Sunday 30 December 2012

Twenty-Twelve: A Year of Wake-up Calls

Every year has its share of good and bad events in world affairs. But looking back on this year it seems to have been filled with a mixture of unfortunate events and near misses which remind us of the failings in our current ways of doing things. However, many of these events seem to have triggered a real reevaluation of our policies, our political systems, and our social aspirations. Among the gloom there may be cause for optimism yet.

Extreme weather, Climate Change, and the end of the world

A few years ago, news reports would shy away from suggesting a link between extreme weather in the present day and long-run climate change. Any mention of such a link would be filled with hesitation and caveats. A turning point seems to have been reached this year, with news reports making this connection regularly and unashamedly. Indeed, the frequency and extremity of storms, droughts and flooding has undeniably been rising over the last decade. This year has seen Hurricane Sandy cause massive destruction in New York and its surroundings. Meanwhile much of the central US was hit by drought. In the UK, the rain from April to June was the heaviest on record, with more floods this winter making it possibly the wettest year on record.

The supposed Mayan prophecy of the end of the world did not come to pass. But the threat that climate change poses is very real, and this year saw a change in the tone of the debate about its effects.

American Political Deadlock, US National Debt and the Fiscal Cliff

As I write this, negotiations about raising the US debt ceiling are ongoing, and it seems likely that automatic spending cuts and tax rises will kick in. This in itself is a worrying prospect. But the fundamental factors causing it are even more cause for concern. On the one hand the US has an immense level of national debt, as well as a gaping budget deficit, which will doubtless be a source of global instability in years to come. On the other hand, the American political system is so highly polarized into two ideologically opposed parties it seems that meaningful political progress on any issue is almost impossible. 

A pessimistic analysis would conclude that the institutions of US politics are fundamentally broken, that gridlock is the new norm, policy will drift and the economy will stagnate. An optimist might attribute the slow resolution of problems to the election, and point to Obama’s new democratic mandate as a catalyst of further progress. We shall learn which (if either) is right by seeing how things play out in 2013.

EU Bureaucracy, public sector finances and the Grexit

In 2012 it seems we came very close to seeing the break-up of the Eurozone. While disaster was, apparently, narrowly avoided, the budgetary problems of the periphery countries are far from resolved and the political union is more fragile than it has been in years. In the mean-time the degree of bureaucratic waste in the European political system has become ever more apparent. The backlash in the UK against surrendering power to Brussels has grown to record levels; so much that the anti-EU UK Independence Party is now the third most popular party, having overtaken the Liberal Democrats in the opinion polls.

An image has emerged of an EU parliament and commission disconnected from the people they represent. European bureaucrats are seen as a sinister elite, bound together by the sacred mission of European integration, a mission so important that trivialities such as democracy and national sovereignty can be ignored.

The chaos caused by public spending cuts in Greece has changed the people’s tolerance level for wasteful publicly funded institutions. After the failure of leaders to agree on the next EU budget in 2012, the stage is set for a showdown in 2013. This could well lead to turmoil, both in Brussels and further periphery countries, if it is not handled with finesse.

Some other alarm bells

  • The Arab Spring has stumbled. The jubilation at the toppling of several dictators is over, as the situation in Syria has crumbled to all-out civil war, and an Islamist-backed strongman has risen to the leadership of Egypt. The freedom and democracy that many in the region hoped for may yet be realized, but is proving more elusive than most hoped for.
  • The Sandy Hook shooting seems to have caused a change in the US debate on gun control. The stark contrast between the two attacks on primary schools that occurred on December 14th is especially poignant. In China, a man with a knife attacked 20 children, and none died; in the US, a man with a gun attacked 20 children all of whom died. It looks like in 2013 we may see new legislation curbing sale of the most powerful weapons to the public.
  • The Libor scandal has shaken up the banking sector and to skeptics is proof that the financial sector is rotten. When the metrics (i.e. interest rates) taken as the fundamental building blocks of the financial system are so easily corrupted, what does this say about the rest of the system?
  • The dispute between China and Japan over island territory has raised tension in East Asia, and contributed to the election of a hawkish leader in Japan’s election. The search for a diplomatic solution must be a top priority, as the crisis is already damaging the regional economy and threatens something much worse.
Have we woken up yet?

This remains to be seen. While I have noted a change in the tone of many important debates, this needs to be followed by action if real progress is to be made. I will be watching closely in 2013 to see if these seeds of change will flourish.

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