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Top Risks and Ethical Decisions 2016

January 5, 2016

DEVIN STEWART: I'm Devin Stewart from Carnegie Council in New York City. I'm sitting here with Ian Bremmer, founder of Eurasia Group. Today we're talking about Top Risks for 2016. We're talking about what those risks are and what they mean in terms of ethics for individuals, companies, organizations, and governments.

Ian, great to see you.

IAN BREMMER: Happy New Year, Devin.

DEVIN STEWART: Thank you very much.

So what do you mean by a top risk? What is that, and how do you determine what a top risk is for 2016?

IAN BREMMER: A risk is something that can lead to negative outcomes that are otherwise unexpected, not where a U.S.-led globalized world with democracy and human rights and free markets would otherwise expect you to get to.

The way we rank these, the way we assess them, is along three dimensions. The first is, what's the likelihood that the risk actually happens? Second is how imminent is it—could it happen tomorrow, or maybe at the end of the year we might see some of that? Then the third, of course, is, the magnitude of the impact that risk would have, not just on the country itself but more broadly in the global scheme of things, how significant is this? You put those three things together, you shake them up, and at the end of the day that's how you kind of rank-order it.

DEVIN STEWART: That's a quantitative assessment?

IAN BREMMER: I would say there are certainly lots of quantitative elements when you think about scale. But ultimately, we've got a firm of almost 150 people, we have 500 folks in 90 countries locally, we spend about three months from start to finish actually putting this together. We've done it for about 16 years now. There's a lot of inputs.

When you're talking about political risk, there is a lot of art in addition to science. That doesn't mean there isn't expertise—there's enormous amounts of expertise—but it's not as if a computer is going to replicate this.

I think one of the ways that we try to give a lot of rigor to the process is we tell all of these experts, "We're going to take this piece and we're going to keep it on our homepage for the entire year, in addition to all of the publicity that it gets around the world and the rest. So that at any point anyone who comes and looks at our site is going to actually go back and see what we actually said, until the next piece comes out on January whatever, the first Monday of the year, in 2017." I think that tends to hone the mind a little bit.

You know, political science has been one of these fields that people for such a long time have basically said, "Well, you know, how do you get anything right if you can't possibly get it wrong? You're hedging all over the place." No, no, you can get this stuff wrong.

DEVIN STEWART: So there's accountability.

IAN BREMMER: There needs to be.

Phil Tetlock, who I love, just wrote this great book called Superforecasting. It came out and talked about the fact that most people who say that they are going to prognosticate tend to get this stuff wrong. So one of the things that actually makes people forecast more effectively is if there is true accountability around the process.

I think that, number one, being in the private sector helps that. But, number two, there are processes you can put in place to make sure that people assess, "Did it happen?" That's what we do.

DEVIN STEWART: So the product of creating the lists is sort of guided by ethics and that you're accountable to it. But is there ethics imbued in it? Is it incorporated into the method of finding out what's risky and what's not risky?

IAN BREMMER: I'll tell you the way that ethics are incorporated. I actually find it spiritually difficult to put this out every year, to write it, in a way that I don't with almost anything else we do, because every fiber of my being as a political scientist wants to be as accurate as humanly possible. I want this piece to be the best possible work I can do. And yet, as a human being, I really don't want these things to happen. It's really hard to be proud of a piece of work you put yourself into that you would like to fail at some level, at a profound level. There's not a single thing that's in this report, in these risks, that I actually want to actually come to pass, and that's been true since we started 16 years ago.

I suppose you kind of get used to it over time. It's like sort of Chinese water torture—you can get yourself used to anything.

But, more broadly than that, I'd like to think that the ethics here is that if we think that these risks truly are likely, that they are going to come, that the issue is not how you stop them but it's how in better understanding the world you can more effectively adapt to it, you can create decisions that will be more sustainable—whether it's economically, whether it's from a security perspective, whether it's diplomatically—I think that's the role that this report can play.

I do feel that the amount of attention that it has gotten over the years, which has become kind of humbling for me—it has kind of created this life of its own. You have to understand when we started this, this was me writing this piece all by myself and sending it out in lower case, and clients read it, and a few friends, and they sort of read back. Now, suddenly, it's like this is the look ahead that everybody sort of thinks about.

