Economic and social factors could lead to a disastrous 2012

A convergence of many worrying events could plunge the global economy into recession and the world's populations into mass civil unrest. Leadership from the US may not be enough to avert disaster.


To many the start of 2012 may feel like being sucked slowly into a black hole. The consequent wormhole interstellar transfer to a parallel universe is distinctly disturbing. What happens from now on could make 2012 one of momentous historical importance or a damp squib of more of the same at slightly increased levels.

There are very few years in history where a date resonates. 2012 may well be one for the future history books. Its place in those pages, however, is unlikely to be because of a crisis avoided.

One of the alternative scenarios for this year that no one really wants to contemplate begins with the break-up of the eurozone and the consequent rapid deterioration of the global economy into a 1929-style global depression. Talk of widespread civil unrest is not just a problem for troubled Middle Eastern regimes but a real possibility for many European Union states, if the worst happens.

The unprecedented uncertainty of 2012 is making people overly optimistic or pessimistic. That might normally not be a problem but the optimistic/­pessimistic Jekyll/Hyde personality has already infected markets, politicians and the media. Most people do not like change.

The current unsettled world, even for those who cling to the belief that somehow the eurozone 17 will pull a monetary rabbit out of the disintegrating hat, is making everyone and everything edgy.

People in the developed world are not accustomed to hardship or deprivation. More worryingly, the younger population is much more an instant gratification culture with short tempers.

High levels of unemployment are politically dangerous at the best of times but coupled with little or no prospect of a job in the foreseeable future and welfare/social safety net cutbacks, they could lead to some nasty confrontations in many countries.

The rioting and disgruntlement witnessed in 2011 in a variety of European countries, as well as the US, should be a warning to governments that austerity with no carrot incentives could be a recipe for widescale civil unrest. If the economic situation deteriorates even more with no sign of a plan for recovery, simmering frustration and anger from the middle classes could well unite with lower-class anxieties and impatience.

The causes of this instability are many and while the eurozone has to top the list for good reasons, there are other dangers to overcome in 2012.

On top of the euro fiasco comes the delight of continued Middle East conflicts, including the worrying possibility that the West could get sucked into a confrontation with a nuclear-aggressive Iran just as governments think they are exiting the messy struggles in Iraq and Afghanistan.

Regime change in a few countries is on the cards. The US presidential election means minds in Washington will be focused more on domestic issues than on leadership of the world. Some would say that is a good thing but a distracted US means no one is willing (or able) to bash reluctant political heads together in order to achieve stability and order. Whether the US is capable of that (or any country) in the present circumstances is very much debatable. But at least some leadership and control from the US side might result in less economic confusion and political vagueness (particularly from Europe).

A presidential election in France means Nicolas Sarkozy will be focused on retaining his day job and not on a sensible resolution of the eurozone crisis.

Russia’s foregone presidential ‘election’ is not good news for the world, too. A bolder and more confident Russian population is unlikely to take the re-election of Vladimir Putin as good for the country.

Ruling out a Russian revolution is premature. This is no longer a population cowed by years of communism. People have had a taste of freedom and, more importantly, consumer choice. They are unlikely to be as compliant politically as the Kremlin is used to. Likewise, the Kremlin is not mentally geared for this kind of scenario. The result could be explosive.

Moving eastward things do not improve. The handover of power in North Korea to Kim Jong-un is not good news. The country’s need to reassert its military might could be dangerous and an aggressive North Korea is never good news for the world.

In China the leadership will be looking at peaceful and orderly succession planning and avoiding any major upheavals in the interim. While the world may be hoping Chinese growth acts as a catalyst for a recession-prone environment, leaders in the country may be more focused on avoiding increasing social unrest and dissatisfaction stemming from slower growth as well as mounting general popular discontent.

Without even beginning to look at the implications for markets, hedge funds and investors, this is more than a worrying confluence of events guaranteed to keep the world in a state of disquiet for at least the next 12 months.

“There is no dark side of the moon really. Matter of fact it’s all dark.”
The Dark Side of the Moon, Pink Floyd, 1973

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