The World’s Emerging Political Economy Risks

Posted by on Jul 21, 2014

The World’s Emerging Political Economy Risks

As the world economy is recovering from the prolonged recessionary consequences of the 2008 “great recession” new geopolitical risks have surfaced rapidly, and somewhat unexpectedly. The military developments in Syria-Iraq in the form of the rise of ISIS militia, the instability and social issues growing in Nigeria, the widening reach of Al’Shabab in East Africa, the continued instability in Ukraine, and ongoing tension in the Middle East, together with territorial disputes between China and some other countries of the South East Asia region are the key and high profile sources of risk and instability in the world economy. Alongside these visible risks are the subterranean activities of cyber attacks, and other threats based on digital technology across the world.


This has thrown the world economy into a new era of rising uncertainty and potential instability. Once again the world resources are spent proportionally more on military and defence expenditure rather than on other socio-economic needs. This means limited global resources are being spent more on less productive, counter-productive and/or destructive ends. As this process takes roots, global productivity falls. The upshot of it all is a material decline in the world potential GDP.


At the same time, the rise in military and defence expenditure leads to a worsening of the quality of public services as public resources for such socio-economic programmes typically contract. At the end of the day, the poor suffer because the poor are more reliant on public services. In the face of an already high disparity of wealth and income within the world economy, and within most societies, the new trends are likely to worsen the relative position of the poor within the society. There are clear and predictable socio-political consequences for this trend.


For Africa, in particular, these new global developments have far-reaching consequences. It is critical that Africa’s growth and development remain on sustainable path. Yet the rising level of insurgency and military actions on the continent is bound to divert the resources from socio-economic ends towards military hardware. In this manner, the continent’s resources and surpluses are channeled to the armament manufacturing countries in the east and in the west. In the process, the inaction by the African Union structures is highly problematic. The ineptitude of the AU with regard to safety and security remains the most obvious fault-line of the organization.


A similar fault-line is evident at the UN structures. The existing global safety and security infrastructure is woefully inadequate and inappropriate for today’s world circumstances. Much has changed since 1945, and yet the UN system has remained largely intact. More importantly, the nature of international threats has evolved considerably. The emergence of global terrorist groups spanning different territories and regions of the world has made the old style inter-state hostilities less of a threat. The regional and global multilateral organisations, therefore, need to respond to the changing circumstances. For such responses to be effective, national leaders ought to reconsider some of the age-old notions of “self-interest” and “national interest”.  In such re-definitions, new realities of limits to national actions towards safety and security need to be recognized. At the same time the very notions of ‘safety and security” need serious re-definition.


Optimum and cost-effective measures of safety and security in today’s world call for a considerable re-think of the trade-offs between national and regional/international structures. As the nature of global risks changes, effective responses require creative and new measures of regional and global coordination. Unless the new risks are effectively mitigated, the world economy will remain vulnerable to underperformance. This is not good news for Africa.