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The Geopolitical Risk Global Agenda Council aims at establishing Geopolitical (and inherently Geoeconomic) Risk as a primary category in the discourse on economic and political global governance. Geopolitical and geoeconomic risk transcends the boundaries of bottom-line risk assessments both in the private and the public sector and therefore plays an important role in the deliberations and findings of the Network of the Global Agenda Councils, and the World Economic Forum by extension.

The 2011-2012 term was thus far the busiest year for the Geopolitical Risk Council, leading to two reports, a plethora of op-eds, social and traditional media appearances and culminating in a Washington DC-based workshop. As a warm-up exercise, the Geopolitical Risk GAC opened the new term with a snap “reaction report” on the geopolitical implications of the Arab Spring, presented at the Summit of the Global Agenda in Abu Dhabi. Our view was less “Spring or Winter”, than the unmooring of traditional geopolitical alliances as the United States played a receding role in the region … and leading powers in the region become more decisive and “in play”.Saudi Arabia, Turkey and Iran emerged as the key geopolitical drivers in the region (with Egypt focused on domestic dissent and transition), with sectarianism challenging economic divides as the most significant organizing principle in the Middle East. In short, the aftermath of the Arab Spring has created more drivers for fragmentation than integration. One potential silver lining is the emergence of the Gulf Cooperation Council as a more durable and well-integrated organization; bolstered by the availability of economic resources. But in the near term, the Middle East remains the most problematic region geopolitically as we emerge from the 2008 financial crisis.

From the Summit on the Global Agenda onwards and for the remainder of the 2011-2012 term, the Global Agenda Council on Geopolitical Risk focused on the interplay between two distinct trends that build off one another — global institutions, whose effectiveness in addressing current and future global problems, especially those of a financial and economic nature, is being called into question; and the largely concurrent rise of regionalism, which holds the potential to affect the global power balance.

The Council discussions were largely broken into two areas of exploration:

  • Assessing the effectiveness of Global Institutions amid the Rise of Regionalism
  • Consequences and key takeaways of this dynamic: expected risks, opportunities, winners and losers.

We also discussed the impact on the broader World Economic Forum/Davos agenda and on other GACs that these fundamental shifts might bring.

We attacked the question of how to deal with global institutions, including the G20, the United Nations, the World Bank and the International Monetary Fund, that were established to ensure that global conflicts were settled not through the exercise of raw power, but through agreed rules, global membership and with decisions taken by votes of its members, but, which are now largely failing to effectively meet current challenges.

After more than 65 years, a radical overhaul of existing global institutions and governance systems might be appropriate. But, given vested interests and the lack of a post-war/crisis dynamic to spur agreement, we determined that these stand little chance of success.

The Council explored the various reasons for the inadequacy of global institutional response, including: governance structures that lack legitimacy; insufficient support from today’s great powers — the United States and China; structural ineffectiveness; and outcomes prone to migrate to the lowest common denominator.

We noted that the unbridled pursuit of individual national interests would produce sub-optimal results, but that the lack of adequate global crisis-response mechanisms created a potential vacuum into which dangerous, resurgent nationalism might flow. To provide leadership that extends beyond the national stage, we explored in detail the growing reliance on regionalism to stopgap this shortage of effective global decision-making and keep nationalism at bay.

Because regionalism is still at a relatively early stage of development, there is an opportunity to affirmatively craft these evolving regional alliances, entities and institutions to optimize their ability to coordinate with one another as well as with existing global institutions. It is far from certain that, left to their own devices, these new institutions will develop along multilateral models similar to existing institutions and to one another.

Our Council agreed that the real challenge is managing the rise of regionalism in a way that enhances, and does not impede, the pursuit of solutions to systemic and far-reaching global problems.

We extensively explored scenarios relating to how Europe might emerge from its current crisis since Europe remains of the highest importance to the future of international organizations, and is the region in the world where countries have successfully pooled sovereignty, on the principle that all countries are (more or less) equal and they should all follow collectively agreed rules and work through supra-national institutions.

Even with its influence in decline, the EU model of regional cooperation is still the most highly developed in the world, and the evolution of its governance structures, rules, institutions and power dynamics that emerge from the current crisis will likely be looked upon with great interest by those contemplating regional alliances of their own. While the eventual shape of the EU remains less certain than it has been for decades, how it responds to its current crises will have a significant effect on global institutions and the structure of regional alliances going forward.  Should its decision-making dynamic result in reform — which will potentially cause some discomfort for smaller countries — that increases its effectiveness and allows a more realistic approach to decision-making, this could, ultimately, mean that the European Union emerges stronger and with greater international influence.

