Will Germany save Europe? (photo: Getty Images)
It might seem perverse to argue that 2013 will bring fewer of the problems that have gripped so many countries, and people, for the past four years. The reasons why it might do the opposite seem more obvious.
The eurozone has failed to resolve a crisis that is plunging Greece “into the economic Stone Age,” in the words of one central banker, who added, “no country has been through this since America’s Great Depression.” More than half the young people in Greece and Spain are unemployed, a paralysis of lives and loss of skills that changes a country in a generation.
The protests in Tahrir Square against Mohamed Morsi, the president who is the product of Egypt’s “democratic” revolution less than two years ago, and who has now seized powers to block all constitutional challenge, is a reproof to those who readily cheered the Arab Spring. “Nobody knew. Nobody knows now. We are all at sea,” said Matthew Parris recently in The Times; he had warned at the time that the fall of despots did not mean the rise of democracy. Prophesies of Bashar al-Assad’s fall in Syria have been premature, while those of the threat to Jordan’s King Abdullah II may prove prescient.
And 2013 may yet be the year when Iran gets within easy reach of a nuclear weapon. Pakistan is increasingly hostile to the US, public anger stirred up by American drone strikes which its politicians have condemned in public while carefully tolerating in private, and may become after its imminent elections a problem that only China, the original supplier of its nuclear expertise, can contain.
Meanwhile, in Britain, George Osborne’s Autumn Statement showed that even if the economy picks up, many planned cuts have yet to have their impact (see George Magnus and Adam Posen). “Don’t forget 2015,” when much of the austerity drive will take place, has been the message from Paul Johnson, director of the independent Institute for Fiscal Studies.
Yet many trends are transforming the way countries are governed, and improving the lives of millions of people. Some even derive from the financial onslaught of 2008. After four years, we are finally making use of a good crisis.
Here are ten problems that may look better in a year’s time.
1. Democracy will fare better
These have been tough years for democracy: economics points to a path that politicians with hopes of re-election fear to tread. Prospect has spent much time recently on the afflictions of the US, Europe and Japan—“diseases of the rich,” as the American mathematician and lyricist Tom Lehrer put it.
So, while economics might argue for allowing more migration of workers, or shifting support from the elderly to the young, these are politically toxic. “It’s a nightmarish problem,” says David Miliband, former foreign secretary.
It’s not the first time that our societies have had high debt and deficits; cue those grainy pictures of Wall Street in the 1930s that have been ubiquitous for the past few years. What is new is that populations are more elderly. The numbers claiming pensions and healthcare are rising, while fewer are available to pay tax. Governments know they can’t afford to meet the bargain with voters that has stood since the second world war—on welfare, health, education. You might call it the bonfire of the promises.
Some ask whether democracy is up to the task of tough reforms at all. They point, say, to Mario Monti, an unelected technocrat endorsed by Brussels to sort out Italy, even if one so self-contained and neatly-suited that he evokes the tidy conference halls of Europe’s capital, not the gold braid and epaulets of Europe’s past dictators. And it’s true there is a kind of gridlock across the democratic world.
In Japan, which has had six prime ministers in six years, governments have failed to find the answer to two “lost decades” of stagnation. In the US, the hostility between Republicans and Democrats in President Barack Obama’s first term has brought the amount of legislation enacted to the lowest level since the second world war; the current Senate has passed only 2.8 per cent of the bills it has introduced, a 90 per cent drop from its high in the mid 1950s. Even in India, where the population is much younger, bureaucracy and corruption are undermining support for government—and choking the growth that has cut the number living in poverty by nearly 140m since 1990.
It feels a long, long time since the Iraq invasion of 2003, when Donald Rumsfeld, then US secretary of defence, declared that “freedom is untidy,” a moment when America regarded the rhetoric of democracy as its most powerful weapon. Europe and America could make a stronger case now to President Morsi that his grab for constitutional powers was unacceptable if they had become less diffident about the virtues of their own political arrangements. It matters for liberal values that they become more vocal again.
The reason to be more hopeful is that voters know the world has changed, and are prepared to let their leaders pursue an uncomfortable course if there seems to be a good case. Look at Angela Merkel, Germany’s chancellor (see Katinka Barysch) who is riding high in the polls despite bailing out Greece, a policy so loathed that Bild newspaper (circulation, 3m) trumpeted “Is Greece going to break our banks?” (It even sent a reporter to dish out old drachma notes in Athens to give itself the headline “Bild gives broke Greeks their drachmas back.”) Resentment at paying for unification still runs deep—and there was no serious public challenge to that ecstatic, historic gesture to embrace fellow Germans; it would have been no surprise if Germans, particularly younger ones, rebelled at paying for Greece. But they haven’t.
