Discontent, Demands and Decisions: The Sway of Global Politics in 2014
The potentially sour politics of 2014 could ease if the United States puts its fiscal house in order, the Chinese economy surges or Europe’s long-awaited recovery takes hold.
Discontent will shape global politics in 2014. Five years after the Great Recession began, the global recovery remains lackluster. In the United States and Europe, slow growth, persistent unemployment and pessimism about the future have voters questioning whether fundamental social compacts are being broken and radical solutions needed. In emerging economies, concerns about inequality, corruption and poor or nonexistent government services will fuel demands at the ballot box and on the street for change. Even countries like China that are enjoying relatively good economic times will struggle to close the gap between what their public expects and what they can deliver.
The pressure to defuse domestic discontent will pull national governments inward. The focus on business at home may be most significant in the United States where Americans are not ready to abandon global leadership but also are reluctant to embrace it. The drift inward, however, will extend well beyond Washington and could imperil efforts to push forward with ambitious new trade agreements. As much as the public wants a respite from foreign problems, geopolitical rivalries will persist and international crises will erupt in 2014. Disputes over maritime boundaries in Asia, mass casualty terrorist attacks and simmering tensions in the Middle East and Africa could escalate into bloody conflicts. Strong leadership and smart decision-making might keep the peace. But both qualities could be lacking in a year in which governments will feel beleaguered rather than empowered.
The U.S. national anthem, "The Star Spangled Banner," turns two hundred in 2014, but polarization rather than unity will dominate American politics. Democrats and Republicans face off in November midterm elections, so electoral calculations will shape their behavior throughout the year. The agreement reached in December 2013 to fund the U.S. government through September 2015 took the threat of another partial government shutdown off the table. But the deal does not mark a new era of bipartisan cooperation in Washington. Disagreements persist between Democrats and Republicans over raising taxes. So a "grand bargain" that puts the U.S. government on a firm fiscal footing by trading tax hikes for entitlement reform remains a long shot.
The debt ceiling suspension ends on February 7. The U.S. Treasury will use "extraordinary measures" to avoid hitting the ceiling until March, or if tax revenues exceed projections, perhaps until May. The extra time, however, may only make it harder to raise the debt ceiling. Congressional Republicans facing tough primary challenges in late spring will be reluctant to cast votes that could be used against them. It might take market unrest to end the brinksmanship.
President Obama starts the debt battle weakened politically. Public assessments of his job performance and trustworthiness sagged in 2013, in good part because of the troubled rollout of the Affordable Care Act. Obama will need to convince the public of the law's merits to regain momentum. A steady drumbeat of negative stories would encourage Democrats to distance themselves from the White House. Democrats already face uphill battles to retain their Senate majority and retake control of the House. They have more Senate seats at risk, many of which are in conservative-leaning states. Congressional districting gives House Republicans a built-in advantage, and midterm voters tend to be older, whiter and fewer in number, all of which favor the GOP.
Even if Obama avoids becoming a premature lame duck, his legislative agenda is stalled on Capitol Hill. The prospects for comprehensive immigration reform are dim and those for significant tax reform only slightly better. Renewal of Trade Promotion Authority (TPA) is questionable. The White House hopes a successful conclusion of the Trans-Pacific Partnership talks will persuade Congress to pass TPA. However, lawmakers may still be unwilling to cast a potentially tough vote in an election year.
Obama has more freedom to act on the diplomatic front. He may not be willing to use it, however. His reluctance to put U.S. prestige and resources on the line in messy disputes like Syria will be reinforced by the American public's deep skepticism about foreign adventures and its willingness to discount for now the dangers of U.S. inaction. Obama's top priority will be turning the interim nuclear deal with Iran into a comprehensive one. That would fundamentally reorder Middle East politics. Doing so, however, will require overcoming bipartisan Congressional skepticism and securing significant concessions from Tehran. The need to reassure anxious friends and allies in the Middle East about U.S. intentions, coupled with austerity at home, will hamper Obama's ability to rebalance U.S. foreign policy to focus more on Asia.