There's a lot of responsibility that comes with doing a piece like that. I think that any time you do something that isn't just about making it good but that you know actually has resonance and impact, that ethics has to be a part of that process fundamentally, all the way through. If it's not, you've really missed the bus.

DEVIN STEWART: So 16 years you've been doing these Top Risks. For eight of those 16, we've had the pleasure of having you here at Carnegie Council to look at the ethical implications and the dimensions of those risks. It's a chance to sort of get outside of the news cycle and the hard news and look at the bigger picture.

IAN BREMMER: Yes.

DEVIN STEWART: I would say that of those eight years, looking at it and reading it close to New Year's Day every year, this might have been one of the most alarming of all the years that I've seen. It must have been difficult to go through that process, to come to such a dramatic conclusion.

For example, you talk about the possibility of war in the Middle East, conflagration. You also talk about the lack of the United States as a global fireman.

How much worse do you think the Middle East could actually get? Let me put it this way: What is the big picture and what's your worst-case scenario?

IAN BREMMER: Look, we wrote this before Saudi-Iran happened. Nothing like showing up on Monday morning and saying, "Hey, tick off that risk, okay, check it for the year." Not fun.

The problem is—I started Eurasia Group back in 1998—geopolitics don't play out every year, they don't play out most years. We know that we have recessions. We've had global recessions since World War II, on average, every seven-to-eight years. It's a cycle, and those cycles are reasonably predictable.

The cycles of geopolitics are actually much, much longer. They run out over many decades, sometimes even longer than that. We've been in this wonderful cycle of the United States and the Europeans together creating the global order—first, fighting against the Soviets in the Eastern Bloc, and then over the last 25 years not even having to do that. That's coming to an end. We all know it. We all feel it.

In my view, 2016, facing the world's most powerful-ever terrorist organization, facing the greatest refugee crisis that the world has yet experienced, and with six failed states across the broader Middle East—those things are not coincidental. It absolutely makes me feel—it makes us at Eurasia Group feel—that this is very likely to be the most dangerous year of geopolitical risk that we have experienced since we started this process.

So you are absolutely right to say that there's a lot to be concerned about. It's not because there's no good news—there's actually a lot of good news, but it ain't in the Middle East—the very fact that in the Saudi-versus-Iran conflict the Americans are on the sidelines.

The Saudis decided to execute this cleric and then further escalated after their embassy was attacked by breaking off diplomatic relations and then commercial relations and air flights, and lobbied heavily all over their allies to do as much as possible—some listened; many did not—to also pressure the Iranians, that was done in literally weeks before the United States intends to implement the Iranian nuclear agreement, which is by far the signal achievement of the Obama administration in the Middle East in seven years.

Now, the Saudis aren't stupid. They knew that what they were going to do was going to be immensely problematic for the United States. And they also knew that the United States would absolutely not be coming out loud and proud on their side—America is supposed to be their big ally—which means they didn't care. It also meant that they're under an enormous amount of pressure.

So when you ask me how bad it can get, I think, without talking about Armageddon, but are we seeing a Sarajevo moment for the Middle East? We might be.

I do not know what legitimizes the Saudi regime going forward. I think one of the reasons why they have decided to pick a big fight with Iran is because they don't know what legitimizes the Saudi regime going forward, and ginning up a common enemy in a big way could at least help, because it ain't the royal family and it's not the economy and it's not the geopolitical support they're getting in the region or globally. Everything that could be going wrong for these guys is going wrong.

The reason I'm spending so much time focusing right now on Saudi, aside from the fact that yes it's in the news, is because if you want to fix the Syrian War, you have to have a willingness of the Americans and the Europeans to really get involved, maybe some compromise with the Russians. But the most proximate players on the ground, the Saudis and the Iranians, have to at least be able to talk to each other. We're very far from that. If you want to be able to fight ISIS (Islamic State of Iraq and Syria), same thing; you want to deal with Yemen, same thing.

