report is centered around the idea that “Pax Americana” (a state
of relative international peace regarded as overseen by the US) is in
its final death throes.
Americana” is the term often used to define the (previously)
current geopolitical order. That the general peace and stability of
the Post-WWII world is due to America’s dominant economic and
political power, backed up by its huge military.
says that the Pax Americana era is over, and that the
future holds nothing but uncertainty, chaos, and instability.
has begun, as 2015 ended, amid a significant worsening of the global
political climate and along with that, considerable volatility in
financial markets. Investors and businesses are increasingly aware of
the need to understand the drivers and the implications of a greater
level of event risk exacerbated by shifting social patterns.
more, we see little sign of this trend of political risk cutting
across advanced and emerging economies reversing. We think it’s
unlikely that the moderate global growth that Citi’s economists
forecast as their central scenario will dampen these risks. If
anything, the data we have analyzed for this report, combined with
our combined expertise in comparative political science and
international relations and security and defense analysis,
underscores how, by many measures, these risks are on the rise and
indeed could endanger even the already modest prospects for global
other words, the global economy is about to crash.
our view, political and business leaders will need to be more attuned
to the new shape of global political risk, a paradigm shift that
means that previous policies will fail to keep pace and uncertainty
will remain high, with the potential to interact in unexpected ways.
Among the key implications of this more fragile and interconnected
risk outlook is that so-called Black Swan events — in this case,
geopolitical events producing instability spanning several orders of
magnitude — may be both more likely and more difficult for leaders
and global financial institutions to resolve.
Black Swan theory was developed by Nassim Nicholas Taleb, as the
disproportionate role of high-profile, hard-to-predict, and rare
events that are beyond the realm of normal expectations in history,
science, finance, and technology.
9/11 attacks are a good example of a “Black Swan”.
report closes with:
the long-term, failure to devise policies to address middle class
anxiety and declining living standards increases the likelihood that
Vox Populi risk — including mass protests and government collapses
— could move from being episodically disruptive to systemic,
undermining globalization in the process. And we are deeply concerned
that the political capital necessary to stem the refugee crisis and
terrorist threat, perhaps best-characterized as the collision between
previous foreign policy failures and current governance capacity,
exceeds that available to government leaders, who have relied upon
central banks to manage the lion’s share of global crises over the
past several years. 2016 could be a very political year for markets.
Political Risk: The New Convergence Between Geopolitical and Vox
Populi Risks, and Why It Matters