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The world order changeth

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Our future will be shaped in many ways by what happened in the year gone by

By George Friedman


Tis the season to make lists, and a list shall be made. We tend to see each year as extraordinary, and in some senses, each year is. But in a broader sense, 2014 was merely another year in a long chain of human triumph and misery. Wars have been waged, marvelous things have been invented, disease has broken out, and people have fallen in love. Nonetheless, lists are called for, and this is my list of the five most important events of 2014.

1: Europe’s Persistent Decline

The single most important event in 2014 was one that did not occur: Europe did not solve its longstanding economic, political and social problems. I place this as number one because regardless of its decline, Europe remains a central figure in the global system. The European Union’s economy is the largest in the world, taken collectively, and the continent remains a center of global commerce, science and culture. Europe’s inability to solve its problems, or really to make any significant progress, may not involve armies and explosions, but it can disrupt the global system more than any other factor present in 2014.

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The Greek economy was thrown into turmoil and the richer EU nations like Germany put tough conditions to bail it out, much to the discomfort of the country’s population

The vast divergence of the European experience is as troubling as the general economic malaise. Experience is affected by many things, but certainly the inability to find gainful employment is a central feature of it. The huge unemployment rates in Spain, Greece and southern Europe in general profoundly affect large numbers of people. The relative prosperity of Germany and Austria diverges vastly from that of southern Europe, so much so that it calls into question the European Union’s viability.

We have seen a rise of anti-EU parties not only in southern Europe but also in the rest of Europe as well. None have crossed the threshold to power, but many are strengthening along with the idea that the benefits of membership in a united Europe, constituted as it is, are outweighed by the costs. Greece will have an election in the coming months, and it is possible that a party favoring withdrawal from the eurozone will become a leading power. The United Kingdom’s UKIP favors withdrawal from the European Union altogether.

There is significant and growing risk that either the European Union will have to be revised dramatically to survive or it will simply fragment. Its fragmentation would shift authority formally back to myriad nation states. Europe’s experience with nationalism has been troubling, to say the least—certainly in the first part of the 20th century. And when a region as important as Europe redefines itself, the entire world will be affected.
Therefore, Europe’s failure to make meaningful progress in finding a definitive solution to a problem that began to emerge six years ago has overwhelming global significance. It also raises serious questions about whether the problem is soluble. It seems to me that if it were, it would have been solved, given the threat it poses. With each year that passes, we must be open to the possibility that this is no longer a crisis that will pass, but a new, permanent European reality. This is something we have been pointing to for years, and we see the situation as increasingly ominous beca-use it shows no signs of improving.

2: Ukrainian and Russian Crises

Historically, tensions between Russia and the European Peninsula and the United States have generated both wars and near wars and the redrawing of the borders of both the peninsula and Russia. The Napoleonic Wars, World War I, World War II and the Cold War all ended in dramatic redefinitions of Europe’s balance of power and its map. Following from our first major event of the year, the events in Ukraine and the Russian economic crisis must rank as the second most important event.

Stratfor forecast several years ago that there would be a defining crisis in Ukraine that would be the opening to a new and extended confrontation between the Euro-pean Peninsula and the US on one side and Russia on the other. We have also forecast that while Russia has regional power, its long-term sustainability is dubious. The same internal factors that brought the Soviet Union crashing down haunt the Russian Federation. We assumed that the “little Cold War” would begin in the mid-2010s, but that Russian decline would not begin until about 2020.

We have seen the first act, and we continue to believe that the final act isn’t imminent, but it is noteworthy that Russia is reeling internally at the same time that it is trying to cope with events in Ukraine. We do not expect Russia to collapse, nor do we expect the Ukrainian crisis to evolve into a broader war. Nevertheless, it seems to me that with this crisis we have entered into a new historical phase in which a confrontation with significant historical precedents is re-emerging… .

MIDEAST-CRISIS/IRAQ

The Islamic State has unleashed unprecedented violence in the territory it has occupied in Syria and Iraq, not even sparing followers of Islam

The Russians think of this as an event triggered by the United States. In the newspaper Kommersant, I was quoted as saying that the American coup in Ukraine was the most blatant in history. What I actually said was that if this was a coup, it was the most blatant in history, since the United States openly supported the demonstrators and provided aid for the various groups, and it was quite open in supporting a change in government. The fact that what I said was carefully edited is of no importance, as I am not important in this equation. It is important in that it reveals a Russian mindset that assumes that covert forces are operating against Russia. There are forces operating against it, but there is nothing particularly covert about them.