So all of these things that I mentioned at the beginning—whether it's terrorism or whether it's failed states, sectarian conflict, it's refugees—when I look at 2016, I do not see a real possibility of them getting better. There are obviously very severe consequences of that, both across the region and of course eventually into Europe.

DEVIN STEWART: You talked about the Sarajevo moment in the Middle East as a possibility. Do you think that that moment could happen elsewhere in the world as well?

IAN BREMMER: Not really, no. I mean I think there are lots of places in the world where life is getting more problematic. We have governments in Europe that could easily turn authoritarian.

Poland now, following the Hungarian model, no one would have expected that a couple of years ago. They were more closely aligned with Germany than anyone. And now it looks like they're sort of taking away the independence of their judiciary. I mean they're sort of systematically unpacking what it was that made Europe work, rule of law.

And I look at what's happening in the United States, the polarization and the populism. Very different than the elections we've been used to.

So there are many things that are out there that are troubling. But a Sarajevo moment, something that would actually plunge a region of the world into conflagration, that is now conceivable in the Middle East.

You said you want to take the big picture here. Here, let's take the big picture. You have a bunch of countries that basically were created because they found themselves randomly, fantastically, in a desolate region with massive wealth that was right underneath their feet, and by tapping that wealth they didn't have to do anything. They could build all the trappings of a state and institutions and largesse. And it worked for decades, with billions and billions and billions of dollars.

Now, if you look at this in historic context, there's no reason why that ever should have succeeded. It was this random stroke of luck. But there's certainly no reason to believe that it can persist, and it won't.

It's not just that the United States is not the policeman and doesn't want to be. It's not just that no one else will take the Americans' place. It's that the price of energy has dropped through the floor because of technology. If that doesn't break them this year, it's going to break them. It's not just the U.S. energy revolution. You can't contain that technology. It's going to lead to taking out new energy sources in Eastern Europe and in South America, and China has the biggest known reserves of unconventional energy.

Well, what makes Saudi Arabia work, with almost 30 million people, when the one thing that legitimizes their government is no longer worth anything to you? I don't know how that works.

So when I say that I think there's the possibility of a Sarajevo moment, I'm not sure if we've just hit it or if it's coming. But what I do know is this region is unsustainable, these states are unsustainable, these rulers are unsustainable. When you're giving me tens of millions of young men who are agitated and they have the technology to organize and to make that disenfranchisement known, this is not going to end well. So that's where we are.

DEVIN STEWART: That's a good segue. Let's look at your top five risks. Since number 5 is Saudi Arabia, as you said, let's look at the ethical dimensions of each of those five risks.

Does the United States have an actual positive role to play in this unsustainable region, and should we even be taking sides? It seems that right now is a moment where countries are vying for support of the United States, either moral support or monetary support. Is there a way to do good in the Middle East? What should the United States do?

IAN BREMMER: There are certainly ways to do good for the Middle East and for the people of the Middle East. As you know, 2016 is an election year. I don't know why we don't say 2015 is also an election year, because elections take two years in the United States now. But let's pretend that it's just 2016.

We are talking a great deal about foreign policy in this country. We're talking a great deal about security in this country. We are not talking very much about what we should be doing for all of the people who are displaced.

One way the Americans can indeed do good in the region is we are providing by far the largest amount of humanitarian aid in the region, both to the countries and also to displaced peoples. I think that is very important. We are helping to build infrastructure. We're helping to improve health care.

DEVIN STEWART: Are we doing enough?

IAN BREMMER: You can't look at what's happening in the region to these people and say anyone is doing enough, obviously. But we're doing vastly more than anyone else, and that should make us proud. We shouldn't lose sight of that. The Japanese are number two. The Americans—at least we've got some proximate responsibility. We blew up the Iraqi institutions. We kind of broke it. Colin Powell did say that meant that we had some responsibility to fix it. Crate and Barrel always worked that way. It's not clear why the barrel of your gun doesn't.

So when I think about that, the Japanese didn't break a damn thing, but they're just generally nice people, so they're spending a lot of cash. And then after that it tails off pretty dramatically.

