Computation used to train AI systems, measured in total petaflops (10^15 floating-point operations per second), 1950s-2022. Demagogues and populists will weaponize AI for narrow political gain at the expense of democracy and civil society. We’ve already seen the likes of Trump, Brazil’s Jair Bolsonaro, and Hungary’s Viktor Orbán leverage the power of social media and disinformation to manipulate electorates and win elections, but technological advances will create structural advantages for every political leader to deploy these tools—no matter where they sit on the political spectrum. Political actors will use AI breakthroughs to create low-cost armies of human-like bots tasked with elevating fringe candidates, peddling conspiracy theories and “fake news”, stoking polarization, and exacerbating extremism and even violence—all of it amplified by social media’s echo chambers. We will no doubt see this trend play out this year in the early stages of the U.S. primary season as well as in general elections in Spain and Pakistan Data: Our World in Data. Graphic: Eurasia Group
Computation used to train AI systems, measured in total petaflops (1015 floating-point operations per second), 1950s-2022. Demagogues and populists will weaponize AI for narrow political gain at the expense of democracy and civil society. We’ve already seen the likes of Trump, Brazil’s Jair Bolsonaro, and Hungary’s Viktor Orbán leverage the power of social media and disinformation to manipulate electorates and win elections, but technological advances will create structural advantages for every political leader to deploy these tools—no matter where they sit on the political spectrum. Political actors will use AI breakthroughs to create low-cost armies of human-like bots tasked with elevating fringe candidates, peddling conspiracy theories and “fake news”, stoking polarization, and exacerbating extremism and even violence—all of it amplified by social media’s echo chambers. We will no doubt see this trend play out this year in the early stages of the U.S. primary season as well as in general elections in Spain and Pakistan Data: Our World in Data. Graphic: Eurasia Group

By Ian Bremmer and Cliff Kupchan
3 January 2023

(Eurasia Group) – Russia has no way to win in Ukraine. The European Union is stronger than ever. NATO rediscovered its reason for being. The G7 is strengthening. Renewables are becoming dirt cheap. American hard power remains unrivaled. Midterms in the United States were decidedly normal … and many of the candidates posing the biggest threat to democracy (especially those who would have had authority over elections) lost their races. Meanwhile, Donald Trump is the weakest he has been since he became president, with a large number of Republicans preparing to take him on for the GOP nomination.

There’s got to be a catch.

The big one: A small group of individuals has amassed an extraordinary amount of power, making decisions of profound geopolitical consequence with limited information in opaque environments. On a spectrum of geopolitics with integrated globalization at one extreme, these developments are at the other extreme, and they’re driving a disproportionate amount of the uncertainty in the world today.

Our top risks this year are skewed toward these actors and their impact: Rogue Russia, Maximum Xi, Weapons of mass disruption, and Iran in a corner all come from international actors facing severe structural challenges and strong opposition (internal and/or external) in achieving their desired goals, with neither oversight, adequate expert inputs, nor checks and balances constraining their actions.

Dictatorships are stumbling at the same time that they’re becoming more consolidated. Vladimir Putin’s Russia is too isolated for its leader to attend the G20 summit, facing serious economic and military decline … while NATO has never looked stronger. Iran, Russia’s most important military ally, faces a deeply hostile geopolitical environment alongside the greatest domestic unrest since the 1979 revolution that brought the Islamic Republic to power. China was thoroughly unprepared for its troubles with zero Covid (our #1 risk last year), leading to unprecedented demonstrations … and a sudden turnaround of President Xi Jinping’s policy, ending restrictions two years after the Americans and Europeans. Their trajectories are, to varying degrees, increasingly unsustainable.

Survey results of U.S. Republicans and Democrats with “unfavorable” and “very unfavorable” views of the opposing party, 1994-2022. The United States remains one of the most politically polarized and dysfunctional of the world’s advanced industrial democracies. The growing partisan polarization of the American electorate is continuing to erode the legitimacy of core federal institutions: the three branches of government and the peaceful transfer of power through free and fair elections. Consequently, political power is devolving to the states, increasingly led by partisans stepping into the void left by Washington to pursue agendas that cannot be implemented by a fractious and sclerotic federal government. Accordingly, the contrast in policy direction between Texas and California, for example, is far starker than it was even five years ago. Survey data are from the Pew Research Center American Trends Panel (2020-2022) and Pew Research Center phone surveys (1994-2019). Graphic: Eurasia Group
Survey results of U.S. Republicans and Democrats with “unfavorable” and “very unfavorable” views of the opposing party, 1994-2022. The United States remains one of the most politically polarized and dysfunctional of the world’s advanced industrial democracies. The growing partisan polarization of the American electorate is continuing to erode the legitimacy of core federal institutions: the three branches of government and the peaceful transfer of power through free and fair elections. Consequently, political power is devolving to the states, increasingly led by partisans stepping into the void left by Washington to pursue agendas that cannot be implemented by a fractious and sclerotic federal government. Accordingly, the contrast in policy direction between Texas and California, for example, is far starker than it was even five years ago. Survey data are from the Pew Research Center American Trends Panel (2020-2022) and Pew Research Center phone surveys (1994-2019). Graphic: Eurasia Group

More broadly, progress in human development has been thrown into reverse by a global pandemic, a land war in Europe, a massive inflationary shock, and mounting climate catastrophe. After decades of globalization pushing unprecedented global growth and the emergence of a robust global middle class, we are now seeing a majority of the world’s 8 billion people fare worse, not better, in education levels, life expectancy, economic well-being, and safety and security. The headwinds for human development will grow in 2023.

