Will ‘unravelling world’ fall apart in 2019?

Pessimists will some time be right about the world turning to custard. Will they be right about 2019?

Ambrose Evans-Pritchard (SMH/Telegraph) – The dystopian view: Is this the year the world falls apart?

This is the year that mounting hammer blows to the Western alliance system and the edifice of global governance threaten to bring the old order tumbling down.

There are always threats, but most years things manage to hang together, sort of.

“The geopolitical environment is the most dangerous it’s been in decades,” warns Eurasia Group, political risk-adviser to the world’s elites, and a voice of globalist ideology.

Pax Americana is unravelling. The transatlantic concord underpinning the West since the Fifties is dying. Nato, the G7, the G20, the WTO and the EU are all in varying degrees of crisis. Vladimir Putin’s Russia has an open goal.

“Every single one of these is trending negatively. And most in a way that hasn’t been in evidence since the Second World War,” it said.

Anti-liberal strongmen are tugging away at the edges in Turkey, Brazil and Hungary. Some in the twilight zones of the democratic world are drifting -towards the Putin-Xi camp.

There does seem to be a rise in extreme right and extreme left groups. The UK and Europe are battling over a split. Donald Trump is shaking up US and world trade and diplomacy.

“US alliances everywhere are weakening. The limited trust that underpins the US-China relationship appears to be gone,” said Eurasia in its annual outlook.

The dystopian picture is grim enough even at this late stage of global economic expansion, which begs the question: what would happen in a deep recession with mass unemployment?

The world has gone longer than usual without a recession, so one may be overdue.

Eurasia Group warned that 2019 could “turn out to be the year the world falls apart” although it is not the central forecast. Denouement may take a little longer.

“Barring bad luck (like -Sarajevo in 1914?), it takes years, even decades to knock down a geopolitical order. That process of erosion is under way around the world today,” it said.

It is a world in which the gloves are coming off in cyber warfare, setting off a cycle of “action and reaction” that could all too easily spin out of control.

In parallel, a “global tech Cold War” is closing in. States are slashing -reliance on foreign suppliers wherever national security is at stake. The West is shutting out Chinese manufacturers of 5G high-speed equipment. Digital globalism is in retreat.

Donald Trump is – in Eurasia’s view – the central catalyst and accelerant for much of what is going wrong in the world. It starts at home in Washington.

“Damage is being done to the legitimacy of democratic institutions in the world’s largest economy,” it said.

Europe is in no fit state to step into the leadership vacuum as America turns its back on the liberal alliance system and nexus of shared values.

There’s no doubt that major international relationships are shakier than usual, and this could increase.

Eurasia estimates that eurosceptic/populist forces will win 37 per cent of the seats in the European Parliament next May, up from 28 per cent in 2014.

That’s quite a move but well short of a majority.

“The new body formed later in 2019 will be in crisis before it even gets to work. This year will be the one when populists gain real power on Europe’s largest stage,” it said. This before the next inevitable downturn hits. When it does come the political shock absorbers will be perilously weakened. Belt-tightening will unleash a lot of deflationary demons.

Recessions are inevitable, and the risks of the next one being exacerbated by current international turmoil must be high.

The biggest tail risk is a Sino-American showdown ending in global economic slump, bitter recrimination, and a cycle of escalation “into the kinetic space”. Eurasia says relations have already deteriorated beyond the point of no return. Nor is there any workable common ground for compromise. At stake is 21st Century technology dominance, not trade.

“Rising nationalist sentiment makes it unlikely that Beijing will ignore US provocations,” it added.

Despite the doom and gloom headline and intro:

The balance of probabilities is that the world will muddle through 2019 without any of these landmines detonating. Yet the drift of events is clear. The Western liberal order we took for granted at the end of the Cold War is under existential threat.

“We’re setting ourselves up for trouble down the road. Big trouble,” it said.

But there’s no way of knowing when big trouble will arrive. It may or may not be in 2019.

Should we have confidence that Trump, the EU, Theresa May, Putin, China can smooth the lumps out the custard when it turns? Ah, I have concerns with that lot and the way they are currently playing things.

Here in New Zealand there is little to nothing we can about it anyway, except be prudent with our own national finances and personal finances to prepare ourselves for harder times, whenever they come.