As we have frequently reported, we are in a period of “hegemonic shift”, as the Atlantic Era is coming to an end. In 2018, we have seen many manifestations of this shift (e.g. in India or Vietnam) and an increasing fragmentation of global (military) power. Although we should be aware that this is a return – or that the Atlantic Era was a kind of historical aberration – rather than a rise from nothing. Within this megatrend, we saw three themes emerge in 2018.
The most significant geopolitical event in 2018 was the unfolding of the trade war between the U.S. and China. However, while tariffs and blockings of takeovers took headlines, there is more structural tension between the U.S. and China: the upcoming tech war. Technological leadership (including biotech) is closely related to “hard power”, if only because countries maintain tech-autonomy, even in space. Furthermore, digital technological capabilities will increasingly determine (cyber) power relations and means of projecting power.
This struggle for technological dominance will only become more important in the future with the rise of the sensor-based economy. And with this, we will also see a shift of power to the local level: a new wave of urbanization and smart city technology will greatly empower cities over national governments. As the global tech battle unfolds between China and the U.S., Europe risks losing out on innovation as it still scores high in research, but less so in development of value-adding products and services, seeing itself as on a mission to bring forth a true European champion.
The primary “challenger” of the U.S. hegemony is China. Based on its own historical and cultural traditions, it is developing a new vision of progress based on its own unique political philosophy. Increasingly, the contours are emerging of China’s worldview and a Chinese-led world order, as China is leading Eurasian cooperation, BRICS integration, and spearheading Asia’s financial catch-up. This process is further accelerated as the U.S. is increasingly turning inwards and alienating some of its former allies as well as making new enemies. Furthermore, China is making large infrastructure investments (e.g. establishing an intercontinental super grid) as well as developing a new Silk Road for the 21st century.
While the BRI and adjacent investment policies are defining China’s future foreign policy, Made in China 2025 is the blueprint for China’s future economy. Following this plan, China wants to leapfrog its economy into becoming a digital leader with future growth coming from its megacities and regional capitals, which have their own governance model. This is enabled by the implementation of a social credit system that is to combat (financial) misbehavior, corruption and (re-)install trust throughout Chinese society, as well as by other sweeping reforms, as we have seen in 2018, such as its financial liberalization drive or the greening of its economy. Despite economic problems (e.g. the deleveraging of its economy) and technological hurdles (e.g. its semiconductor industry), China will lead the hegemonic shift of our times.
In 2018, we saw no backing down of populism. In Europe, far-right populism is becoming more mainstream across the European continent. This European divide will make life harder for political parties in the center, which have dominated European politics for decades and have often pushed for more European reforms. Furthermore, the economic policies – loose monetary conditions with high deficit spending – that are proposed by these parties are driven by the resurgence of the Eurozone’s southern member states, such as Italy’s new populist government. In addition, the upcoming Brexit will shake up European dynamics and may open doors to some smaller stakes like the Netherlands. No matter the circumstances, the U.K. will leave the EU.
However, populism is not limited to Europe or the West alone: in Brazil, far-right nationalist candidate Jair Bolsonaro, a former army officer with a “law-and-order” style of governance, has won the Presidential elections. Elsewhere on the continent of change, Latin America, Manuel Lopez Obrador won the Mexican elections with a sweeping majority, promising to take on Mexico’s “mainstream elite”. However, there are also brighter signs of improving political conditions: in April 2018, in just one week, three former presidents were sentenced in South Korea, South Africa, and Brazil on bribery charges. And populist tides will also push countries into cooperation based on shared values, such as the Indo-Japanese partnership.
