As investors assess the threat of increasingly hostile relations between the U.S. and Iran, Eurasia Group says the conflict isn’t the biggest threat facing global economic and political stability this year. Instead, the top risk in 2020 is likely to be America’s politics.
“It’s the first time in history of our firm that a domestic political risk is No. 1,” said Ian Bremmer, president of the political risk consultancy, in a conference call to discuss the geopolitical advisory firm‘s annual risk-assessment forecast. The firm started in 1998, he noted.
At the heart of the issue is the November presidential election, with Bremmer predicting that many Americans will view the results as illegitimate no matter the outcome. The Senate is likely to acquit President Donald Trump in his forthcoming impeachment trial, heightening political tensions in an already polarized nation, he added. In a close election this fall, the losing side will claim the results were “rigged,” leading to instability and legal challenges, Bremmer said.
“Meaningful [France-style] social discontent becomes more likely in that environment, as does domestic, politically inspired violence,” Eurasia Group wrote in an analysis issued on Monday.
In addition, legislation could stall because of what the firm called a “non-functioning Congress,” adding to mounting problems if the economy slows down, according to the Eurasia report.
The second biggest risk for 2020 is one that has been in the headlines throughout the past year, according to Eurasia: The decision by China to reduce its technological dependence on the U.S. following Mr. Trump’s trade war with the country.
“Caught off-guard by U.S. actions, President Xi Jinping has called for a new ‘Long March’ to break China’s technological dependence on the U.S.,” the report noted. “At the same time, China will expand efforts to reshape international technology, trade and financial architecture to better promote its interests in an increasingly bifurcated world.”
That represents a shift away from decades of globalization, Bremmer said. He added that “very soon” the world’s largest economy may no longer be America’s capitalist system, but China’s hybrid of state control and capitalism.
Iran: Not at the top of the list
The threat of deteriorating U.S.-Iran relations ranks at No. 8, Eurasia Group said. That’s partly because Bremmer said his group doesn’t believe a full-scale military response will evolve from the U.S. killing of General Qassem Soleimani, the head of Iran’s elite Quds military force and one of the most powerful figures in the Islamic Republic.
“Iran is a committed adversary of the United States but also has a clear understanding of U.S. military power … as well as (now) a better sense of Trump’s red lines and deterrence capacity,” the report noted.
Below is Eurasia Group’s list of the top 10 risks for 2020.
- U.S. domestic politics: As noted above, a polarized nation is heading into an election that could be contested by both sides, leading to legislative and economic challenges.
- “The Great Decoupling”: China and the U.S. are cutting their technological ties, leading to disruptions in the globalization of trade and business.
- U.S.-China tensions: As conflict between the U.S. and China festers, economic and security tensions will intensify.
- The waning influence of multinational companies: Regulatory and trade restrictions will lessen big companies’ ability to generate wealth, growth and jobs.
- Pressure on India’s Narendra Modi: Sectarian and religious conflicts are growing in India, which is facing a precarious fiscal situation.
- The European Union pulls away: The EU is growing more independent, which creates regulatory and economic risks for other countries.
- The politics versus economics of climate change: Political solutions to climate change aren’t working, which increases the risks of economic disruptions and political instability.
- Tensions with Iran and the Middle East: “U.S. policy toward the major Shia-led nations in the Middle East is failing,” increasing the risks of regional instability and higher gas prices, Eurasia Group said.
- Latin America’s instability: Citizens in Latin American countries are angry about issues ranging from corruption to low-quality public services. That and other pressures are increasing risks across the region.
- Turkey: “President Recep Tayyip Erdogan has entered a period of steep political decline … This year, his weakness will lead him to lash out. The response will further damage Turkey’s already ailing economy,” the group predicted.
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‘It’s like being for puppies’
ANC factions stir ‘dangerous politics’ in South Africa’s towns – Financial Times
Thapelo Mohapi looks at the mangled and scorched scraps of what were once shacks and reflects quietly that, at 38, twice now have the flames of political violence in South Africa left him without a home.
The first time, as a boy in the 1980s, Mohapi was given shelter by Indian neighbours in the Durban settlement of Phoenix when the brutal last days of apartheid engulfed the nearby black township where he lived. It was part of solidarity that would in time give rise to a multiracial democracy. “The Indian community never said at any stage that you are not part of us,” he says.
The second time was the night of July 14. As riots and looting sparked by a power struggle in the ruling African National Congress swept heartland regions, destroyed businesses and left more than 300 dead, a fire burnt through the homes of Mohapi and hundreds of others in an informal settlement in Durban’s Briardene suburb. “The fire brigade couldn’t reach it in time because of the unrest,” Mohapi says. For now, he is living in a friend’s car and in donated clothes.
What President Cyril Ramaphosa labelled an “attempted insurrection” in Gauteng and KwaZulu-Natal, two provinces that make up half of the gross domestic product of Africa’s most industrial nation and nearly half of its population, was only put down with the deployment of tens of thousands of troops.
