Licypriya Kangujam, a young environmental activist from India, protests against the use of fossil fuels during an event at Cop28 on December 11 in Dubai. Photo: AP
Opinion
Andrew Sheng
Andrew Sheng
Why 2023 will be remembered as a tipping-point year
From the collapse of banks in March and the Federal Reserve’s interest rate increases, to the impact of geopolitics on trade and the rising number of armed conflicts, this year has seen an acceleration in mega trends
This year will be remembered as a tipping point when almost all the mega trends of finance, technology, trade, geopolitics, war and climate change showed signs of increase in speed, scale and scope. You can call this a state of permacrises, a series of cascading shocks that seem to be building up to a bigger catastrophe.
In finance, we saw the collapse of Silicon Valley Bank in the US on March 10, followed by that of Signature Bank. The Federal Reserve and Federal Deposit Insurance Corporation acted fast to guarantee all deposits to stop “Twitter-fuelled bank runs”.
In Switzerland, Credit Suisse was taken over by UBS on March 19, after the bank lost nearly US$75 billion worth of deposits in three months. Swiss financial credibility was hurt when holders of Credit Suisse Additional Tier-1 bonds became outraged that they would suffer writedowns ahead of equity holders.
Although prompt action by the Fed and Swiss financial authorities averted global contagion and restored calm to financial markets, the Fed raised interest rates four times this year to 5.25-5.5 per cent to tackle inflation. This month, gold prices touched a record high of US$2,100 per ounce, signalling anticipated inflation abatement, but escalated geopolitical tensions.
In technology, 2023 marked the seismic arrival of generative artificial intelligence, following the public launch of ChatGPT in November 2022. Commercialised AI is considered the next big thing, sparking a US tech stock rally, which helped avert a year of portfolio losses in financial markets hurt by interest rate hikes.
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Will ChatGPT replace reporters? We asked AI to write for the Post
Will ChatGPT replace reporters? We asked AI to write for the Post
In trade, the latest United Nations Conference on Trade and Development (UNCTAD) Global Trade Update estimated that global trade would shrink by 4.5 per cent year on year to less than US$31 trillion in 2023, with trade in goods declining by nearly US$2 trillion and trade in services expanding by US$500 billion. The outlook for 2024 is pessimistic because trade issues are now geopolitical, rather than purely market-driven. Global supply chains are either decoupling or de-risking to avoid sanctions.
Geopolitics dominated headlines in 2023, as diplomacy played second fiddle to the militarisation or weaponisation of everything. The biggest risk faced by businesses today is related to companies or financial institutions being caught in geopolitical tit-for-tats. Where national security is concerned, businesses are expected to bear the cost of supply chain restructuring with no questions asked, or face possible shutdowns.
The Israel-Gaza war, which began in October, has resulted in a scale of civilian slaughter more horrific than that of the Ukraine war, which began in February 2022. The latest Armed Conflict Survey by the International Institute for Strategic Studies, covering the period from May 1 2022 to June 30, 2023, found that fatalities and conflict events increased by 14 per cent and 28 per cent respectively.
The Stockholm International Peace and Research Institute reported that 56 countries were involved in armed conflict in 2022, five more than in 2021. Three – Ukraine, Myanmar and Nigeria – involved 10,000 or more estimated deaths, with 16 cases involving 1,000–9,999 deaths. Expect more conflicts when natural disasters hurt food, water and energy supplies.
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Premature babies evacuated from al-Shifa after Israeli troops seize Gaza’s biggest hospital
Premature babies evacuated from al-Shifa after Israeli troops seize Gaza’s biggest hospital
As nearly 100,000 delegates left the United Arab Emirates at the end of Cop28 this month, the UN painted an upbeat picture, saying the conference marked the “beginning of the end” of the fossil-fuel era. However, at the current rate of carbon emissions, it is extremely unlikely that the world will be able to limit the increase in average global temperature to below 1.5 degrees Celsius above pre-industrial levels.
If most governments fail to meet their current commitments to limiting carbon emissions, the planet will see temperature rises of over 2 degrees Celsius above pre-industrial levels, meaning more natural disasters, rising sea levels and increased migration and conflict. Every three weeks, the US has experienced at least one natural disaster costing more than US$1 billion in damages.
Putting all these mega trends together suggests that a mega-system disaster may be on the cards. Historically, these seismic-scale disturbances are settled through a massive recession, like the Great Depression of the 1930s, or wars which wipe out debt and make everyone poorer.
So far, the world has neglected to address these looming issues with either denial or postponement – printing more money and incurring more debt. Painkillers do not fix structural imbalances.
As my favourite poet TS Eliot wrote, the world ends “not with a bang, but a whimper”. The world is in permacrises, with no one fully in charge. Democratic governance is in flux when no one can agree on the problems, let alone the solutions.
Next year will see some decisive but messy elections, especially in the US. This does not augur well for anyone, because 2023 marked the turning point when the US lost the respect of the Global South over its catastrophic handling of Ukraine and Gaza. Allowing other people to fight and die for one’s own benefit shows great cowardice.
There is no shortage of technology or money to deal with the existential global threats of climate change and social imbalances. If man-made or natural calamities are looming, do we mitigate them or adapt? As inhabitants of a single planet, we can run but we can’t hide. So each of us must decide to do what we can, rather than relying on politicians to fix themselves, let alone our problems.
There is a wise saying about Christmas charity: give with warm hands. Do that now, or we will be giving with scalded hands, or none at all.
Best wishes for 2024.
Andrew Sheng is a former central banker who writes on global issues from an Asian perspective