The failures of Russian intelligence servi-ces to manage the Ukrainian crisis and the weakening of the Russian economy raise serious questions about the future of Russia, since the Russian Federal Security Service is a foundation of the Russian state. And if Russia destabilizes, it is the destabilization of a nation with a massive nuclear capability. Thus, this is our second most important event.

3: The Desynchronization of the Global Economy

Europe is predicted to see little to no growth in 2015, with some areas in recession or even depression already. China has not been able to recover its growth rate since 2008 and is moving sideways at best. The US announced a revision indicating that it grew at a rate of 5 percent in the third quarter of 2014. Japan is in deep recession. That the major economic centers of the world are completely out of sync with each other, not only statistically but also structurally, indicates that a major shift in how the world works may be underway….

The desynchronization of the international system raises questions about what globalization means, and whether it has any meaning at all. But a major crisis is occurring in economic theory. The forecasts made by many leading economists in the wake of 2008 have not come to pass. Just as Milton Friedman replaced John Maynard Keynes as the defining theorist, we are awaiting a new comprehensive explanation for how the economic world is working today, since neither Keynes nor Friedman seem sufficient any longer. A crisis in economic theory is not merely an academic affair. Investment decisions, career choices and savings plans all pivot on how we understand the economic world. At the moment, the only thing that can be said is that the world is filled with things that need explaining.

GAZA CITY, JULY 10:- Palestinians run following what police said was an Israeli air strike on a house in Gaza city July 9, 2014. At least 23 people were killed across Gaza, Palestinian officials said on Wednesday, by a bombardment Israel said may be just the start of a lengthy offensive against Islamist militants whose rockets struck deeper than ever before into Israel. REUTERS/UNI PHOTO-6R

Children were unsuspecting victims of conflicts across the world, be it Israel’s offensive on Gaza (like in this picture) or Islamic State’s atrocities on Yezidis, attack on a Pakistani school or the abduction of school girls in Nigeria

4: The Disintegration of the Sykes-Picot World

Sir Mark Sykes and Francois Georges-Picot were British and French diplomats who redrew the map of the region between the Mediterranean Sea and Persia after World War I. They invented countries like Lebanon, Jordan, Syria and Iraq.

Some of these nation-states are in turmoil. The events in Syria and Iraq resemble the events in Lebanon a generation ago: The central government collapses, and warlords representing various groups take control of fragments of the countries, with conflicts flowing across international boundaries….

The question is how far the collapse of the post-World War I system will go. Will the national governments reassert themselves in a decisive way, or will the fragmentation continue? Will this process of disintegration spread to other heirs of Sykes and Picot? This question is more important than the emergence of the Islamic State… .

What is significant is that while a force, the Islamic State is in no position to overwhelm other factions, just as they cannot overwhelm it. Thus it is not the Islamic State, but the fragmentation and the crippling of national governments that matters. Syrian President Bashar al Assad is just a warlord now, and the government in Baghdad is struggling to be more than just another faction.

Were the dynamics of the oil markets today the same as they were in 1973, this would rank higher. But the decline in consumption by China and the rise of massive new sources of oil reduce the importance of what happens in this region. It still matters, but not nearly as much as it did.
What is perhaps the most important question is whether this presages the rise of Turkey, which is the only force historically capable of stabilizing the region. I expect that to happen in due course. But it is not clear that Turkey can take this role yet, even if it wished to.

5: The Births of Asher and Mira

I was given two new grandchildren this year. For me, this must be listed as one of the five major events of 2014. I am aware that it is less significant to others, but I not only want to announce them, I also want to point out an important truth. The tree of life continues to grow new branches inexorably, even in the face of history, adversity and suffering. The broad forces of history and geopolitics shape our lives, but we live our lives in the small things. As much as I care about the other four matters—and I do—I care much more for the birth and lives of Asher and Mira and my other grandchild, Ari.

Life is experience in the context of history. It is lived in intimate contact with things that history would not notice and that geopolitics would not see as significant. “There are more things … than are dreamt of in your philosophy,” Hamlet said to his friend Horatio. Indeed, and their names are Asher, Mira and Ari. This must not be forgotten.
Have a happy New Year’s, and may God grant you peace and joy in your lives, in spite of the hand of history and geopolitics

—Courtesy Stratfor

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