What will 2015 bring forth?

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By Enrique Lescure

2014 in hindsight, what now?

2014 was a year dominated by social entropy.

The Syrian civil war spread into Iraq, making the Islamic State a new unrecognised government in the heart of the Middle East, spreading atrocities from Aleppo in the west to Baghdad in the east, and contributing even more to the tragedy that the destruction of Syria represents.

In eastern Ukraine, a similar type of conflict has emerged, this time with indirect and direct involvement from both the West and the Russian Federation. This war is centered around nationalism and competing geo-political interests, and those suffering the most are the civilians.

In Africa, the Central African Republic and South Sudan were both fraught with sudden outbursts of civil wars, in the case of the former temporarily turning the CAR into a failed state, leading to ethnic clashes between groups professing to Islam and Christianity. Boko Haram, the despicable terror group of northern Nigeria, have intensified their campaign against the Nigerian state.

The year was however – also – characterised by a continued green revolution in energy generation, a continued automatisation process and a growth in 3D printing, the nano-revolution and engineering pursuits, which can prove interesting in shaping the outlook of the world until the 2020’s and beyond.

So what interesting things can happen in 2015?

The Greek Elections; or “the collapse of the European Union intensifies”

grexit_477701130Greece is holding their elections on Sunday the 25th of January 2015, ahead of schedule, caused by the failure of the Greek parliament to elect a (ceremonial) president.

Meanwhile, Switzerland has disconnected it’s currency from the Euro.

Are those two events connected?

Yes, there is a very serious reason why Switzerland has moved towards a floating Franc. In 2010, following the world financial crisis, Greece was forced to borrow money to pay debt to the banks to which they owed money, de-facto entering a state bankcruptcy.

State bankcruptcies are nothing new for Greece. During the course of the 19th and 20th centuries, Greece has suffered debt defaults five times. This would have been the sixth. The reason why I write would is that the Greeks have not been allowed to default on their debt, because that would damage the credibility of the entire Eurozone, and result in a chain reaction where speculators would move against the Euro.

In 2010, Germany’s chancellor Angela Merkel de-facto became the EU president, as she moved towards sanitizing the debts of the southern European states (amongst which Greece was the worst), in return for massive austerity packages from these countries, which unsurprisingly led to increasing unemployment and dissatisfaction. In the last Greek election, in 2012, the left-leaning party SYRIZA (an amalgamation of many parties to the left of the Greek social democratic party PASOK) became the second largest party of the Greek Parliament.

This time, on the 25th, SYRIZA can very well win the elections and form a government. The party has threatened that if Greece is not allowed to move away from the austerity package and have the debt renegotiated, they will move away from the Eurozone.

How would cash-strapped Greece leaving the Eurozone and declaring default hurt Europe?

Firstly, those affected will be the banks that Greece owes money to, and the governments will probably make up for their losses by even more austerity, since banks are considered “too big to fail”. This will most likely add fuel to the sentiments that the established parties and governments in Europe are more identifying themselves with financial institutions and the wealthy elite, than with ordinary middle and working class people – which could create more room for dissatisfaction, dissent and even violent reaction…

Secondly, the Eurozone is not primarily an economic project, but a part of a political process. The European Union is formed according to a functionalist principle, where the founding fathers of Europe realised that there was little popular support amongst the masses for European federalism.

David Mitrany

David Mitrany

Functionalism as a model, envisioned and described by amongst other people the Romanian-born social scientist David Mitrany, establishes that European integration should take the easiest possible route, much like how water is moving around rocks to flow down to the sea.

The European Union began as the Coal & Steel Community of 1946 – 1957, upgraded itself to the European Economic Community of 1957 – 1993, and became the European Union by the Maastricht Treaty of 1993. Each of these changes brought a deeper economic integration. The European Monetary Union is a complement to the European Union, which is aiming at harmonising monetary policies. The next logical step would be integrated financial and taxation policies, but this has failed to materialise, mostly because the political capital of the European Union was exhausted after the introduction of the EURO and the expansion from 15 to 27 member states in 2004-2007.

The European electorate was not that keen on the increased political influence of the European Union, illustrated by the failed referendums in France, the Netherlands and Eire during the 00’s. When the crisis of 2008 hit, there was no identification with the European Union amongst the masses, and when the economy failed, the European leaders quickly moved to access the interests of their own economies. So the European integration project is rapidly losing momentum, and will continue to stay weak so long a new stable equilibrium is not reached.

It is very possible that Tsipras (SYRIZA’s leader) is going to be far more moderate than the worst doomsday sayers predict, but his electorate wants results, and if the current malaise trods on in Greece, people will become increasingly radicalised and maybe either move to the far left or to the far right Golden Dawn.

Alexis TSIPRAS

In the case of “the worst scenario”, a Greek expulsion/resignation from the Eurozone, Greece’s economy will probably default, leading to an intensification of the crisis. However, such a deep dip will probably on the medium term be good for the Greek economy, as it will rationalise and prices will lower to the level that the tourism industry starts to generate growth for the overall economy.