And Jean-Claude Juncker, prime minister of Luxembourg, and author of the over-quoted phrase that “we know what to do, we just don’t know how to get re-elected after we’ve done it,” is living disproof of his own maxim; first elected in 1995, he is the world’s longest serving elected leader, even if he is stepping down from the attempt to broker a deal in the eurozone.
In Britain, the same is true, up to a point. The phrase “we’re all in this together,” is welded to George Osborne’s reputation, an exhortation always bound to provoke derision had he tried. And the Conservatives remain about 10 points behind Labour in the polls.
But protests about austerity have been astonishingly subdued given the scale of the changes, while the coalition has survived, against many predictions. The disappointment has been that Labour has not admitted more directly how close its own projections of spending are to those of the government, nor produced its own account of how to cut the deficit. It has lost the chance, then, to make the debate a more explicit one about how the pain should be distributed.
But others have not, and have put inequality at the centre of debate, a healthy step. Joseph Stiglitz, the Nobel prize winning economist, and others have argued for recognising the damaging impact on the economy, not least by shutting the children of poorer families out of access to education (see Andrew Adonis on Chrystia Freeland’s new book about plutocrats). You don’t have to accept Stiglitz’s view that governments should have spent much more, much earlier, to stave off recession, to agree with him about the costs to the economy and society (even if, like his fellow advocate, Paul Krugman, he is more sure-footed in his case on the US than on the rest of the world).
On that note, too, the debate about how to stimulate growth has become more thoughtful and more likely to generate answers, after years when politicians expended sound and fury in accusing each other of lacking a “growth plan.” It is extraordinary that Britain’s coalition government does not have an answer to the question of where it wants a new airport, housing, or energy supplies, three of the projects on which investment could productively be spent. But the answers—of how to spend it, in the laconic title of the Financial Times magazine—are getting sharper in their focus.
2. America’s growth will recover
On that note, a second argument is the strength of America’s recovery, and the country’s capacity for change. Some years ago I wrote a book called In Defence of America (a short book, perhaps I should say), contesting the predictions of US decline after the fiasco of the Iraq war. It’s getting easier to make that case again.
I’d concede—who wouldn’t?—the huge problems facing the States. As Bill Emmott wrote in Prospect last month (“The American century is not over,” £), the US’s $11.5 trillion public debt hangs over all political debate. No politician—apart from Paul Ryan, Mitt Romney’s running mate in the unsuccessful Republican bid for the White House in November—has dared propose cuts to Medicare, the healthcare scheme for the elderly, which, even more than state pensions, threatens to bankrupt the country. President Barack Obama’s legislation did at least break the taboo that healthcare was too hot to handle, but while it took the popular step of extending insurance to those not covered, it avoided the pain of cutting benefits. Meanwhile, the centre ground has disappeared from Capitol Hill politics, much more than it has from the electorate; the shining white dome sits over a cauldron of partisan poison.
But the rise of the Hispanic vote is shattering that gridlock—while immigration has given the US one of the youngest workforces in the industrialised world, a big advantage. Nor is it fanciful to project that the energy revolution—stemming from the new access to vast reserves of shale gas (see Stanley Johnson) will significantly boost the US’s chances of a strong recovery. It’s an extraordinary fact that US greenhouse gas emissions are sharply down—8 per cent lower in the first quarter of 2012 than the year before, and the lowest for that period since 1992.
The US’s energy revolution may delay the shift to more efficient technology, and weaken its interest in pushing for a deal on climate change. President Obama has brought in new efficiency standards, but the waste in private and commercial use is still immense. Still, it’s impossible to overstate the boost to national optimism; fears that the US would be forever dependent on the oil of Saudi Arabia and other combustible places have fallen away like the gantry at a rocket launch, to be replaced with the heady vision that the US—or perhaps, the US and Canada together—might be able to supply all of their own energy within a decade.
On his re-election, Obama delivered the ominous pronouncement that “nation-building begins at home,” bad news for those who think that the US’s involvement—generally—helps resolve conflicts abroad. When America is prosperous, it is more likely to be prepared to do so.
3. Poland, Turkey, Mexico
An odd trio of flags make up the third reason for optimism; the common factor is that although they are not giants, their new strength is helping their regions.