The violence had begun as reprisals for the jailing of former president Jacob Zuma for contempt of court — a victory for the rule of law and the country’s democratic principles under Ramaphosa. Zuma had defied a constitutional court order to attend an inquiry examining his role in corruption so widespread that it hollowed out institutions under his presidency, according to the testimony of dozens of witnesses. He was forced to resign in 2018.
After winning the ANC leadership in 2017 by a narrow margin, Ramaphosa stabilised the party’s decades-long grip on power in a 2019 election and has slowly isolated his predecessor’s closest allies. But the unrest signals that he is confronting a faction who in order to avoid jail are prepared to sacrifice a weakened state — and manipulate social divisions.
Phoenix, Mohapi’s old refuge, was also swept up in the fallout. As police vanished amid looting, tragedy unfolded in a microcosm of South Africa’s complex race relations. As street barricades were thrown up against looters, armed vigilantes emerged and “people that had lived side-by-side in relative peace turned on each other”, Ramaphosa said last week. At least 20 people were killed in the clashes in a township that is majority Indian but where many black South Africans live and work.
The looting was a threat without police on the ground but “in the racial profiling of our African brothers and sisters, some took the law into their own hands — and they were gangsters,” Marvin Govender, general secretary of Phoenix’s residents association, says.
The state was absent, failing to stop both the vigilantes and the looting, Govender says. Chris Biyela, the convener of a post-unrest Phoenix peace committee, agrees that “if the government responded forcefully in this manner, many lives would have been saved”.
In the chaos of the ANC’s factional battle, even the fire in Briardene appears suspect. Mohapi is a spokesman for Abahlali baseMjondolo, a movement that represents informal dwellers. With 100,000 members, it is a fierce critic of the ANC and has often received threats. The day before the fire, Abahlali released a statement that blamed “people who are pushing the agenda of the Zuma faction in the chaos”.
The group also fell victim to attempts to stir up a race war when a statement it issued calling for calm in Durban, KwaZulu-Natal’s largest city, was doctored with anti-Muslim vitriol, and then spread on WhatsApp.
With mounds of garbage choking the air and broken sanitation, the state has failed Briardene’s informal settlement dwellers. Mohapi has every reason to be cynical about the country’s post-1994 gains. But after what he sees as an assault from within the ANC “to divide the poorest from the poor” and destroy the basis of South Africa’s freedom and its unfinished racial reconciliation, he is more determined than ever to defend them.
“Nelson Mandela would be turning in his grave. This is not what he fought for,” he says. “We can’t be taken back to where we were. We can’t sacrifice that because one man is in prison.”
A warning from history
South Africa received a prophetic warning as far back as 1997 that one day the difficult transition to democracy might be betrayed from within.
Such an attack, the document said, would involve “setting up intelligence and armed networks parallel to and within the state to sabotage change through direct political activity or aggravation of such social problems as crime”, and erosion of governance through “deliberate acts of corruption driven not merely by greed”.
The prophet was the ANC itself — and while the warning was a reference to those still clinging on to apartheid, it accurately describes how decay of the state under the party has created forces that led to insurrection.
Systematic looting of state institutions during the Zuma presidency is well documented. Less visible has been the culture of impunity that was allowed to grow at the bottom, as police and other authorities were compromised by their political masters.
“The whole state has been criminalised,” Mary de Haas, an expert on KwaZulu-Natal’s political violence, says. “We had corruption, but we have been criminalised in the last 10 years . . . there are all sorts of mafia and criminal networks that would jump on this bandwagon.”
The impunity has spread to threaten investments needed to restart the stagnant economy, particularly in Zuma’s home province. In June, Rio Tinto was forced to suspend mineral sands mining in KwaZulu-Natal after security threats and the murder of a manager. From construction to security, businesses in the region say they are used to gangs with alleged ANC links demanding a cut. Ramaphosa admitted recently that extortion rackets have already begun targeting reconstruction following the unrest.
“There is very little crime intelligence coming from this province,” de Haas says. Intelligence officials “admit that the whole thing is factionalised. Then you get to national intelligence, and that’s even worse. Zuma captured the whole of intelligence, basically.”
An official 2018 report warned of “politicisation and factionalisation of the civilian intelligence community based on the factions in the ANC”, including “serious criminality” in the embezzlement of cash. The state capture inquiry heard this year that a rogue spy unit with a direct line to Zuma was used to target his political opponents.
Such testimony appears to have infuriated the former president. “Every country has its own secrets and things that are not publicly spoken about,” Zuma told supporters at Nkandla, his homestead in rural KwaZulu-Natal, before his arrest for defying the inquiry. His supporters fired off weapons and threatened police, before Zuma was taken into custody by his own state protection in the dead of night.
Senior ANC politicians were still arguing that Zuma should be freed even as the violence spread.
“The politicians and their cronies are attempting to brew and encourage a very, very dangerous politics that is building fear and anger with the aim of dividing people along lines of nationality of origin, ethnicity and race,” the Abahlali group says.
