When we began SIG’s blog in June of this year, our goal was to provide original and timely analysis of trends that the mainstream consensus was missing. Clients told us they had much more information about global markets and political trends than they could possibly process. What they were missing was actionable and fresh information that was not merely canned trend-spotting followed by a company recommendation or two. They wanted to go beyond the obvious.
To address that need, we spent a lot of time on Asia this year — traditionally a strong region for SIG and one of enduring interest for our clients. The nature of Southeast Asia’s growing centrality, and the shifting strategic approaches of Japan and South Korea, kept our attention and helped us not get too stuck in the US-China struggle, crucial as it is.
In 2024, we expect both of these focuses to continue, both because US policy on China is unlikely to change much in an election year and because Chinese policy toward Chinese tech multinationals won’t change much either. American and Chinese experiments with varieties of economic nationalism will continue. They are in turn the main drivers of what we have described as Southeast Asian non-alignment, especially digital non-alignment, and of Korean-Japanese rapprochement.
China’s increasing nationalism is notable, although in the last half of 2024 its opposition to the U.S. was modulated by the dire economic conditions it was facing. Xi Jinping’s opposition to the U.S. eased. Nevertheless, China’s long-term goals and strategic opposition to the US in East Asia have not changed, nor have Xi’s designs on Taiwan. He has stated that reunifying China will be his legacy.
We have also looked closely this year at India. Narendra Modi’s extraordinary consolidation of policy power — combining a market orientation with strong state policies and a cultural nationalism of alarming strength — continued in 2023. Modi’s popular support remained very strong, and state elections earlier this month confirmed his BJP party as the political anchor of the 600-million-person Indian electorate. Most importantly, per capita GDP growth has stayed vigorous as the BJP has made massive transfers to low-income groups and steadily empowered the lower Hindu castes. The BJP has apparently succeeded in generating increased demand domestically by strengthening the lower classes through policy. How sustainable this progress is remains to be seen, but the BJP certainly is in pole position going into national elections next April.
In regional terms, our final major focus since June has been the Middle East. The set of initiatives known as the Abraham Accords, alongside a surge in successful Chinese diplomacy in the region, led many to think the Middle East would be stabilizing after the years of violence that followed the rise of Daesh/Islamic State and the suppression of the Arab Spring. Hamas had something else in mind, and mainstream commentary on the Middle East has swung from mildly optimistic to apocalyptic. But the strong drivers of normalization between Israel and key Arab states will not necessarily weaken in 2024 and might well grow stronger. The relatively subdued reaction of these states to Israel’s reaction to the Hamas attack continues to remain notable. Both the OIC/Arab League solidarity on Gaza and the petrostates’ reluctant acceptance at COP28 of a fossil-fuel phaseout suggest a relative political steadiness in Muslim interstate relations and even some sense of common purpose.
Common purpose is what we have looked for in Europe, without great success. True, hostility toward poorer immigrants has become one source of greater solidarity; so has opposition to Russian aggression in Ukraine. Yet both also contain seeds of disunion as political forces in individual states gain power by sharpening themselves against the European consensus. Given general European declines in both productivity and population, the relative power of Poland and other Central European countries has been expanding as they grow more quickly than the Western states. Germany has begun to imagine what a long-term estrangement of oil-rich Russia might mean for the European solidarity on which Germany bases its positioning of itself in the world. At the same time, Germany and, especially, France are trying to adjust to the continued rise in autarkic industrial policies in both the US (EV subsidies, semiconductor chips) and China. About half of the EU’s population is older than 45. In parts of Western and Northern Europe the median age is above 50. All of this puts European productivity under greater pressure and will increase tension between demographically older and younger parts of the continent. Age will be no guarantee of stability. It also creates a tension around immigration from Africa and the Middle East — the only means for many European countries to have an increased number of younger workers.
Since we launched in June, we have put great emphasis on various technology sectors because the peacetime capacity of economies to innovate in technology has become so wrapped up in major-state calculations about war and military competition. Borders are being erected across the Internet in a displaced strategic competition that is lacking in historical analogies to guide us (and that was predicted years ago by SIG’s Scott Malcomson in his book Splinternet). The level of popular and state-level anxiety about technologies that hardly exist yet is extraordinary. US policy now aims squarely at perpetual superiority to China in any technology that might prove to have strategic significance; Chinese policy aims just as squarely at achieving whatever advances it can on the basis of a military-technological-industrial complex bent to establishing breakneck progress if not primacy. The logic has become well established. In 2024 we will stay focused on identifying its effects.
Which brings us to the Americas. An elected right-wing leader had plunged Argentina into political chaos while an elected left-wing leader in Brazil is pushing through long-needed reforms of investment regulation. Mexico will have elections in 2024 and Canada might too, as large majorities of Canadians say Trudeau should move aside. The American superpower will definitely have an election, this time with a desperately low level of predictability. For almost a decade, mainstream analysis has consistently underestimated both Donald Trump and the level of popular alienation from the Democratic Party consensus. The results in November are impossible to predict with accuracy, but it seems certain that the road to get there will be very rocky indeed. Social unrest and violence in the U.S. cannot be ruled out.
There are national elections in 40 countries in 2024, representing more than 40 percent of the population of the world, many in countries where people have lost faith in institutions and incumbent leaders, resulting in a wide tendency to reject them and their parties, further increasing volatility.
It has been said that 2023 was the year in which business accepted that politics could not be safely ignored, especially the multi-player geopolitics that we have focused on in our blog and our work. The liberal rules-based order sometimes continued in the letter in 2023 but the spirit was gone and won’t soon—if ever—be back. This leaves the world in a kind of systems vacuum, resulting in movement back toward a balance-of-power, sphere-of-influence geopolitics. The unstable and fracturing conditions within and among nations are still not really priced in to markets, as can be seen by how quickly they continue to bounce back from shocks that in the past would have had significantly more long-lasting negative effects, such as the Israel-Hamas war.
2024 will be a pivotal, perhaps decisive year. We look forward to helping our readers and our clients navigate ways to prosper in a very treacherous time. We will take a break next week and look forward to re-engaging with you in the New Year.