Freak weather and new superstorms will spark more talk about combating climate change, but climate negotiations will not progress much. Continued growth of unconventional energy sources like shale gas and tight oil will be a bright spot in the U.S. economy. Lower energy prices are giving some U.S. manufacturers a potentially significant competitive advantage. Debates at the state level will focus on how to exploit unconventional energy sources while protecting the environment.
Ceremonies marking the centennial of the start of World War I will not provide escape from the crisis shaking the foundation of the European Union (EU). Since the Great Recession began, EU and national leaders have kept the eurozone intact without solving its underlying maladies. While Germany and a few of its northern neighbors are prospering, many European countries face unsustainable debt, low or negative growth and record unemployment, especially among the young. The fact that national governments have pursued austerity in the face of growing public discontent highlights the appeal that the vision of a unified Europe has for European elites.
That vision's appeal to the European public will be tested in the May election for the European Parliament. Populist and nationalist parties should do well as voters vent their frustrations. That will change the tenor of the debate in Strasbourg and Brussels. But the bigger effect could be on national governments left wondering whether commitment to EU economic orthodoxy means their political ruin. That could undercut the push to craft a tighter fiscal and banking union, as well as intensify pressure on Berlin to offer more generous terms to its overextended partners. The political fallout from the European Parliament vote could also undercut the ambitious bid, already rocked by the Snowden spy revelations, to conclude a Transatlantic Trade and Investment Partnership deal with the United States on "one tank of gas."
Scottish voters go to the polls in September to vote on independence. Pro-independence forces get a boost in June when Scotland celebrates the 700th anniversary of Robert the Bruce's victory over the English army at Bannockburn. But nationalist emotion will give way to cold calculation when Scots contrast the costs of leaving the United Kingdom with the plums that the British political parties will offer for them to stay in the fold. Catalonia may hold its own independence referendum. Unlike Great Britain, however, Spain insists the vote would be illegal.
The pressure to defuse domestic discontent will pull national governments inward.
Nationalism will be on display in a different way at the Sochi Winter Olympic Games, where Vladimir Putin has spent lavishly to present Russia's best face to the world. A successful Games might distract Russians from the country's faltering economy. A failed Games, however, would further undermine Putin's once unassailable political position. In 2013, he both cracked down and eased up on his critics; the progress of the Games and the economy will shape which way he tilts in 2014. Either way, he will move aggressively to keep Russia's neighbors, particularly Ukraine, closely tied to Moscow, even at the risk of raising tensions with Europe and complicating Russia's presidency of the G8 in 2014.
The Arab Spring's failed promise continues to weigh on the Middle East. Egyptians applauded the July 2013 ouster of President Mohamed Morsi, signaling that they cared less about Islamist principles and more about jobs, order and political openness. Entrenched opposition will deter the Egyptian military from making the structural reforms needed to rejuvenate the economy, but financial support from Gulf states should stave off financial crisis. Egyptians will vote in 2014 on a new constitution, parliament and possibly a president. These steps toward reopening politics, however, will be accompanied by continued repression of Islamists. A low-grade insurgency persists in the Sinai, but Cairo will protect its cold peace with Israel.
The bloody stalemate in Syria will continue now that Western military strikes and greater support for Syrian rebels are off the table. The human cost of the stalemate will remain high, with more than two million Syrians having fled the country. Jordan has adroitly managed the influx of more fears that Amman could become collateral damage of Syria's civil war. Sectarian violence in Iraq has reached levels not seen since the height of Sunni-Shia conflict in 2007 and may accelerate in the run-up to elections in April. Iraqi oil production is poised to expand as new fields come on line, while Kurdistan dodges many of the ills plaguing the rest of the country.
Iranian president Hassan Rouhani will struggle to deliver prosperity to a public whose expectations jumped in the wake of the interim nuclear deal that brings Iran limited relief from international sanctions. Hardliners will resist the concessions Rouhani needs to elicit more significant sanctions relief and his push for significant economic reform. Across the Persian Gulf, the Sunni ruling family in Bahrain faces demands from its Shia-majority population for greater political rights. Saudi Arabia will push its much-smaller neighbor to repress critics, as it has its own disgruntled Shia minority to contend with. A succession crisis in Riyadh, where the mildly reforming King Abdullah is set to turn ninety, would roil the kingdom and the global oil markets.
