If 2022 marked the end of the post-Cold-War world order, then 2023 was proof of just how challenging the transition to a new global paradigm will be. In 2024, at least seven crucial political, economic, social, technological and environmental questions will start to receive answers.
The answers to these questions will shape what the world will look like over the next decade and beyond. None can be answered with certainty right now, but much should become clearer as 2024 goes on. While the increased clarity will certainly be helpful, businesses need to take action now to be faster than competitors in identifying and capturing the opportunities and mitigating the profound risks.
1. Will geopolitical instability and military conflicts deepen and spread?
2023 wasn’t kind to the existing world order. While tensions between the U.S. and China may have eased somewhat, the underlying structural issues are essentially unresolvable, while the recent Taiwan election will continue to affect bilateral relations. At the same time, the highly anticipated Ukrainian counteroffensive was unsuccessful, ending in a bloody war of attrition that favors an eventual Russian victory, with potentially dire consequences for European security, energy and grain supplies. In addition, Russia’s need for weapons and munitions pulled in Iran and North Korea in exchange for Russian capital, influence and know-how, such as advanced missile technology.
Making matters worse, a new conflict erupted in the Middle East, where the latest Israel-Hamas war is drawing attention and resources away from Ukraine. Hostilities are already spreading throughout the region through Iran’s proxies and disrupting global supply lines through the Red Sea and Suez Canal. At least as important, the war is increasing the international isolation of the U.S., eroding its soft power, especially in the Global South, and accelerating geopolitical fragmentation and realignment.
Much will depend on what happens in 2024. Will the simmering tensions between the U.S. and China heat up again? Will Western support to Ukraine prove sufficient? Will the latest Middle East conflict spread throughout the region? Will conflicts erupt elsewhere (e.g., North Korea)? This year may be decisive in part due to the unusual number of elections around the world, which will both influence and be influenced by these conflicts. The EU parliamentary elections in June and U.S. Presidential election in November will be especially consequential for determining in which direction the post-post-Cold War world will turn.
2. Will the post-WWII trading system break down?
The institutions underlying the expansion of free trade – WTO, IMF, and World Bank – have been under attack for years and become increasingly ineffectual. The turn away from free trade by all sides within the U.S. – the leading driver of trade liberalization since World War II – and the increasing tension between the U.S. and China has created the risk of a complete return to mercantilism. Some of the ideas floated by Donald Trump – such as 60% tariffs on Chinese imports – make the U.S. election a clear signal on the future of trade and global supply chains. The EU parliamentary elections will also be crucial, since the populist parties that are in ascendance throughout the EU are opposed to the free movement of goods, services and – especially – people.
3. Will the Chinese economy get stuck indefinitely?
China hasn’t been able to play its usual role as the world’s economic growth engine for several years now. While partially due to transitory issues, such as the pandemic, Beijing’s real challenge lies in overcoming the longer-term structural issues associated with the so-called “middle income trap” – i.e., when the productivity gains from shifting people off the land into low-tech manufacturing are exhausted.
These problems aren’t new and that is precisely the concern. Time is running out and Beijing’s ability to find solutions is far from assured due to:
- The inherent challenges of transitioning from low- to high-value economic activities
- China’s demographic-, debt-, and corruption-related challenges
- The decentralized nature of economic decision-making
- Concerted efforts by the U.S. to limit China’s access to advanced semiconductor and related technologies
- Beijing’s preference for prioritizing national security over economic interests.
Will Beijing be able to wean itself off simply spending its way out of mounting local government debt and dislocations in the property market, especially in the wake of the court-ordered liquidation of the Evergrande property group? Will it find more creative solutions to address the consumer spending constraints associated with its inadequate social safety net? Will it finally implement meaningful SOE reforms? This year will start to provide real answers to a long-simmering series of critical questions.
