Brexit is now, unbelievably, a reality. But is this just the beginning of the collapse of ‘the European project’ that was highlighted as a major global risk by the National Intelligence Council in their Global Trends 2030: Alternative Worlds document?
They nicknamed this possible global future scenario ‘Stalled Engines’:
Stalled Engines—a scenario in which the US and Europe turn inward and globalization stalls—as one of the bookends, illustrating the most plausible worst case. Arguably, darker scenarios are imaginable, including a complete breakdown and reversal of globalization due to a potential large-scale conflict on the order of World War I or World War II, but such an outcome does not seem probable.
We believe the risks of interstate conflict will rise, but we do not expect bilateral conflict to ignite a full-scale conflagration. Moreover, unlike in the interwar period, the complete unraveling of economic interdependence or globalization would be more difficult—and therefore less likely—in this more advanced technological age with ubiquitous connections. Stalled Engines is nevertheless a bleak future.
Our modeling suggests that under this scenario total global income would be $27 trillion less than under Fusion, our most optimistic scenario. This amount is more than the combined economies of the US and euro zone today. In a Stalled Engines world, the US and Europe are no longer capable nor interested in sustaining global leadership. The US political system fails to address its fiscal challenges and consequently economic policy and performance drift.
The European project unravels.
Greece’s Britain’s exit from the euro zone European Union triggers the rapid, unmanaged exit of the rest of the periphery. More nationalist, even nativist, parties rise to claim positions of influence in coalition governments.
By the 2020s, it looks like only a limited free trade zone will remain. Economic growth continues in major emerging markets and accounts for approximately three quarters of global growth. Nonetheless, fundamental economic and political reforms remain elusive in China and India.
Corruption, social unrest, weak financial systems, and chronically poor infrastructures slow their growth rates. China’s growth falls, for example, from 8 percent at the start of the period to around 3 percent by 2030. As pressures grow everywhere for disengagement and protectionism, the global governance system is unable to cope with a widespread pandemic that triggers panic. Rich countries wall themselves off from many developing and poor countries in Asia, Africa, and the Middle East. By disrupting international travel and trade, the severe pandemic helps to stall out, but does not kill globalization.
What does Brexit mean for emerging markets?
Brexit could well be the signal that the global economy has entered the proposed Stalled Engines scenario. Although this is certainly a dystopian reality for developed economies; younger, emerging regions need strong leadership to step forward and rapidly fast track collaborative trade strategies with each other that mitigate the knock-on effects of this crisis. With less reliance on the ‘fearful & aged’ West – a preferred future for the likes of Asia, Africa and South America is certainly plausible through better coordinated co-operation.