need to be matched by a moral and ethical analysis. Particularly because, as the US recently warned, “the resurgence of nationalist agendas across the world may point to a dwindling capacity of the multilateral system to play a meaningful role in the global governance of AI.”