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STRATFOR.COM Global Intelligence Update January 3, 2000

The Decade to Come: A Summary

Summary:

Just before New Year's Day, Stratfor concluded the Decade to Come, our series of forecasts for the years 2000 to 2010. Since all of our forecasts contain extended analysis and history, we thought it might be useful to summarize our global and regional forecasts, with links back to the full analysis.

Analysis:

The basic global political trend will continue to be coalition formation designed to contain and control the single, global power -- the United States. [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/default.asp ] This is part of the process of creating equilibrium in the internationalsystem. Since the threat of joining the anti-American coalition will be used to try to extract concessions from the United States, we expect the international situation to be complex, fluid and increasingly dangerous over the course of the decade.

The basic global economic trend will be an intensification of de- synchronization between regions. Each region and many countries will operate on their own, enclosed business cycle. This will tear apart multinational economic entities, like the International Monetary Fund (IMF) and will lead to the creation of regional entities. This economic trend will intensify the political process described above.

The United States [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/us.asp ] will continue its economic expansion until mid-decade or beyond. However, it would seem reasonable to expect a short, sharp recession at some point during the expansion. Like previous downturns since the expansion began in 1982, this will not affect the basic trend.

We see the U.S. expansion running into serious trouble sometime after 2005 and before 2010. This will be driven, like the expansion, by demographics. As the baby boomer generation matures and starts liquidating financial and real estate holdings, severe downward pressures are likely in all markets.

U.S. politics will be defined increasingly by a fault line dividing protectionism and free trade. As the economy weakens toward the end of the decade, protectionist sentiment will increasingly dominate, defining domestic and foreign policy.

We do not see a fundamental redefinition of Europe's [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/europedecade.asp ] basic political institutions in the next decade. However, a major issue will be the return of Russian power to the Polish frontier and the willingness of the rest of Europe and the United States to share the burden of defense with Germany. Europe will be torn between an unwillingness to shoulder massive defense burdens and a fear of Germany increasing its military power to defend itself. European institutions should be able to contain the tension until the end of the decade, since the Russian threat will not materialize immediately.

The European Monetary Union will be tested as the de-synchronized European economies go their own way and as new, wholly unsynchronized economies are included. Given the divergences in Europe's economic cycles, it is difficult to imagine how a single, European-wide monetary policy can be sustained. We expect withdrawals from the European Monetary Union as the decade progresses. Both politically and economically, European institutions will come under heavy stress and will fray.

Asia [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/aisadecade.asp ] as a whole continues to be in a major downward trend. Upturns should be viewed as bounces within this basic trend. It will take a generation to solve the underlying problems affecting major Asian economies. Some economies, like Singapore's and South Korea's, will fare better than others. But the two most important economies, China's and Japan's, have not confronted their basic weaknesses and cannot recover until they do.

China faces major internal challenges. The rising expectations engendered by the growth of the past generation have hit a brick wall. Merely holding on to what has been gained is a dubious economic challenge for China. The expectations will turn into disappointment and the disappointment cannot help but create political tensions. Beijing has already transformed the political atmosphere in China to control unrest. However, it is our view that the situation in China is, over the course of the decade, too explosive to control. Regional and class tensions will tear at the fabric of Chinese society and polity. We do not expect the center to hold.

Japan is facing a difficult future. Internally, it is suffering from its own crisis of unrealized expectations. Externally, it is the inevitable leader of an Asia that increasingly sees its interests diverging from the rest of the world and the United States. Japan is extremely reluctant to accept Asian leadership and Asia is extremely reluctant to accept Japanese leadership. Nevertheless, as a generation matures whose youthful economic expectations have been unmet -- while another arises that has only known economic stagnation and has little contact with the history of Japanese international passivity and pacifism -- we expect to see a major political transformation in Japan. Japan already spends more money on defense than any country in the world save the United States and Russia and will take its place on the global scene in the coming decade, to the discomfort of the United States.