American leadership is a double-edged sword. One year into Russia’s failed war, the United States has only gained as the world’s sole global military leader. Core allies clearly recognize their reliance on the United States for national security, broadly defined. America’s comparative economic power is stronger coming out of the pandemic and through the Russia war than after the global financial crisis in 2008. Whispering in Europe has gotten louder that the global position of the United States is benefiting from the war, while the Europeans and Japan face deindustrialization and a permanent end to the peace dividend. China, too, faces massive economic challenges, much greater than other major countries. Its economy is still expected to surpass that of the United States in GDP by 2030, but there is a growing chance it never does. And if it does, this does not herald a Chinese century as China’s population halves by 2100. If any major middle-income country is truly outperforming in the coming decades, it’s the world’s soon-to-be third largest economy (and its largest democracy), India.

Number of water-related conflicts (left), percentage of global population facing water stress and scarcity (right), and global freshwater use billions of gallons (bottom). There are no quick fixes in sight. For decades, rich nations treated water scarcity as a problem affecting poor countries that could be mitigated through bilateral aid. This led to chronic underinvestment in technological solutions such as desalination plants, which remain prohibitively expensive for use in agriculture—a sector accounting for 70 percent of freshwater withdrawals. International cooperation won’t come to the rescue, either. While climate and biodiversity international negotiations—known as conferences of the parties, or COPs—are gaining traction, the COP focused on desertification remains overlooked (have you even heard of it?). The last one in May 2022 made no significant progress. And other global initiatives such as the upcoming UN Water Conference won’t make a dent in water stress this year. Data: Council on Strategic Risks, Population Connection, Nature, Kummu et al., Global International Geosphere-Biosphere Programme, Our World in Data. Graphic: Eurasia Group
Number of water-related conflicts (left), percentage of global population facing water stress and scarcity (right), and global freshwater use billions of gallons (bottom). There are no quick fixes in sight. For decades, rich nations treated water scarcity as a problem affecting poor countries that could be mitigated through bilateral aid. This led to chronic underinvestment in technological solutions such as desalination plants, which remain prohibitively expensive for use in agriculture—a sector accounting for 70 percent of freshwater withdrawals. International cooperation won’t come to the rescue, either. While climate and biodiversity international negotiations—known as conferences of the parties, or COPs—are gaining traction, the COP focused on desertification remains overlooked (have you even heard of it?). The last one in May 2022 made no significant progress. And other global initiatives such as the upcoming UN Water Conference won’t make a dent in water stress this year. Data: Council on Strategic Risks, Population Connection, Nature, Kummu, et al., Global International Geosphere-Biosphere Programme, Our World in Data. Graphic: Eurasia Group

But in terms of leading by example, it’s a radically different story for the United States. In 1989, the US was the world’s leading exporter of democracy. Today, it is the leading exporter of tools that undermine democracy—the result of algorithms and social media platforms that rip at the fabric of civil society while maximizing profit, creating unprecedented political division, disruption, and dysfunction. That trend is accelerating fast—not driven by governments but by a small collection of individuals with little understanding of the social and political impact of their actions.

Is the tech centibillionaire a bigger threat to global instability than Putin or Xi? It’s unclear but the right question to ask and a critical challenge for the world’s democracies, highlighting the vulnerability of representative political institutions and the growing allure of state control and surveillance. As we showed with the J Curve back in 2006, open societies were the most stable, in part because technology strengthened them and weakened authoritarian regimes. In 2023, less than two decades later, the opposite is true.

It’s not the end of democracy (nor of NATO or the West). But we remain in the depths of a geopolitical recession, with the risks this year the most dangerous we’ve encountered in the 25 years since we started Eurasia Group.

Percentage of OECD countries experiencing higher-than-average inflation, 1970-2022. The global inflation shock that began in the United States in 2021 and took hold worldwide in 2022 will have powerful economic and political ripple effects in 2023. It will be the principal driver of global recession, add to financial stress, and stoke social discontent and political instability everywhere. Today’s historically high inflation comes from multiple sources. First was the Covid-19 pandemic, which prompted governments to cushion the fall in incomes with extraordinary fiscal and monetary stimulus at the same time that it disrupted global supply. Then, just as the United States and Europe were coming out of the pandemic thanks to vaccines, China doubled down on its zero-Covid policy, locking down the global economy’s most important manufacturing and shipping hubs. Finally, Russia’s invasion of Ukraine and the West’s sanctions in response put a strain on the global supply of energy, food, and fertilizer. This unprecedented confluence of overlapping shocks pushed inflation to levels most countries hadn’t seen in nearly 50 years. Graphic: Eurasia Group
Percentage of OECD countries experiencing higher-than-average inflation, 1970-2022. The global inflation shock that began in the United States in 2021 and took hold worldwide in 2022 will have powerful economic and political ripple effects in 2023. It will be the principal driver of global recession, add to financial stress, and stoke social discontent and political instability everywhere. Today’s historically high inflation comes from multiple sources. First was the Covid-19 pandemic, which prompted governments
to cushion the fall in incomes with extraordinary fiscal and monetary stimulus at the same time that it disrupted global supply. Then, just as the United States and Europe were coming out of the pandemic thanks to vaccines, China doubled down on its zero-Covid policy, locking down the global economy’s most important manufacturing and shipping hubs. Finally, Russia’s invasion of Ukraine and the West’s sanctions in response put a strain on the global supply of energy, food, and fertilizer. This unprecedented confluence of overlapping shocks pushed inflation to levels most countries hadn’t seen in nearly 50 years. Graphic: Eurasia Group

