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ECONOMY| 19.01.2023

Present and future geopolitical challenges

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It is difficult to predict with certainty what the main geopolitical challenges will be in 2023, as these will depend on a wide range of factors that could rapidly change. However, based on current trends and issues, there are a number of challenges that could emerge or gain greater importance in the coming years.

As noted in the latest Economic and Industry Outlook report prepared by MAPFRE Economics, tensions between major powers, particularly the United States and China, along with the impact of rapid technological change, are coming to the fore. Likewise, the threat of terrorism is likely to remain a major concern, and climate change is expected to continue to erode income and wealth at the bottom of the world’s socioeconomic ladder, increasing inequality and perpetuating the middle-income trap.

Tensions between great powers

One of the main challenges that may continue to shape the geopolitical landscape in 2023 is the ongoing tensions between major powers, particularly the United States and China. These tensions have been fueled by a range of issues, including trade, diplomacy, and military confrontations, and they have the potential to disrupt global relations and stability. This challenge is taking on greater importance as the Trade Expectations Theory has started losing ground, whereby reasonable diplomatic relations were upheld in the interest of the mutual benefits of bilateral trade. This can be seen again in Sino-US bilateral relations and the ban on technology sharing, the growing tensions over Taiwan, a key link in the technological value chain, or the re-arrangement of energy sources following the dissociation between Europe and Russia.

Impact of technology

The rapid pace of technological change is likely to continue to have a major impact on international relations in 2023 and beyond. This could include the emergence of new technologies that have the potential to change the balance of power between nations, as well as the potential for cyber-attacks and other forms of digital sabotage to disrupt global systems and infrastructure. The struggle to control technology value chains and key parts of the value chain will continually increase tensions between major powers. In addition, the risk that naturally arises from technology, especially artificial intelligence (AI), is vastly underestimated. Algorithmic biases, the power and CO2 costs of machine learning training, and the rise of AI foundation models are causing a shift in productivity growth and pose lasting dangers to stability and inequality.

Climate change

The impacts of climate change, including rising sea levels, more frequent and severe natural disasters, and changes in weather patterns are likely to continue to pose significant challenges in 2023 and beyond. These impacts could disrupt world trade, displace large numbers of people, and strain relations between states, and dealing with them will require global cooperation and coordination. Moreover, climate change, like all other long-range risks, acts the way regressive taxes do in eroding income and wealth at the bottom of the socio-economic ladder, increasing inequality and perpetuating the middle-income trap.

Terrorism

The threat of terrorism is likely to remain a major concern in 2023. It is also likely that the use of social networks to spread propaganda and inspire violence will continue to pose a major challenge in the fight against terrorism. Terrorism functions as a coercive means to achieving an objective when scant resources are available, and in a context in which actual clashes are created. Hence, a stable environment is needed for a tangible version of this to spread and create this coercive power. It is also probable that terrorism, in times of upheaval, will take the shape of cyberterrorism.

Political instability and conflicts

Political instability and conflict are likely to remain major challenges in 2023, with a number of issues, such as economic inequality, ethnic and religious tensions, and resource scarcity potentially leading to unrest and violence in various parts of the world. This could have significant implications for global security and stability. The feedback loop between inequality, disenfranchisement, and partisan hostility must be broken to mitigate this type of risk. However, amidst the other geopolitical challenges, this would appear to be difficult to achieve in the foreseeable future.

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