Now, you and I have spoken in the past, and we spoke here last year, about how disgusted I was that we lived in a country that had the Statue of Liberty and yet we were doing nothing to respond to the refugee crisis. Well, in the last 12 months it has gotten much worse, because we now are talking, with the leader of the GOP nomination right now saying, "We're just not going to accept any Muslims; it doesn't matter if it's Constitutional or not." I don't care who's delivering the message. It is a message that has resonance in the United States.

There's no political willingness to make a difference. Twenty-five thousand people Hillary Clinton is talking about. The Germans are taking a million, and the Germans are looking to the United States, their most important ally in the world, and they recognize that they're getting nothing. This is damaging for Chancellor Merkel, the most important leader that Europe has had for a decade, and the Americans are nowhere there, absent from the process. Obviously, the ethical dimension of that is huge.

Now, more broadly, the question of what should we be doing on the ground in the region is a complicated one. The easiest way for me to answer that is to say that 95 percent of the conversation that we as a nation have been having about the rise of ISIS and the war in Syria has been about military solutions. I do not believe that we can bomb or invade or surveil ISIS and Assad into submission. That's not the way you fix this problem.

It's like when you look at the drug problem and the Drug War in Mexico and you say, "Well, gosh, we've got to tighten the border and, gosh, we've got to go after these cartels." Actually, what we need to do is stop the demand for drugs. Unless you do that, the drugs are going to find a way to get to the people because the money is there.

Well, it's not that the money is there right now in the region—in fact, a lot of the money isn't there the way it used to be—but the demand is there, the demand for this radical jihad. We Americans need to spend a lot more time—a lot more time—talking and thinking about what are the ways that you can provide alternatives to the demand for ISIS. We are not doing that.

DEVIN STEWART: Speaking of which, good segue to Number 4, ISIS and friends. Do we as a country, the United States, have a special responsibility to take care of that problem, given that we seemingly had a role in spurring and spawning such a challenge to global security?

IAN BREMMER: I understand why people would believe that we have a special role to play and I understand why people would believe that we should leave this alone. I think that there are reasonable explanations ethically behind both.

You know, you look at young people in America who have seen trillions of dollars wasted fruitlessly on wars in Iraq and Afghanistan. They're taxpayers. They don't see the same opportunities for themselves that they thought that their forebears were having. The ability for the middle class to rise, to take their education and get meaningful, long-term employment is eroding in this country. The Americans aren't spending money on infrastructure. The Americans are leaving a lot of these people behind.

I think that if you look at the track record the Americans have had outside their country in the Middle East over the past decades, there are very good reasons for you to be skeptical and say "that money would be much better spent in the United States." I think that is an ethically defensible argument.

I also think there's an ethically defensible argument to be made that says that the way that we defeated the Soviet Union, which was a morally repugnant regime, which breached every human rights obligation in a social contract between its citizens and the government that could possibly justify investing in Soviet authorities the responsibility to arbiter force—we needed to defeat them, and we did. The way we defeated them was not just by building a military. Ultimately, it was the power of ideas and values, it was the promotion of democracy and rule of law and an independent judiciary—and, yes, a free marketplace—that was aspirational for the captive nations of the Eastern Bloc. We actively beamed that into these countries—we had our Captive Nations parades, we had Voice of America, we had Radio Free Europe. I think that there is a very strong argument to be made that if we hadn't done that, that the history books would be written very differently for the Europeans and for the world.

There is an ethically defensible argument to be made that the United States needs to be actively promoting its values among the governments of the Middle East that we have been providing a lot of support for. We've been selling them a lot of weapons, but we haven't expressed a lot of concern that their systems of governance are in many ways repugnant to us and also to their own sustainable development and to their own citizens.

So you've got two arguments. They are completely at odds with each other. American allies around the world actually really have no idea which of those two we should actually choose. And certainly, if you look at the 2016 presidential debate thus far, you would not receive any clarity in that outcome.

DEVIN STEWART: Certainly, liberal values were a major force in determining the end of the Cold War.

It happens that Number 3 on your top risks is China's footprint worldwide. As China's influence grows, will it be setting new standards for the way countries are run, the way businesses are run, the way people see their freedoms? Will it challenge the liberal order and, if so, how; and does it even matter?