I’m not going to argue for cheerfulness about the eurozone; the bailouts so far have barely postponed worse trouble. The International Monetary Fund reckons that even on its best scenario, there will be less lending to the private sector, choking growth; on its worst, there will be sharp recession (and it has cut its forecast of global growth from 3.9 per cent to 3.6 per cent partly because of the eurozone.)
But within Europe, Poland has suddenly become a country that writes the script for the union, after years when its leaders—right and left of centre—affected a wistful sulkiness at Brussels’s failure (as they saw it) to appreciate the country’s natural stature. Now, Poland is the unquestioned star of the 10 that joined the EU in 2004. It has wrong-footed Britain, which was relying on Poland to share its antipathy to the euro; officials in London were stunned when their Warsaw counterparts moved adroitly to take advantage of the increased British distance. Radoslaw Sikorski, foreign minister, published a joint report with 10 others in September calling for more integration, and is now signing the new memorandum to authorise the next round of bailout money to Greece.
This is good for Europe; it solidifies the union’s embrace of the east, an important force for stability. At the same time, signs that EU leaders will encourage Turkey to keep looking westwards are healthy, not least given the central role that Turkey now plays in the Middle East. In October, Merkel, during talks with prime minister Recep Tayyip Erdogan, stated that Turkey’s EU membership “negotiations will continue, irrespective of the questions we have to clarify” (and she no doubt also has in mind that trade between Germany and Turkey reached a record €31.4bn in 2011, a powerful glue).
Seven thousand miles away, the improvements in Mexico are rewriting relations both with the US and partners to the south. Confidence in Mexico has been blighted by the astounding eruption of violence in the drugs trade, which has killed over 50,000 since 2006, and spilled far over the US border to Phoenix, Arizona. Now, things are a bit better.
Mexico’s new president, Enrique Peña Nieto, has come to power promising tax and industrial reform; the drugs trade has not vanished, nor the violence, but has abated a little, and the country is showing growth. In Washington in November, Peña, then president-elect, told President Obama that “We should reconsider greater integration of North America to achieve a region that is more competitive and capable of creating more jobs.” That call seems more plausible than for years.
4. Africa—progress is sticking
The World Bank says that in a continent of a billion people, 21 countries, with a combined population of 400m, have now achieved middle income status. The bank predicts that 2012 will have brought growth of 4.8 per cent, despite the weak global economy, eurozone crisis, and rises in oil and food prices. Africa’s exports grew by around 30 per cent in the first quarter of 2012, partly because of hunger for raw materials (China accounted for a fifth of trade for the whole continent in 2011).
And the future looks even brighter. The IMF has just revised its forecasts for the continent’s growth in 2013 from 5.3 per cent to 5.7 per cent, while the African Development Bank predicts the economy could grow by around eight times in the next 50 years. And though the north will continue to have the highest income per head, the east will see the most growth.
However, the coming nation is Nigeria. Research by Morgan Stanley predicted that by 2025, the country’s economy may overtake South Africa to become the biggest on the continent. Nigeria is Africa’s largest oil producer, pumping over 3m barrels per day at full capacity, and in 2013, Lagos is expected to overtake Cairo as the continent’s largest city, with almost 12m people.
Another of Africa’s largest oil producers, Angola, produces 1.9m barrels per day; the African Development Bank predicts that its real GDP growth will be 8.2 per cent in 2012 and 7.1 per cent in 2013, figures of which European finance ministers can only dream.
One figure stands out: that remittances to the African continent (including the north)—money sent home from workers who have left to work abroad—are about equal to the level of global aid flows, according to the World Bank. Countries that suffered a brain drain for 30 or 40 years are now reaping an investment gain from the diasporas sending money and knowledge home.
5. Iran’s elections may help
This is a tough one—only a slim chance for progress. President Mahmoud Ahmadinejad is barred from standing in Iran’s presidential elections in June as he’s reached the constitutional limits of his term. Three leading candidates are Ali Larijani, speaker of the parliament, Saeed Jalili, the chief nuclear negotiator, and Ali Akbar Hashemi Rafsanjani, a ubiquitous presence in Iranian politics and business for four decades.
There is no real sign that any potential leader is inclined to a deal with the US to curb Iran’s nuclear programme, which has moved forward steadily without pause—other than that created by malfunctioning technology—since Ahmadinejad’s election as president in 2005. All the same, a change of president might help create an opening for the deal which US officials have been quietly probing when they find themselves on the margins of big UN jamborees with their Iranian counterparts—lifting sanctions in return for forswearing the manufacture of fissile material.
