Understanding and Forecasting Geopolitical Risk and Benefits

Abstract

Over the past few decades, global human development has improved across multiple dimensions. Poverty has fallen, incomes have grown, and improvements in education, health, infrastructure, and governance have been sustained. However, the drivers of this success (technology and globalization in particular) have created new sets of problems that threaten these post-Cold War achievements. We forecast the impacts of five potential geopolitical disruptions—increased global trade protectionism, the collapse of the European Union, heightened political-military tensions between China and the United States, an energy shortage stemming from Middle East conflict, and global water scarcity across five measures of development: global GDP, extreme poverty, middle- and upper-class size, internal political instability, and networks of dependence.

This project utilizes the International Futures (IFs) tool, a freely available integrated assessment model. Download or use the tool from pardee.du.edu. The analysis is rooted in the IFs Base Case, a dynamic forecast for 186 countries across the following interconnected issue areas: agriculture, demographics, economy, education, energy, environment, governance, government finance, health, infrastructure, international politics, and technology. The Base Case sets reasonable expectations for how the world might unfold without major geopolitical disruptions.

Seven of the scenarios explored in this report are:

- Protectionist Victory: Globally, in this scenario, GDP would be $18 trillion lower, 25 million more people would live in extreme poverty, 54 million fewer people would fall into the middle or upper class, and 63 more countries would experience heightened risk of internal political instability, compared to the Base Case. - EU Collapse: Global trade is restructured as formerly EU states intensify trade with non-European countries. In this scenario, global GDP would be $4 trillion lower, 4 million fewer people would fall into the middle or upper class and two additional countries would experience heightened risk of instability, compared to the Base Case. - Arid Earth: In this scenario, which assumes greater water scarcity worldwide, countries with more robust water resources and capacity to increase food exports acquire prominence in the trade network. Overall, global GDP would be $1.8 trillion lower, and 15 more countries would experience increased risk of instability, compared to the Base Case. In countries that do not become net exporters of agricultural goods, the number of people in extreme poverty would increase by 6.8 million and 11.5 million fewer people would fall into the middle or upper class, compared to the Base Case. - Severe Weather: This scenario assumes that governments would divert resources from other productive sectors to make their agricultural sectors more resilient. Consequently, compared to the Base Case, global GDP would be $6.7 trillion lower, and 21 more countries would experience higher risk of instability. In 2032, when global yield losses are forecast to peak, 21 million more people would live in extreme poverty and 38 million fewer people would fall into the middle or upper class, compared to the Base Case. - New Cold War: In this scenario, which assumes heightened political-military tensions between China and the United States, global GDP would be $34.5 trillion lower, 22.6 million more people would live in extreme poverty, 88 million fewer people would fall into the middle or upper class and 46 more countries experience greater risk of instability, compared to the Base Case. - Constrained Energy: In this scenario, which assumes a tightening of global energy resources due to Middle East conflict, global GDP would be $54.4 trillion lower, 23 million more people would live in extreme poverty, 93 million people fewer people would fall into the middle or upper class and 26 more countries would experience heightened risk of instability, compared to the Base Case. - Accelerated Renewables: In this scenario, which simulates a global push for renewables in lieu of constraints on other energy resources, global GDP would be $46.4 trillion lower, 16 million more people would live in extreme poverty, 76 million fewer people would fall into the middle or upper class, and 24 more countries would experience greater risk of instability, compared to the Base Case.

The greatest disruption to global GDP occurs in the two energy crisis scenarios. The greatest increase in extreme poverty takes place in the protectionist scenario, which also shows the highest number of countries experiencing heightened risk of domestic conflict. The greatest reduction in the number of people in the middle or upper class is seen across energy scenarios and in the scenario that models conflict between China and the United States.