Turkey is wondering whether Prime Minister Recep Tayyip Erdoğan, who is required by his party's rules to step down as prime minister in June 2015, will run in the country's first direct election for president in August. Efforts to rework Turkey's constitution to give its mainly ceremonial presidency greater powers have faltered over opposition to a potential Erdoğan run. His heavy-handed response to urban protests in 2013 clipped his popularity and stoked fears that he is trampling on Turkish democracy. A sagging economy, a corruption scandal that has forced several government ministers to resign and the outcome of provincial and mayoral elections in the spring all could influence Erdoğan's decision.
China's president, Xi Jinping, has a mandate from the Communist Party to give the market a "decisive role" in the Chinese economy and to shift from export-led to consumption-led growth. But enacting significant structural reforms will be difficult, time-consuming and disruptive. Xi will also be under pressure from ordinary Chinese to address the country's horrific environmental problems. Missteps on either front could generate significant public protests. With June marking the 25th anniversary of the Tiananmen Square massacre, Beijing will have a low tolerance for dissent. The effort to enact major economic reforms will not deter Xi from pushing China's aggressive claims in the East China and South China Seas. Beijing may not start a fight, but it likely won't back down from one.
Chinese policy in the East China Sea will test Japanese prime minister Shinzo Abe's diplomatic skills. His unabashed nationalism during his first year in office angered Beijing and Seoul and worried Washington. Implementing good crisis communication procedures among all the parties to the dispute will be essential to keep accidental or inadvertent confrontations from escalating. At home, Abe's bold effort to jumpstart the Japanese economy will come under strain. A new consumption tax hits Japanese consumers in the spring. Abe hopes that Japanese employers will provide offsetting wage increases to persuade Japanese workers to take the tax hike in stride rather than hoard their earnings. Abe also faces pressure to turn his talk of making Japan more competitive into reality. Should Abenomics stumble, his political stock could drop as quickly as it rose.
Nationalism will be on display in a different way at the Sochi Winter Olympic Games, where Vladimir Putin has spent lavishly to present Russia's best face to the world.
India holds elections for its lower house of parliament in the spring. The Congress Party faces potentially big losses after ten years in charge. Slowing economic growth, crumbling infrastructure and rampant corruption are just a few of the issues driving public anger. The Narendra Modi-led Bharatiya Janata Party (BJP) and its allies should benefit, but decisive victories are rare in Indian politics. The country hasn't had a single-party government since 1989, and an unwieldy coalition government incapable of tackling the concerns that brought it to power is possible. The election results likely won't heighten tensions with Pakistan; most Indians want improved relations with Islamabad. Despite its staunch Hindu nationalism, the BJP extended a "hand of friendship" to Islamabad when it last governed India a decade ago.
Pakistan's ability to return any peace gesture, however, is limited. The country remains politically fragile and Islamabad's commitment to curtailing homegrown terrorists is questionable. The drawdown and possible complete withdrawal of U.S. troops from neighboring Afghanistan could spark a destabilizing competition between India and Pakistan for influence in Kabul.
Myanmar will decide the rules governing its 2015 elections, potentially the first free and fair ones in more than fifty years. The decisions that are made will signal whether democracy is taking root in the country. Neighboring Thailand faces more unrest as the bitter battle between supporters and opponents of exiled former prime minister Thaksin Shinawatra continues to roil the country's politics.
Indonesians vote in July for a new president. Joko Widodo, the governor of Jakarta, is the favorite. But he may not run in deference to his party's leader, former president and two-time losing candidate, Megawati Sukarnoputri. Whoever wins inherits a daunting inbox. Generous fuel subsides have turned the former oil exporter into an oil importer, and corruption and a sclerotic bureaucracy discourage investment. Nationalism and populism are surging, and the parties likely to prevail in April parliamentary elections will play to popular passions rather than argue for needed structural reforms.