The obstacle is that the regime has deeply invested itself in holding the pressure at bay. It has wide public support—there is a sense of pride at the pursuit of technology which “even Pakistan” (in the common, disdainful Iranian phrase) has achieved, and a sense of humiliation at being leant on to relinquish it. Yet US and EU sanctions are clearly biting; one place to see that is in Herat, in neighbouring western Afghanistan, previously an island of comparative prosperity in one of the world’s poorest countries, but now struggling from the collapse of trade with Iran.
6. Autocracy: unappealing
It isn’t just Twitter; it’s the mobile phone—the ubiquity of personal communications is making it impossible for governments to control their people, even in Burma (see Nic Dunlop’s report (£) on the refugee camps that can’t be brushed aside). North Korea remains, just, the exception.
In China, the new leadership is likely to be more open even than the last. Xi Jinping, who takes over formally as president in March was 25 in 1978, when Deng Xiaoping began to open China to the world; having lived through that transformation, it is impossible for him to have the same mindset as the generation before him.
Meanwhile, Vladimir Putin, while presiding over a democracy in name, has taken the unpopularity of his role as far as it can go; his astonishment at the protests against his decision to reinstate himself as president, which began a year ago and have persisted, was one of the choice spectacles of 2012.
In Syria, resistance to the government of Bashar al-Assad remains a clear statement of the popular unwillingness to continue under his rule. In November, the rebel cause won international support from François Hollande, the French president, whose endorsement of the Syrian rebel coalition carried special significance—the country was a French mandate from 1922-1943.
True, as Matthew Parris said, no one can readily predict the course of the changes shaking the Arab world. But at least the upheaval gives some of the more astute leaders, in a region frozen too long by autocratic rule, good reason to attempt reform—while they can. Twenty years ago, Saudi Arabia used to issue brochures, by way of public relations, with the claim that it was achieving “progress without change”. Given the changes the kingdom is permitting, even if slight by revolutionary standards, that is not a boast it would now make—or a joke you could now make at its expense.
7. Mobile books, banks and lessons
This will be the year when people will access the internet more through mobile devices—phones and tablets—than through desktop computers or laptops, according to projections from Morgan Stanley. This is another significant jump in the life of the internet. The past decade has seen a revolution in the use of mobile phones, bringing communications to villages in India and Africa that had little hope of much landline capacity (and making a mockery of all those consultants’ models built to work out when countries would finally be “wired”.)
The new supremacy of mobiles will make a reality of “e-wallets”—using phones to make electronic payments—particularly in places without a good banking system, and that will transform the way people conduct their lives and the capacity for growth. The Afghan experience shows why it will spread fast—paving the way for Britain, and others, where the technology is embryonic.
In 2002, when international forces arrived in Afghanistan, only a small percentage of a population of about 23m had access to a bank, and fewer than 200,000 access to a phone. By 2012, the SMS financial transactions system set up by Roshan, Afghanistan’s largest phone operator, with Vodafone, had 1.2m users. These customers pay cash to a certified mobile money agent, and then spend or transfer their “e-money” elsewhere. Around 15m now have access to a phone; the police have been paid by e-money for three years now, and it helps, say, teachers in remote areas who might have to wait months to receive cash due to transport difficulties, where mountains can separate villages only a few miles apart as the crow flies, and where the roads can be lethal.
The coming year may also bring real triumph for the e-book in Britain. Reading on digital devices may start feeling truly normal for most people. In the first half of 2012, sales of digital fiction rose by 188 per cent, and that trend looks set to continue, with the Christmas boom in gifts of tablets and e-readers. “It feels as if the last outposts of non-digital culture are rapidly being outflanked—and Britain is streets ahead of Europe here,” says technology writer Tom Chatfield.
Prospect has written about the digital revolution in higher education (“Professors without borders” and “Education for all” £), through massive open online courses (Moocs). EdX—a joint venture between universities including Harvard and MIT— has almost 400,000 registered students; another, Coursera, has 1.7m, and is growing “faster than Facebook,” according to its founder Andrew Ng. British universities—apart from Edinburgh and the University of London—have been slower to jump on board. Adrian Smith, the new vice-chancellor of the University of London, told the Guardian in December that “You can’t hold back the tide. This is a big wave and you have to work out how to surf it rather than drown.”
8. Great cities: ideas and growth
Even if national politicians are tempted to become xenophobic, the mayors of the world’s great cities will push back. Boris Johnson, mayor of London, in India in November, attacked Britain’s tightening of the rules on student visas, prompting students to turn away from London. Michael Bloomberg, New York’s mayor, has criticised laws that prevent foreign students who secure high qualifications in the US from remaining there. “We become a laughing stock of the world with this policy,” he said in 2011.