Food as a political weapon
The most chilling part of what Ramaphosa called “deliberate, well-planned and co-ordinated” targeting of infrastructure in the unrest were attacks that seemed tailored to exploit South Africa’s inequality, especially insecurities over food. Truck burnings shut down a major food supply route, the motorway between Durban and Johannesburg, Gauteng’s provincial capital. Supermarkets were attacked and then their distribution centres hit.
“It really dawned on me when I realised that not only were the warehouses being emptied out [by looters], they were also attacking the packaging industry . . . one of the big aims was to bring access to food to its knees,” says Mervyn Abrahams, co-ordinator of Pietermaritzburg Economic Justice and Dignity, an NGO based near Durban. “You are creating conflict between those who are poor and those who are middle class just to access the food that is available.”
Activists in KwaZulu-Natal say soldiers and police reinforcements came just in time to stop the total collapse of the supply chain and prevent an even worse second wave of riots driven by those who might not have eaten in days.
It reflected another facet of South Africa’s absent state, worsened by the pandemic — a hunger crisis that has silently swept the poorest, as social protection has fallen short and the economy has sputtered.
GDP per capita has flatlined since Zuma’s presidency and unemployment has soared, with 43 per cent of the working age population without a job or discouraged from looking for one at the start of this year. Even many of those with jobs are in a precarious position. Around half of the average minimum wage worker’s monthly pay of about 3,600 rand ($247) is eaten up by transport and electricity costs even before food bills, estimates Pietermaritzburg Economic Justice and Dignity. A safety net of welfare grants, covering about 18m people, has also grown threadbare and no longer reflects the cost of living.
In July, a basic nutritious diet for a South African child for the month was estimated to cost about R724, or about $50. The monthly child support grant is R460. Stunting rates in children — an indication of malnutrition — have remained stubbornly high since 1994, at about a quarter or more. The effects are felt decades later, in poor school results, a life on the margins of the job market and long-term health problems. “Each year we reap what was sown 30 or 25 years ago,” Abrahams says.
Saddled with high debts that are approaching 90 per cent of GDP, Ramaphosa’s government bet on riding out a series of pandemic lockdowns with minimal fiscal relief. This only prolonged the agony. In July, the country’s treasury reinstated a temporary monthly grant of R350 for the jobless that it had cut just months earlier. It will last until March.
After the unrest’s wake-up call, civil society is pushing for more permanent transfers. A basic income grant for South Africa’s 11m unemployed would cost R78bn a year if it paid out just enough per month to keep them above the food poverty line of R585, according to the Institute for Economic Justice, a Johannesburg-based think-tank. But the middle class is likely to balk at the tax rises needed to pay for this, or additional borrowing for larger grants.
“We pay for all of this in other ways in the economy,” Abrahams says. Millions have moved to shacks in the midst of major cities to find work. This proximity is part of why the unrest flared so quickly. “Now ‘the poor’ are right on our doorstep. Higher walls and more security are really not going to protect us.”
Had a safety net been in place, even with political instigation of the riots, “would they have been able to get so many people in the townships to support them, just because they wanted to get food?” asks Abrahams. “It would not have happened at the scale it has now.”
‘Crying for bread’
Organisers in communities across South Africa worry that poverty is about to get much worse in the aftermath of the unrest. “Those who did not loot, do not have food now,” Mohapi says. “People are crying for bread.”
Acts of solidarity have helped residents in Briardene. A Muslim charity has delivered bread and milk. Tents provided by Doctors Without Borders and Abahlali house dozens who were displaced by the shack fire. But private initiatives alone cannot replace the state.
“I’m afraid that the solidarity that had been built, particularly at the bottom of our society, will be placed under huge pressure in the context of what has happened,” says Imraan Buccus, an analyst with the Auwal Socio-Economic Research Institute. “We need to be on the lookout. We are at a fragile point in our democratic post-apartheid phase. Our state has not done what it needed to do.”
July also marked the 30th anniversary of Mandela’s post-prison election as leader of a very different ANC, as apartheid was crumbling and a new democracy was being born. Joining Mandela as party secretary-general and deputy to that role were two politicians of the next generation: Ramaphosa and Zuma. One all but destroyed Mandela’s governing legacy; the other is running out of time to restore it.
Ramaphosa’s first term as party leader is now all but over. The next leadership vote is due at the end of 2022. Most agree that he will probably just about secure a second term. If so, KwaZulu-Natal, the region with the most ANC members, is not a province easily defied. Zuma is in prison at least for the next few months and his acolytes who inflamed tensions may soon join him. But his politics of impunity and patronage live on.
“There is a reluctance on the part of the ANC. They are scared. They don’t want to rock the boat in this province,” de Haas says. “There are a hell of a lot of people who have a lot to lose if the ANC cleans up its act.”
Ordinary South Africans lost even more in the unrest. From below, their anger is growing. “The ANC is rotten and it should be removed. It does not represent the ideals of Mandela,” Mohapi says. Otherwise, he fears, “we are heading for disaster. We will have riots after riots.”
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