Geo-Politics

The first issue which needs to be considered is the geo-political uncertainty around the world. This is fundamentally caused by the end of the cold war, the rise of China and clear signals that the United States is not willing to continue to play a leadership role in terms of global security.

Peace and prosperity are essential pre-conditions for human development and there may be serious problems in different parts of the world over the course of the next five to 50 years.

Understanding what is going on in the part of the world you live in or do business with is increasingly important as the world becomes increasingly complex. That complexity, however, should not be an excuse to ignore these issues. Geo-political problems and opportunities do not happen overnight. They are the result of historical trends, economic and political rivalry, and political movements. As such they can be studied, analyzed, and in some cases predicted.

The difficulty in doing such analysis is that most people in business did not study history or geo-politics in college and feel that these issues are beyond them. My opinion is that if you spend some time on it, you can acquire a working knowledge of the issues facing the parts of the world they you most interested in. The framework I developed for this purpose looks at the geo-political situation of a country or region in terms of three ideas which are loosely based on accounting principles. 

The fixed aspects include the location of a country, its history and traditional alliances and trade partners, endowment of natural resources, etc.

Semi-fixed aspects are those that will, most likely endure for many years but will change during the course of history. The democratic system of government in the United States, for example, is unlikely to change in the next 50 to 100 years but is a relatively recent phenomena in historical terms. Even more recent is the European Union in its current form. The EU is however, still evolving adding countries in the East on the one hand and dealing with the implications of the United Kingdom’s decision to leave on the other.

Current aspects are those which may realistically play out over the next five years. Examples include the current election cycle or trending issues in civil society and the media.

What I recommend is to look deeply a specific place which is of interest and think through its geo-political situation as part of thinking about our professional future. Failure to anticipate such issues can lead to tremendous upheavals in our lives. A fractious world

Depending on what part of the world you live in and do business in, there are a number of critical issues being played out at the end of 2019 which are good examples of how current aspects of the geo-political situation interact with its semi-fixed and fixed characteristics.

In Europe the most pressing current aspects are Brexit and the ongoing conflict in Eastern Ukraine. As it is currently planned, Brexit will have an immediate impact on Ireland and will also affect a number of European companies in finance, automotive and other spaces. What happens in the U.K. will also affect the future of the EU which is a semi-fixed aspect of the geo-politics of the region.

The conflict in Eastern Ukraine and Crimea is an example of how geo-politics affects business and people’s careers. The sanctions and counter sanctions from that crisis had a devastating effect on food companies in Spain and Ireland after Russia banned most agricultural imports from the EU.

The deeper issue is what will be the relationship between Europe and Russia as time goes by. Europe still needs Russian gas, especially in the North East. The Russian government, however, is deeply suspicious of the West and sees the expansion of the North Atlantic Treaty Organization to the Baltic States as a provocation. 

Turkey’s fixed geo-political reality is that it sits at the crossroads between Eastern and Western Europe and between Europe and the Middle East. The country appears to be calm after the attempted coup in 2016 Recep Erdogan’s has moved its army across the border into Syria in order to contain the Kurdish enclave of Rojava that emerged victorious in the fight against ISIS. 

The civil war in Syria has ended but the situation remains volatile and Russia maintains its military engagement even while the United States is withdrawing.

The biggest threat to the Middle East is the rivalry between Iran and Sunni Saudi Arabia which has been a semi-fixed aspect of the region for years. Many analysts see the war in Yemen as a pre-cursor to an eventual fight between the two largest countries in the region. Iran has the biggest army and Saudi Arabia spent more on armaments than any country except the U.S. and China in 2018.

For almost 25 years, shipping in the Persian/Arabian Gulf has been protected by the American fifth fleet which is based in Bahrain. The American presence is thought to act as a deterrent to any instigation on the part of Iran although the two countries appear to be increasingly at odds. An important question is if the U.S. will maintain the fleet in the Gulf as it reaches full energy independence in the next few years.

The situation between Israel and the Palestinian Authority does seem to be improving although a permanent peace still seems years away and the conflict in Gaza continues.