Economic liberalism in Russia [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/ciseedecade.asp ] has failed catastrophically. The burning issue in Russia today is how to reclaim the stolen billions that are in the hands of the oligarchs and to halt further theft. Whether the current system will deal with this problem will determine if political liberalism survives economic liberalism's demise. We don't think so. Prime Minister Vladimir Putin's mission is to achieve this. If he fails, either he or his successor will put in place a brutal regime designed to reclaim Russia from the oligarchs and Westernizers. An intimate part of that campaign will be reclaiming Moscow's empire to the full extent of the former Soviet Union. That process will take a generation to complete and will consume Russian energy in a complex series of campaigns along its borders. Crises in the Baltics, Ukraine, Caucasus and Central Asia can all be expected during this decade.

We expect the Middle East [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/meafdecade.asp ] to be, for a rare interlude, a peaceful backwater, or at least as peaceful as it ever is. The shift of great power conflict to the north and northwest of Turkey removes some tension from the region. There will, however, be tension within Arab countries. A generation of leaders that have dominated the region since the 1970s will be passing from the scene in this next decade. With the aging of the Nasserite, secular revolution a new social force is rising in the Arab world, both republican and Islamic. This struggle will take different courses in different countries and will take years to sort out. However, an important factor is the lack of great power interest in the region, compared to a generation ago. That means that internal forces will shape the region, far more than anytime since the fall of the Ottoman Empire.

Latin America, [http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/latindecade.asp ] like other parts of the world, has had an intense flirtation with the free market. Some parts of Latin America and some social sectors are recoiling. Opposition is not only coming from lower classes who see themselves as the victims of market forces. Elites, who are uncomfortable competing with foreign companies, are also having serious doubts about privatization and market openings. We are seeing the reemergence of a Latin American Left as well as of right wing nationalism. At the same time, rising commodity prices, maturation of investments and demographics all favor Latin American economic growth. The issue will be how far the forces reacting against globalization and the free market will go.

Events in Colombia are seriously impacting neighboring countries. Most important is Venezuela, where Hugo Chavez is leading a populist restructuring of the country's economic system. As oil prices rise, Venezuela's economic position improves. However, Colombian drug lords, in a desperate battle with Mexican drug lords for control of the U.S. market, urgently need a secure route to the United States that does not pass through Mexico or through areas controlled by U.S. military forces. They are therefore increasingly focused on Venezuela for transshipment. Increased pressure on Venezuela, a country of major strategic interest to the United States, increases the chances of an expansion of U.S. intervention beyond what is already in Colombia. The northern tier of Latin America, including Panama, is potentially explosive. Also potentially explosive is Mexico, where the effects of massive amounts of drug money on the political system could destabilize the country, again drawing inevitable U.S. involvement.

We do not foresee a substantial improvement in Sub-Saharan Africa. [ http://www.stratfor.com/SERVICES/GIU/FORECAST/decadetocome/africadecade.asp ] A seamless web of conflict ranging from the Horn of Africa to the Caprivi Strip and beyond, is the dominant motif. The only indigenous bulwarks against this conflict are Nigeria and South Africa. Nigeria's military is absorbed in maintaining order in that country and has few resources for going beyond. South Africa has the resources but is coping with the inevitable difficulties of a massive regime change and of dealing with politics after Mandela. Thus, the two African nations potentially in a position to impose order are not practically able to do so. We see little hope for other internal stabilization. Outsiders, like the United States or the European colonial powers, are profoundly disinterested in expending the energy needed to stabilize Africa.

The only forces interested are multi-national corporations involved in exploiting Africa's mineral wealth. We expect to see an intensification of an already existing pattern in which private armies, financed by multi-nationals, or governments heavily influenced or controlled by them, provide stability for the multi- nationals. This will intensify instability in areas not of interest to the multi-nationals, while creating islands of stability where the multi-nationals have interests. In short, there is a pattern of re-colonialization emerging, in which indigenous political interests are complicit. This will intensify in the coming decade.

(c) 1999, Stratfor, Inc. http://www.stratfor.com/

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