4. Will the forces of populism and nationalism strengthen?
Narendra Modi in India, Javier Milei in Argentina, Lula da Silva in Brazil, Giorgia Meloni in Italy, Geert Wilders in The Netherlands and the far-right AFD party in Germany: Populist parties on the left and right have achieved striking electoral and policy victories over the last few years. The destabilizing impact on the existing world order has already been profound, most notably British voters’ stunning vote to leave the EU in 2016. In response, many domestic and international companies have had to rethink their overall strategies, investments, and operational footprints. Will this trend continue?
2024 elections will again provide clarity. The latest data suggests populist parties will do well in the upcoming EU parliamentary elections: Marine Le Pen’s National Rally is well ahead in the polls and the German right wing is also expected to gain significant ground. If so, EU political dynamics would likely change significantly.
Meanwhile, the U.S. Presidential election is shaping up into an epic Biden-Trump rematch with truly consequential results for global trade, climate change, immigration, NATO, China, Ukraine and the Middle East as well as the U.S. institutional environment and the course of human events in general.
5. Will governments “bound” AI and Big Tech?
2023 was also the year of AI, with potential for revolutionary advances in healthcare, education, sustainability and productivity. But there are also a wide range of economic, ethical and even existential challenges that, for example, led to an aborted boardroom coup at industry leader OpenAI. Tech giants are racing to establish their footholds and almost every company is striving to identify productivity advantages from large-language models and other AI tools. Traditional business models are under siege, with content creators trying to capture revenue, all without much regulatory oversight.
2024 will tell us whether governments will continue to allow unfettered development of AI and other advanced technologies or decide to “bound” the industry through various regulatory restrictions. The history of digital revolutions suggests the latter and there are signs that governments around the world, including in the U.S., EU, and China, are aware that new regulations are urgently needed. Nevertheless, no consensus has emerged on how to do so effectively. Meanwhile, progress is so fast that soon it may no longer matter.
6. Will the transition away from fossil fuels be derailed?
A year ago, it appeared the transition from internal combustion engines to electric vehicles (EVs) was a fait accompli. Automakers rapidly scaled up production in anticipation of customer demand that never fully materialized. The transition from early adopters to the more risk-averse and price-sensitive early majority cohort proved to be far more difficult than expected.
In addition, there remains powerful political resistance to EVs as well as to new solar, wind and nuclear energy in general. In Europe, the success of Chinese-made EVs is provoking an EU investigation and potential trade restrictions. In the U.S., EVs have also become enmeshed in politics. The buildout of the charging infrastructure is slowed by restrictions, while subsidies for batteries and vehicles are influenced by industrial policy and threatened by domestic politics.
Will EVs fully replace the internal combustion engine as the dominant fuel-powertrain combination of the future, or will gasoline, diesel, hydrogen, and hybrid electric systems carve out their own niche? If so, when and how? And will the answer be different across products, markets, and geographies? EV sales trends in 2024, as well as regulatory decisions and election results, will provide important indicators of the outlook over the next decade.
7. Is it time to transition from climate change mitigation to mitigation + adaptation?
Global temperatures blew past the worrisome milestone of 1.5°C above pre-industrial levels in 2023, despite the Paris Agreement to set carbon neutrality goals and embrace net zero targets, and despite the ESG efforts of many companies around the world. In fact, the summer of 2023 was the hottest on record, with the impact ranging from sweltering temperatures in the U.S. to wildfires across Canada and extreme flooding in Europe and Asia.
Have we already passed the proverbial tipping point and is it time to change our mindset from just mitigation to mitigation and adaptation? This year will be an important test of our collective political will and sense of urgency to limit the rise in temperatures to 2.0°C or accept the need for accelerating efforts to adapt to – rather than merely mitigate – climate change.
Uncertainty and volatility may not be what companies and their investors desire, but they invariably offer new profit opportunities to those companies that are able to identify emerging trends, capture growth opportunities and mitigate risks earlier than their competitors. Strategic foresight has surely never been more important.
John Jullens and Marc Robinson are managing partners at Arbalète LLC, which helps with business strategy and risk management in a constantly changing landscape. This article orginally appeared in Robinson and Jullens' C-Suite newsletter.