Not all cities are prosperous, of course, but most display a concentration of talent—and innovation. It’s cheaper to deliver services there, so health and education tend to be better, and cities attract and foster a middle class.
The number of megacities of more than 10m people is set to double over the next two decades. You might not want to live in them—but many do. Every month, 5m people move from the countryside to a city somewhere in the developing world.
Take Macau—it has a population of just half a million, but for a decade, the economy has grown by almost a fifth a year, nearly twice as fast as mainland China, and the average resident earns more than the average European. The city of Guangzhou, the heart of China’s Guangdong province, has an economy bigger than Algeria’s; there are plans to link it with other Pearl River Delta cities to create a megacity of 42m across 16,000 square miles. Mexico City produces over a quarter of Mexico’s GDP. And Gurgaon, near New Delhi, barely existed 20 years ago but now has more than 1.5m people—and 26 shopping malls—although still (like too much of India) lacks reliable electricity or water.
9. Rockets and drugs
It will be a great year for science, offering some comfort that, if the species cannot manage a currency bloc, it can at least survey other galaxies and the interior particles of atoms. More countries see big science as a matter of national pride, which will pour a flood of new research into the common store of knowledge.
Advances in genetic testing and a plummeting of the cost of scanning a person’s DNA are bringing closer changes in medicine that could revolutionise treatment. That has enabled doctors to work out that some cancer drugs, for example, work far better than tests had previously revealed—but only for small numbers of people with a certain genetic make-up.
The European Space Agency’s Gaia mission, in development since 2007, is due to launch in 2013. It will take five years to create a 3D map of the Milky Way, unprecedented in scale, helping scientists understand the evolution of our galaxy; they predict that it might discover up to 50,000 previously unknown planets, and “brown dwarfs”—tens of thousands of stars that failed to ignite. India, which launched a moon probe in 2009, also plans to put a spacecraft in elliptical orbit around Mars in November, studying the atmosphere and looking for the presence of life.
China’s unmanned Chang’e-3 orbiter, meanwhile, is expected to touch down on the surface of the moon towards the end of the year. The mission will send a robotic “rover” to explore the surface—the first spacecraft to land on the moon since 1976.
In physics, as Frank Close points out, “2013 is the centenary of Niels Bohr’s model of the atom, which he imagined as planetary electrons orbiting a dense compact massive nucleus.” The year is likely to bring more insight into the atom’s structure—more confirmation of the existence of the Higgs boson and its properties, from analysis of the particle collider at Cern.
“If so, the Nobel Prize for physics is likely to go to Peter Higgs,” says Close, but “there are many who lay legitimate claim to aspects of the basic idea, let alone the huge experiments that are taking place. The committee will have their work cut out deciding [who else might share the prize].”
It is possible that other particles might show up during 2013. But, as Close says, although “we can expect more precise measurements of the properties of dark matter... as to its origin—barring some unexpected breakthrough, that seems likely to remain unknown, at least for another 12 months!”
10. Population growth slowing—but not in the royal family
The rise in the world’s population is slowing down. Between 2010 and 2015, the UN predicts an annual increase of 70m, rather than 80m per year at 2000. Birth rates in African nations including Ghana and Angola are falling. The same is true even in Arab countries such as Bahrain and Qatar. That will help environmental problems—not least climate change.
But not among royals. The standing of the Spanish royal family may have been shaken by scandal and recession (see Jonathan Blitzer, £), but the announcement that Kate Middleton, Duchess of Cambridge, is pregnant, has saved the British newspaper industry for another year, as well as reinforcing the appeal of the most popular flank of Britain’s royal family, after the Queen.
What might the new heir to the throne be named? According to nameberry.com the success of films such as “The Hunger Games” will mean 2013 will see a surge in mythologically-inspired names. Be prepared for a wave of infants named Augustus, Athena, and, apparently, Thor. For the House of Windsor, Thor I, perhaps?
The change in the rules of succession in October 2011 means that if the royal couple’s first child is a girl, she still becomes third in line to the throne, ahead of either a later son or Prince Harry. That is the quietest and quickest constitutional change Britain has managed for years (it also secured the approval of the other 15 nations of which the Queen is monarch). It is a sign of how uncontroversial equality of the sexes now is.
Good news for women—and the media. Congratulations to the royal couple. And for everyone else, reasons to look forward to 2013.