Declining Hegemony

Bill Cara posted a UBS Investment Research Piece "Global Economic Perspectives" (DEC 2006). I found the piece very interesting. This will be a rough post--I'm not trying to distill, merely communicate some points in the report from George Magnus. This piece really stuck in my head and I put it in my notebook. (I had also used a highlighter and margin notes! Marc Faber would have been proud of me!). I wanted to lift a particular section which was their "Known Unknowns for 2007". Some of these items are coming from "the decline in the relative power of the hitherto hegemonic United States: "

• Decline in the relative power of the hitherto hegemonic United States and 10 sources of geopolitical risk:
• Counter-insurgencies in Iran and Afghanistan.
• Relations with Iran--significant adverse consequences for the global economy, energy prices (possibly) and financial markets.
• Political violence in Lebanon and beyond (political sway and hydrocarbons)
• Changing relations
  
• Russian looking like more of an Asian Power due to its energy status, its demographic characteristics and its geopolitical interests
• Sino-US relations that might deteriorate to the point of affecting our economic ties
• EU project facing increased strains from Turkey
• Strife and tension in Africa
  
• Ethnic tensions
• China falling in for natural resources which may bring it into direct conflict with other major powers and institutions.
• Gobalisation's structural tensions and identity politics
• Trilemma (Professor Dani Rodrik term) from economic integration among goals of deeper economic integration, natinoal sovereignty and democratic government. Generally can achieve only 2 of the 3 goals.
• Ethnicity becoming a potentially dangerous issue
  
• Erosion of our Institutions
• Erosion of the institutions or of confidence in them (UN, NATO, WTO IMF/IBRD)...interests of significant new powers on the global stage seem either under-represented or not represented at all.
• Confidence in US leadership low both here and abroad.
• Energy and Raw Material Supplies
• Climate Change
• Pandemics
  

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Currently, there appears to be developing Iranian tensions. The Economist had this to say in this week's editorial :"There is a real possibility that George Bush will order a military strike on Iran sometime before he leaves the White House two years from now."

Further, Russia is becoming belligerent in flexing its natural resources muscle. They are threatening to aim their missiles at their neighbors who support US bases: You can read the full story in the FT here:

http://www.ft.com/cms/s/42e31938-c1df-11db-ae23-000b5df10621.html

"US lashes out at Kremlin over missiles

By Daniel Dombey in Brussels, Hugh Williamson in Berlin and Neil Buckley in Moscow

Published: February 21 2007 19:26 | Last updated: February 21 2007 19:26

Tensions intensified on Wednesday over US plans for missile defence bases in Poland and the Czech Republic, as Washington called on Europe to take a tougher stance towards the Kremlin.

The Bush administration’s two top foreign policy officials lashed out at Moscow’s campaign against the bases, which Washington insists are aimed at possible threats from Iran rather than Russia."

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All of this amid the euphoria in the markets. . . a perplexion to this bystander, certainly. I think that these international tensions are real and they are frightening given the deep agendas and big egos of all involved.