IAN BREMMER: Of course it matters. It matters because China is big. It matters because they're spending a lot of money. It also matters because they're volatile and unstable, as we've seen with the machinations of their own marketplace. The impact of a country that is that opaque and has that much state intervention can whiplash international markets as well. So there's that.

But the heart of the question is: As China gets bigger, as its footprint gets larger, as it spends more and has more influence, what does that do to a liberal internationalist order? Here there is no question that what the West believes is correct is not going to be supported in priorities and values by the way the Chinese are going to spend money. They want governments to align with them, their commercial needs, buy from Chinese state-owned enterprises. When the Americans, of course, put money into the Marshall Plan, we said, "We want to support liberal internationalism." That is what the Chinese are doing. So it will undermine those things.

Now, let's be clear. The Chinese actually have justifiable reasons to want to do that. I mean they are at a very different stage of development. If they do not promote their state system, profits are going to leave China and they are going to go into other countries, because the power is held by the Western multinationals. So the Chinese use their legal system and the absence of rule of law and the absence of an independent judiciary and the alignment of the Chinese companies with the Chinese government, in many cases the direct ownership—they use that and their market pull to be able to help themselves develop over the long term.

Who is right? I mean, if I were advising the Chinese government, I certainly would be telling them to do much of what they are presently doing. And even for the Americans, if China were to suddenly become a liberal democracy, the instability that would come as the consequence of what would clearly be an illiberal democracy would be anathema to most people that I know who are thinking about how the United States needs to actually coordinate and organize itself globally.

So this is a place where values are going to be complicated and they are going to be fought heavily between the two countries.

DEVIN STEWART: Moral contention is at the center of what we look at here at Carnegie Council. If I could be kind of rude and lump your Risk Number 2 and Risk Number 1 together, I think it actually is kind of appropriate, if you will, Ian, because both of them, in my opinion, are about values, and it's about classical liberal values.

Number 2 is we're looking at the risk of a closed Europe. As you put it, that means what's in question is a Europe whole and free that is facing an identity crisis. I take that to mean an identity crisis over its core liberal values.

Risk Number 1 is you're looking at a hollow alliance, where in the past European-American relations have been glued together by explicit values of freedom and equality and human rights—it's even in the founding documents of Europe and the United States.

So how do you see values standing up to these enormous challenges at the core of the force of liberalism?

IAN BREMMER: This is precisely why we wrote the report this way. In a year where clearly China is whipsawing everybody and the Middle East is in flames, how could we start with these two risks that have nothing to do with those things?

It's precisely because the values of the world order that we have grown accustomed to living in for three-quarters of a century are now under a threat that is unprecedented over the course of that order, the weakness of European values and of the fabric that cohered what Europe actually means. Much more concerning than the idea of a recession or a financial crisis, the fabric of the trans-Atlantic relationship, which was the most important alliance—and still has been—for 75 years in the entire world, it is eroding in front of our eyes. It's not that we don't like each other any more; it's that that is just not our priority. We're not paying attention to it. It's an apple sitting on a tree that you can just watch dry and wither and doesn't have the importance, the luster, the significance, that it has had for all of these years.

Where does that leave values? Where does that leave leadership? Where does that leave the world order? That is what underpins the most dangerous geopolitical environment that we have seen in decades.

And so I think this was a year that you couldn't just jump in with China or ISIS or Saudi Arabia or Putin or any of those things. You had to actually take a step back, because it's precisely the erosion of these values, of these ethics, that we've taken for granted. We've taken for granted a liberal international order that we didn't realize allowed us to live the way we have around the world, and we assumed that that's just the way it is. But those are actually very significant political assumptions that we have been allowed to live within over the course of our lifetimes, and we will no longer be able to. It is the end of a trans-Atlantic global order, and it is going to be experienced in 2016 in ways that it has never been since its crucible, its formation.

DEVIN STEWART: Ian, that has been an incredible, thoughtful, insightful conversation. Thank you very much. And Happy New Year.

IAN BREMMER: And to you.

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