Maybe the Greeks would prefer a very painful fall and impact to rock bottom before decades of stagnation.

For the Eurozone, it will mean a definite break from the idea that the Euro as a currency regime is stable, and can lead to a new crisis. Therefore, I expect Merkel to actually try to listen to Mr Tsipras’ demands and try to reach some kind of compromise with a SYRIZA-led government. The question is what the German and Greek peoples would think of such a renegotiation?

Given that, the Tory-led government in the United Kingdom has woved to hold a referendum on continued membership in the EU if they are not reaching a deal regarding free mobility with the European Union. The reasons for this referendum are domestic and populist, and it is not unlikely – if the situation permits – that Cameron would draw back the referendum a few years before it (if he wins the elections in May). However, it signals that the consercatives are now trying to gain (back) the support of the plurality (perhaps majority) of Britons that see the European Union as a problem

The Russian Crisis, the Donbass War and Saudi Arabia

While there are still open hostilities in the East of Ukraine, the Russian actions since the autumn indicates that Russia isnovorussia_map_by_grdgryphonranger-d7ks806 aiming for a d’etente with the West, with a situation where Russia has “lost” the Ukraine as a Pro-Russian state, but the West won’t see Ukraine as a member of the EU or NATO. Meanwhile, the West has sought to punish Russia for their violations of the international order by the means of sanctions. Many European leaders, including the French president and German industrial leaders, are increasingly skeptical to the sanctions as they serve to hurt European growth forecasts as well, while the Americans are more hardline.

The Russian economy on the other hand is quickly draining its capital reserves and is seeing cuts in the civilian sector. The reason behind this is not only tied to the western sanctions, but also to the Saudi oil production figures. Saudi Arabia is involved in an own proxy war versus Iran and Russia inside Syria, and given the current volatile situation, they are ready to use their oil weapon to lowering the price of oil and thereby hurting Russia and Iran (and also the growing shale oil industry in the United States).

It will take eighteen months to deplete the Russian currency reserves, and by then Russia will be reliant on debt, with an 20141018_gdc875awful credit rating at their disposal. This can lead to political destabilisation inside of Russia and create the foundations for regime change there. However, the regime change may not be the desired from the western perspective. If Putin for example would withdraw from Crimea and Donbass and leave the separatists to their fate, he could very well face an uprising from the nationalist right.

More likely, I expect that Russia and Iran could see this as a hostile action by Saudi Arabia, and could use whatever tools they have within their disposal (short of outright military actions) to try to hurt Saudi Arabia in return.

The fall of the Islamic State?

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It won’t end the crisis in Iraq and Syria, but it will mark the introduction of a number of regional powers into the fray. It is likely that Turkey, Iran and perhaps even Saudi Arabia and Jordan can to some degree intervene militarily with ground forces into the theatre. Such an intervention will quickly overwhelm the IS and push them back into armed insurrection and guerilla and terrorist activities, much like how the Vietnamese pushed the Khmer Rogue back into the jungles.

The intervention of Turkey or another major Sunni power would almost certainly force an Iranian counterreaction, perhaps in the form of more regular Iranian troops and revolutionary guards being sent into Syria (and perhaps Iraq). In the worst case scenario, this could mean a regular war between Iran and one or two Sunni Powers, but more likely new armed groups will emerge under the wings of Turkish, Iranian and Saudi base territories and engage in continued fighting in the region. Nevertheless, Syria and large parts of Iraq will continue to turn into failed states for 2015, with an immeasureable humanitarian cost.

Social Entropy

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The truth in evolution is that the more complex an organism is, the more vulnerable it becomes to disturbances in the eco-systems it is dependent on. The human civilization today, with its largely integrated world economy, is an increasingly complex web of structures, arrangements, institutions and interlinked human communities. What is happening in the Middle East and in Europe are not only the results of long-term social and socio-economic trends, but also parts of the very same trends.

These parts of the world are experiencing socio-economic and social realignments which has been working for a long time, and exploded in the Debt Crisis of 2010 and the 2011 Arab Spring. During 2015, there is a high risk that the escalation of these trends will continue on and drive through the realignment. Since many key players are trying to use this alignment to come up on top, they will serve to intensify the crises in matters that they believe could benefit them.

At least in the Middle East, we are seeing a massive loss of social complexity, throughout a large part of the Fertile Crescent, and it is possible that Syria can turn into a new Somalia, situated into the heartlands of the Middle East. This will ultimately work against Saudi Arabia, which now also faces the prospects of a collapsing Yemen on its southern border.

Ultimately, this realignment is part of a wider realignment, where the issue is whether the Unipolar “New World Order” (the American-led world) can come to terms with the BRICS about how power should be distributed internationally, and whether or not the BRICS can survive the oil crisis and China’s dampening growth forecasts.

Enrique

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