In Africa the situation has improved in the last 10-20 years although there are still enormous challenges facing many of the countries on the continent. Countries such as Somalia and Libya are barely functioning, North and South Sudan are still at war, and there are a number of groups such as Boko Harum and Al-Shabaab which continue to cause murder and mayhem.

On the positive side, the major wars of Central Africa are over and there are signs of economic development in many parts of the continent. The most important thing to keep in mind in Africa is the diversity of the 54 countries and the need to look at each one individually in terms of its history, mineral wealth, ethnic and political rivalries, etc.

On the other side of the Indian Ocean, India and Pakistan have settled into a kind of cold peace but the situation in Jammu and Kashmir is still unresolved. India’s charismatic Prime Minister, Narendra Modi recently altered the Indian Constitution to strip the region of its special status and create two new provinces with direct rule from Dehli. Another part of the historical region was incorporated into Pakistan in 1948 and yet another was annexed by China after its brief invasion of India in 1962.

On the Eastern side of China there is another potential flash point in the South China Sea which, like Taiwan, China claims as its own despite international law and opinion. China is also expanding its navy and launched its second aircraft carrier in 2018.

Part of China’s strategy is what it calls the one belt, one road initiative which involves financing infrastructure projects across the region in exchange of political support and access to markets for Chinese companies. The idea is to create a semi-fixed commercial and logistical networking firmly binding many of the countries in the region to China.

Probably the most pressing issue facing the world is the increasing tension between China and the United States which has mainly to do with trade but also with industrial espionage. According to Niall Ferguson, an historian who teaches at Stanford, we are already in cold war 2.0 between the U.S. and China. Unlike the cold war from the last century, however, this one will be fought in terms of trade, tariffs, telecommunications and cyberspace. (see box 3.1)

Another potential flash point is between North and South Korea. My own view is that the threat of North Korea was exaggerated as was the promise of a comprehensive peace after the summit meeting between Kim ill Jong and President Trump in Singapore in 2018. What would be important would be the unification of North and South Korea but that probably will not happen anytime soon, if ever.

South America is largely at peace although the economy of Venezuela is in total collapse and the regime of Nicolaus Maduro continues to hold onto power despite the challenge from the President of the national Assembly Juan Guaidó.

In North America the Trump administration has slowed down the rapprochement with Cuba begun under Barak Obama and forced a renegotiation of the 25 year old North American Free Trade Agreement which is a good example of a semi-fixed aspect of the geo-political situation.

  • Implications

The situations briefly touched on above all affect patterns of international trade as well as causing death and destruction when war breaks out. Besides the human misery involved, war has a devastating impact on a country’s economy wiping out savings, ruining careers, etc. Clearly the biggest implication of geo-political change has to do with the choice you make about the place or places in which to live and work.

Far short of war, however, are increasing tensions, the introduction of new tariffs and perhaps economic sanctions. A current aspect of the situation in South Korea, for example, is an increasingly tense political relationship with Japan which has led to the boycott of Japanese products in late 1999. 

In the United Kingdom, the looming prospect of Brexit has made it more difficult for economic immigrants from other EU countries many of whom have chosen to return home rather than face the legal uncertainty and rising tide of anti-immigrant feeling in the U.K.

Living in a highly politicized and polarized environment can also take its toll in terms of overall levels of stress. A difficult and acrimonious political situation can also sometimes freeze investment and put an overall brake on economic activity as has occured in Barcelona due to the continued push for independence from Spain.

Geo-political tension also has an impact on space although this can cut both ways. The threat of war naturally stimulates spending in defense industries and can devastate a regions tourism business as it has done in parts of the Middle East and in Jammu and Kashmir.

The impact of geo-politics on role tends to be more specific such as increasing demand for cybersecurity experts or as a result of larger more direct impacts on a specific space which then hits the roles associated with that space. An example could be hotel managers or scuba professionals in Egypt’s Red Sea resorts in 2015 after a Russian charter plane was destroyed by terrorists after take off from Sharm El Sheikh.