We noted that a world where regional groupings and organizations address regional and perhaps wider issues is second best to a world of effective global governance. But it nevertheless is preferable to raw nationalism as an alternative outcome, and reflects the broader diffusion of international power away from a pure “might-makes-right” world.  Regionalism may well provide the most effective means of hedging against the potentially hegemonic ambitions of great or regional powers.

The World Economic Forum has demonstrated that globalization is most often a force for good.  Hence it is desirable to draw rising powers and peripheral countries into the global governance system that fosters open trade and the free flow of capital, seeks to address global challenges — from climate change to women’s rights — and strives to give all countries a say in shaping the global agenda.

But the global economic and financial crisis has called into question the benefits of globalization and the predominant model of consensus-driven governance. In many developing countries, people are focused now on improving their economic positions, and are not necessarily looking to the existing global powers and institutions to provide them with the best model with which to do so. In short, the West and the global institutions it dominates are no longer uncontested models for transition economies and regional alliances.

The move away from belief and trust in existing structures and institutions of the global order to solve global problems leads to a potential for fewer shared/trans-national values.

Our Council concluded that the challenge is to ensure that new regional institutions that rise alongside existing global institutions…

  • … embody values such as openness, equality, transparency and intellectual honesty
  • … are open and compatible so that they can work together
  • … integrate with, not undermine, the existing system of global governance
  • … reinforce existing efforts to address global problems
  • … do not turn into tools for regional hegemons to bully their neighbours.

In seeking to publicize our work and findings, the Geopolitical Risk GAC produced a significant policy paper at the launch of the World Economic Forum Annual Meeting in Davos in January 2012. This paper was highlighted in extensive outreach to the press in Davos and elsewhere, including several op-eds published by Council Chair and Vice Chair (for instance in The Financial Times http://blogs.ft.com/the-a-list/2012/01/27/decline-of-global-institutions-means-we-best-embrace-regionalism/#axzz1uv1K1ory), via council members in their home countries in domestic media (both traditional and new media outlets) and on the Forum Blog (http://forumblog.org/2012/01/global-institutions-ineffective-amid-the-rise-of-regionalism/). Our Council participated in Forum Risk Response Network events and exercises as well as in the “What If?” projects in several formats, including video, podcasts, online and in print (http://forumblog.org/2012/05/what-if-global-institutions-fail/, http://forumblog.org/2012/04/what-if-there-was-a-cold-war-between-the-us-and-china/, http://forumblog.org/2012/04/what-if-china-turned-its-back-on-the-world/).

Council work product, in particular the policy paper issued in January, was widely distributed to policy-makers at the highest levels of government in the United States, (including the White House, State Department, Treasury and Congress), the European Union (at Commission and Council levels, as well as at the national level of many, if not all member states), China, Japan, the Middle East, Africa and in Latin America.  We also distributed the paper to the highest level of management and the executive boards of the international financial institutions, including the IMF and World Bank, as well as to the Multilateral Development Banks.

Our Council was also deeply involved in cross fertilization with other GACs on areas of mutual interest. In particular, we explored geopolitical risk-related issues that overlapped with the following GACs: Banking and Capital Markets, Europe, International Monetary System Reform, Fiscal Crises, North America, Systemic Financial Resilience, and Institutional Governance Systems. Indeed the findings of the Institutional Governance Systems report are complementary to this Council’s analysis and recommendations.

The Council has continued its pursuit of these areas of analysis as we produced multiple short papers in connection with a Washington, DC-based roundtable where we discussed these issues as part of our broader next project — What’s Next?: Geopolitical Risks We’re Not Focusing on Quite Yet (But Should Be…). This ongoing project will include exploration of seven areas, including:

  • The impact of Euro-economics on Euro-politics and vice versa: Optimal economic objectives in the Eurozone may not be politically achievable.  But are they at least socially sustainable?
  • Internal dynamics of the “troika” and its prospects: Political choices have economic consequences.  Who will pay the bills?
  • Russia – a Wild Card: The Russian leadership promulgates the idea of Russia as an “independent power” or “floater state”. Can Russia divorce itself from international security architecture? What will be the consequences?
  • The Post-Arab Spring Middle East: the Arab Spring was primarily about economics and sectarianism. How will this dynamic shape the policies of international stakeholders such as the US, France and China?
  • Internal dynamics of the BRICS: The BRICS concept is a Western concept with neither economic nor political fundamentals as a common denominator. What emerging market relationships and dynamics will emerge and help to shape the 21st century?
  • Pivot States in Asia: China’s Neighbours Are Hedging Against its Growing Clout. What are their prospects for success?
  • The Future of Economic Statecraft as a central plank of US Foreign Policy.  Is the US ready to become a “Soft Power” leader?

Disclaimer

The opinions expressed here are those of the individual members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.