As the global elite gather for the World Economic Forum this week the topic of discussion is less about creating wealth for the less fortunate or helping the developing world -- it's about saving the core. Perhaps not surprisingly, economist Nouriel Roubini says don't hold your breath, calling 2012 a year of "no progress." But Eurasia Group's Ian Bremmer is also worried about the retreat of democracy and inequality becoming a global class war. The two experts also reveal their surprising predictions for the big geopolitical and economic winners of 2012 -- and which former European finance minister shouted at Roubini to "Go back to Africa!" Excerpts below (and, for a inside look at the goings on in Davos, keep an eye on Bremmer's daily blog):
Foreign Policy: So, you're both off to Davos. And the World Economic Forum's foremost global risk this year is "dystopia." Is it all that dark?
Ian Bremmer: The folks at Davos intelligently recognize this problem, and they're calling it the great transformation -- it's a search for new models. I think it's appropriate because we're not at the new normal yet. The new models have not shown up. Nouriel and I both believe that we're presently at a G-zero, where there isn't global leadership, and that is articulating itself economically [with] the eurozone. If the Europeans don't get themselves out of this, the U.S. obviously isn't going to, the Chinese obviously aren't going to, no one else is. It's also proving itself in terms of political transition in places like Syria, across the Middle East, Pakistan, and Afghanistan. If the United States isn't going to be able to ensure democratic transition, well, who else is? They're going to have to do it themselves.
Last year's Davos fell in the middle of the financial crisis, and then Egypt hit right in the middle -- and no one knew what to do with that. Looking at it a year on, it's not like we've moved back to Frank Fukuyama and the "End of History." This has not been a year where democracy is bursting out all over; it's vastly more complex than that. Part of the reason is the existence of major economic disjunctures, but part of it is because the global backdrop is not one where Western, democratic values or the free market is actually leading the charge. In the old days, you had the International Monetary Fund and the World Bank providing money, but they also influenced economic shock therapy and political reform. Well, the Chinese have no interest in doing that. The Chinese Development Bank is putting more money on the table than the World Bank and the IMF combined.
Nouriel Roubini: Last year was one in which there was a whole series of tail risks that led to uncertainty, to volatility. They optimists said that these were just temporary shocks: rising commodity prices, the Arab Spring, the Japanese earthquake, the eurozone problems, the worries about the U.S. fiscal environment. But if you look at all these things, they're not temporary, they're not reversible, and these shocks are going to persist -- and the sources of uncertainty as well. You know, for commodities, demand is rising because of growth, industrialization, and urbanization in emerging markets. But supply is not growing as much -- for many reasons. And therefore energy and food insecurity is here to stay with us.
The problems of the Middle East have spread: Tunisia, Egypt, Libya, Syria, Yemen, now tension in Iraq, possible conflicts within U.S., Israel and Iran, conflicts between Turkey and Israel, Turkey and Cyprus, between Israel and Palestinians -- that's going to keep all prices higher. Even these natural events that are unpredictable, like earthquakes, tsunami in Japan, many of these damaging events are man-made. There is now scientific evidence that these extreme weather events, whether it's a drought in Russia, Argentina, or Texas -- or floods in Pakistan, China, or Thailand -- have to do actually with global climate change and these things can disrupt economic activity, as we've seen in the case of the Thai floods.
The eurozone problem has spread from Greece to Ireland to Portugal, to Italy and Spain, to their banks, to their sovereign. Now it is spreading to the core of the eurozone, with French banks and Belgium's banks under pressure, with the downgrade of France and Austria. It is not going away. And the U.S. saga about fiscal deficit and the gridlock between Democrats and Republicans is there to stay. This year is going to be a year of no progress. But next year, whether Obama is elected or Republicans go for Romney, neither party is going to have 60 votes in the Senate -- so one party can veto tax increases, the other can veto entitlement reform. We live in a world in of risk: market risk, financial risk, fiscal risk, sovereign risk, regulatory risk, taxation risk, and -- as Ian says -- geopolitical and geostrategic risk. And it's here to stay.
IB: When you see all of the social movements that have so grasped the attention of the press over the last year -- whether you're talking about the Arab Spring, the protests in Russia, the 180,000 demonstrations in China, or Occupy Wall Street, that's the narrative that people are talking about. It's the one that the Western press is really articulating, and the implication is that it's all about economic dislocations. It's all about rich vs. poor, the gap and divide. It's all about class. And, you know, people have made that mistake historically, and I think we're starting to make that mistake again today.
There's no question economic dislocation is a very, very big issue. But the state is very important. In fact, the state is going to be a more important actor coming out the financial crisis than it was before. I think as a consequence of that we're seeing that it's not just about intra-governmental strife, it's also about inter-governmental strife. There's a lot of nationalism that's emerging. And there's also a lot of sectarianism that's emerging. And much of those trends are distinctly anti-democratic, so even in the places where you do get transitions that come as a consequence of this economic volatility, combined with social networking, global communications, and all the rest, it's not at all clear that the direction you move is the one that the West has been hopefully predicting over the past decade.
FP: But the issue of economic inequality is certainly a factor. Is there a plan to deal with that?
IB: And I think the answer depends enormously on where you look. In the United States, not to in any way downplay the Occupy Wall Street [OWS] movement, but it's not going to lead to significant change in policy. And, frankly, the American system is immensely resilient; it's the most resilient governmental system in the world, and it's not under a lot of pressure to change. And I think despite the fact that it's going to get a lot of attention, and in some ways, it's getting more attention because the Republicans are fighting over the issue internally. Ultimately, I suspect that OWS is going to be subsumed by the Democratic Party, in the same way that, historically, the Green movement has -- and, in some similar ways, to the way the Tea Party has been subsumed by the Republicans.