The Top Ten Global Risks of 2023
We have identified the top global risks in 2023 from a U.S. and global perspective.
Probability: Regional crisis: Medium+; global crisis: Medium
6) Deepening Global Cooperation Deficit: Global risks, ranging from climate change and least developed countries (LDC) debt to outer space debris, are growing as increasing major-power competition is making it harder to achieve cooperation on common global problems. After the November G-20 meeting between President Joe Biden and Chinese President Xi Jinping, the two leaders agreed to resume bilateral talks on climate change. However, another clash over Taiwan will probably halt that effort. The multilateral trading system is fraying badly, as WTO Director-General Ngozi Okonjo-Iweala recently warned, even though the costs of protectionism and self-sufficiency efforts by major powers will slow economic growth for all countries. Other institutions are proving ineffective: The G-20 has been slow to defuse growing debt crises among the hardest-hit countries, such as Bangladesh, Pakistan, Sri Lanka, and others, while the World Bank has come under stiff criticism by developing countries for not shifting more financing to the fight against climate change. Absent more action by multilateral institutions to confront today’s challenges, the legitimacy of the post-World-War-II Western liberal order will erode, particularly in the eyes of many Global South countries, which are now seeing their chances for rapid economic development diminish. Another consequence of economic nationalism driving a failure to cooperate in reforming and updating global institution is fragmentation of the international order into regional clusters and inefficient competing norms and standards. A breakdown in the multilateral system will only increase the risks of greater poverty, nationalism, and conflict.
7) A Technopolarized and Fragmented System: Boston Consulting Group estimates that if major powers try to achieve full-scale self-sufficiency in semiconductors as the Biden administration wants to do, up-front investment could reach $1 trillion and chips would cost 35-to-65% more. As the Sino-U.S. tech war heats up, China will not have access to many foreign products and will need to substitute China-made items, undermining the incentive for adherence to global standards. A McKinsey Global Institute study found in an examination of 81 technologies under development that China has so far been using global standards for more than 90% of them. In many of those cases, Beijing has been relying on foreign multinational companies for 20-40% of needed inputs. Because semiconductors are playing an increasing role in all consumer goods, not just electronics or high-end technological equipment, the markets for all manufacturing goods are likely to fragment with more costs (read inflation) and less choice for consumers. Over the longer term, a decoupling of the world economy into two self-contained Western and Chinese blocs would see global GDP decrease by at least 5%—worse than the damage from the financial crisis in 2007-08, according to the WTO. IMF modeling shows “growth prospects for developing economies under that scenario would darken, with some facing double-digit welfare losses.”
8) Worsening Impacts of Climate Change: COP27 ended with more frustration than a sense of achievement. Calls to phase out fossil fuels were blocked by oil-producing states even as limiting the temperature rise to the 1.5C was kept as a goal. Most scientists think the world will soon reach that 1.5-degree Celsius increase and that we are on track for an eventual 2.2-degree Celsius rise unless countries commit to a 43% cut in total greenhouse gas emissions. A hotter climate means more extended droughts and floods, as well as dangerous changes in precipitation patterns that are set to disrupt agricultural yields. The only semi-bright spot at COP27 was agreement on a new “loss-and-damage” fund to help developing countries cover the costs of climate-change impacts. Nevertheless, no decision was made on how much funding the industrialized world would promise to pay. Western countries are already on the hook for providing financial assistance to developing countries with their transition to a lower carbon world and have not fulfilled those promises. Republicans, now in control of the House, have already said they do not want to pay others to fight climate change. The rightward, more nationalistic shift in European politics may also endanger the funding of “loss-and-damage” in future years. Despite the growing frequency of extreme weather events -- which affect all countries, not just poor ones -- climate change is yet to be an overriding priority for the industrialized West.
9) Deepening U.S.-China Tensions: Despite the November Biden-Xi Summit, where both leaders launched an effort to stabilize relations, fundamental differences remain over Taiwan, technology rules and standards, trade, human rights, and Beijing’s aggression based on discredited territorial claims in the South and East China Seas. An initial resumption of trade, climate, and military-to-military dialogues has begun, but volatile nationalism on both sides could disrupt any substantive achievements. Beijing’s response so far to the Biden administration’s export ban on artificial intelligence and supercomputer chips and chip-making equipment has been to file a WTO complaint against it, and plan to invest an additional $143 billion in subsidies to its semiconductor industry. The measures seek to choke off China’s development of top-end tech. While there is a bipartisan antipathy toward China, the incoming GOP-controlled House plans to undertake a still more aggressive China-bashing agenda on Taiwan, trade, and human rights, which risks undermining Biden’s agenda. Although we judge the probability of China’s trying to coerce Taiwan into unification in 2023 or several years beyond to be extremely low, the pending Taiwan Policy Act, which aims to boost military and political ties to Taiwan, would reignite the tit-for-tat shows of resolve and mutual demonization. The effort to stabilize the relationship faces serious speed bumps ahead and may be derailed.
10) A More Dangerous Predicament on the Korean Peninsula: Pyongyang’s relentless testing of a full spectrum of ballistic missiles (86 tests in 2022); cruise missiles; tactical nuke-capable, mobile, medium-range missiles; and ICBMs is part of North Korea’s agenda to create a survivable second-strike arsenal and provide more options for coercion and possible attack. Preparations for a seventh nuclear test have been in place for months, as the U.S. and South Korean governments have been warning. A possible aid-for-restraint understanding between Pyongyang and Beijing may explain why such a test has not occurred. Nevertheless, if a seventh test occurs and Beijing vetoes UN Security Council sanctions aimed at punishing North Korea, the rift in U.S.-China ties will probably deepen. Pyongyang’s arsenal is already far more than needed for mutual deterrence with the U.S. and ROK. President Kim Jung Un may be tempted to take provocative actions based on miscalculation that could foment a crisis and/or North-South clash.
The risks discussed above are, in former Defense Secretary Donald Rumsfeld’s term, “known unknowns”—discernable developments or trends whose possible trajectories can be assessed. In addition, there are a range of “unknown unknowns”—events we cannot anticipate that would have catastrophic consequences. Among them: a supervolcano eruption (Yellowstone, Indonesia, Japan); a giant asteroid of 6 miles wide, a magnitude that killed off dinosaurs 66 million years ago; a solar storm—coronal mass injection—hurling large amounts of magnetically charged particles at Earth that could disable grids for weeks or months; and radioactive gamma ray bursts from deep space. As we have seen from the COVID-19 pandemic, thousands of viruses on our planet could spark future pandemics, some more difficult to counter than COVID.
All are low-probability, very high-impact disasters.
Mathew Burrows and Robert Manning are distinguished fellows in the Stimson Center’s Reimagining U.S. Grand Strategy Program.