Jakarta's anger over Australia's efforts to stop asylum-seekers from leaving Indonesia and over Canberra's spying on Indonesian leaders adds to a growing list of headaches for Prime Minister Tony Abbott. His political honeymoon ended shortly after his September 2013 election. He faces a tough vote over revamping Australia's policies to combat climate change. Abbott will have a chance to shine when Brisbane hosts the G20 summit in November, where open trade and job creation figure to top the agenda. Events, however, could make it hard for Abbott to reconcile Canberra's security relationship with the United States and its economic ties to China, Australia's number one trading partner.
The World Cup returns to football-mad Brazil in June for the first time since 1950. A record-setting sixth championship for the Seleção would lift the spirits of Brazilians who have seen their economy sputter. A victory, coupled with a crisis-free Cup, would also buoy President Dilma Rousseff's chances in the October presidential election. Her seemingly inevitable march to reelection stumbled last June when complaints about higher train and bus ticket prices escalated into widespread protests over inequality, corruption and inadequate government services. Dilma's divided opposition may be her biggest asset, though she might need a run-off election to keep her lease on Planalto.
Bolivia's Evo Morales and Colombia's Juan Manuel Santos should win reelection. Santos's race will be more dramatic, as his predecessor and former ally Álvaro Uribe has become a bitter foe. Argentine president Cristina Fernández's health woes and the opposition's victory in midterm elections in October 2013 will have Buenos Aires debating whether she is a lame duck. Michele Bachelet returns to the Chilean presidency she left in 2010 facing high expectations that she will deliver the fairer society she promised in her campaign. Enrique Peña Nieto won a big victory in December 2013 with the passage of constitutional revisions opening up Mexico's energy sector to foreign investment. The political battle now moves to crafting the enabling legislation that lays out the legal, tax and regulatory rules for implementing energy reform. The stakes are high. The timing and specifics of these complex arrangements will shape foreign investor interest and the long-term evolution of Mexico's energy sector.
Corruption and violence remain a scourge across Africa. Boko Haram's terrorist campaign in Nigeria is growing in scope and cruelty. Other jihadi groups operate in Mali and Somalia, posing a threat to neighboring countries like Ethiopia and Kenya. Sudan and South Sudan continue to threaten war over their border dispute. Governance institutions remain weak in much of Africa, with scarce educational and job opportunities, inadequate infrastructure, and ethnic divisions limiting economic growth and sowing the seeds for civil conflict.
A rapprochement between Iran and the West might dramatically diminish tensions in the Middle East and create an opportunity to end Syria's civil war.
Where governance is working in Africa, however, countries are flourishing. Botswana, Ghana, and South Africa are growing rapidly, though corruption and high unemployment could hurt South Africa's ruling African National Congress in national elections scheduled for late spring. The peace agreement concluded in November 2013 in the eastern Congo opens the possibility that the resource-rich country might soon turn the corner after decades of war.
The potentially sour politics of 2014 could ease if the United States puts its fiscal house in order, the Chinese economy surges or Europe's long-awaited recovery takes hold. Economic growth and soaring markets can smooth over a lot of political dissatisfaction. A rapprochement between Iran and the West might dramatically diminish tensions in the Middle East and create an opportunity to end Syria's civil war.
But 2014 could also prompt comparisons to Europe a century ago. A military strike on Iran could provoke a wider conflict that unmoors the global economy. Equally dangerous would be a clash between China and Japan in the East China Sea. Washington could find it hard to avoid a direct confrontation with Beijing without damaging its alliance with Tokyo and its credibility elsewhere in Asia. Renewed conflict between India and Pakistan, perhaps triggered by a terrorist strike like the 2008 Mumbai attack, would raise the risk of conventional, and possibly nuclear, war.
Threats to global stability don't end with possible conflicts. A fumbled tapering effort by the U.S. Federal Reserve, a failure by the U.S. Congress to raise the debt ceiling in a timely fashion, insolvency in the Chinese banking sector, a new eurozone crisis or the collapse of Abenomics could all send the global economy into a tailspin. That would further fuel public discontent and exacerbate the gap between what the public wants and what governments can deliver.
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