And now, our top risks [Top Risks 2023].

  1. ROGUE RUSSIA: A humiliated Russia will turn from global player into the world’s most dangerous rogue state, posing a serious security threat to Europe, the United States, and beyond.
  2. MAXIMUM XI: Xi Jinping emerged from China’s 20th Party Congress in October 2022 with a grip on power unrivaled since Mao Zedong.
  3. WEAPONS OF MASS DISRUPTION: New technologies will be a gift to autocrats bent on undermining democracy abroad and stifling dissent at home.
  4. INFLATION SHOCKWAVES: Rising interest rates and global recession will raise the risk of emerging-market crises.
  5. IRAN IN A CORNER: The chance of regime collapse is low, but it’s higher than at any point in the past four decades.
  6. ENERGY CRUNCH: Higher oil prices will also increase frictions between OPEC+ and the United States.
  7. ARRESTED GLOBAL DEVELOPMENT: Women and girls will suffer the most, losing hard-earned rights, opportunities, and security.
  8. DIVIDED STATES OF AMERICA: There is a continuing risk of political violence in the US, even as some who participated in the Capitol riots go to prison.
  9. TIK TOK BOOM: Gen Z has both the ability and the motivation to organize online to reshape corporate and public policy, making life harder for multinationals everywhere and disrupting politics with the click of a button.
  10. WATER STRESS: This year, water stress will become a global and systemic challenge…while governments will still treat it as a temporary crisis.
    RED HERRINGS: Cracks in support for Ukraine. EU political dysfunction. Taiwan crisis. Tech tit-for-tat.
Estimated share (percentage) of OECD GDP spent on energy end-use, 1971-2022. High oil prices will place a heavy burden on poorer developing countries, which have limited cash for expensive energy imports and face surging borrowing costs to fill the hole, resulting in energy shortages and social discontent. Angry over having to shoulder costs for sanctions on Russia they didn’t agree to, emerging markets will chip away at the Western sanctions regime by continuing to trade with Russia. Two of the world’s three biggest energy consumers, China and India, will continue to buy large quantities of Russian crude at a steep discount. The United States will respond by hitting some emerging markets (albeit not China or India) with secondary sanctions, further inflaming tensions between industrialized economies and emerging markets already rocked by high inflation (please see risk #4), the war in Ukraine, the Covid-19 pandemic, and climate change. Data: OECD, FT. Graphic: Eurasia Group
Estimated share (percentage) of OECD GDP spent on energy end-use, 1971-2022. High oil prices will place a heavy burden on poorer developing countries, which have limited cash for expensive energy imports and face surging borrowing costs to fill the hole, resulting in energy shortages and social discontent. Angry over having to shoulder costs for sanctions on Russia they didn’t agree to, emerging markets will chip away at the Western sanctions regime by continuing to trade with Russia. Two of the world’s three biggest energy consumers, China and India, will continue to buy large quantities of Russian crude at a steep discount. The United States will respond by hitting some emerging markets (albeit not China or India) with secondary sanctions, further inflaming tensions between industrialized economies and emerging markets already rocked by high inflation (please see risk #4), the war in Ukraine, the Covid-19 pandemic, and climate change. Data: OECD, FT. Graphic: Eurasia Group

Conclusion

We try not to think too hard about writing a report on where the world is going (put it that way, and it feels like a daunting task). But it’s not about prediction. You start with where the world is, really is, and to the extent that you get that assessment right, it constrains more outcomes than any crystal ball ever could. In many ways, Top Risks is about the art of what’s not possible.

We learn as much about ourselves as the world in the process. What biases are we holding on to that need to be challenged? What are the things we think we know that aren’t really so? And what would make us wrong?

We hope we’ve addressed these issues—we’ve certainly tried! As always, we’ll be keeping the Top Risks on our homepage all year, so we can keep ourselves honest … and then come back in December and see how we’ve done.

In the meantime, a heartfelt thanks for your support for the 25 years since we started Eurasia Group. It’s a milestone that makes us stop for a moment. Yes, we’re older, if not wiser (though it helps that we were children when we founded this thing). We’re definitely more grateful.

Our very best wishes for our year ahead.

Ian and Cliff

[Download the Top Risks of 2023 report]

Eurasia Group’s Top Risks for 2023