2013 will prove the power of global events to shape our economic lives

IN MARKETS, a trading session can seem like a lifetime. This puts in context the old adage, attributed to Harold Wilson, that a week is a long time in politics. In truth, both activities have become even more frenetic, as events in distant corners of the globe hit trading screens and TVs with sometimes devastating velocity.

A New Year is not a bad moment to step back and ask whether, in the middle of accelerating news cycles and deepening integration of global markets, there are big trends out there. Or is it all sound and fury – a sandstorm of events that only need daily handling, and not long-term vision?

Strangely, the two things that may loom largest in many peoples’ minds – terrorism and the euro crisis – are probably less significant trends for 2013 than you might think. On terrorism, the Harvard academic Steven Pinker has charted the decline of violence throughout history. Since the peak of the cold war in 1970, organised conflicts of all kinds have fallen throughout the world, and their death tolls have declined precipitously. Terrorism is horribly visible and challenging to our sense of security, but it claims relatively few lives. The euro crisis is likely to stumble on, but markets have already discounted it. Europe is going to be a low-growth backwater for a while, whatever happens to the euro.

Less noticed trends include rising tensions in Asia-Pacific. This should be of particular concern. Territorial disputes, like the conflict between Japan and China over the Senkaku/Diaoyu Islands, show how China is getting ready to flex its muscles. Five other southeast Asian countries have claims that brush up against those of Beijing in the South China Sea. And yet China is also still afflicted by internal pressures in Xinjiang and Tibet. Asia is arming itself – arms deliveries to South-East Asia rose 185 per cent from 2002-2006 to 2007-2011. And there are a handful of other potential nasty Asian conflict hot-spots – such as Kashmir and the Korean Peninsula.

Asia’s environmental problems can only exacerbate these tensions. 85 per cent of deaths from natural disasters between 1980 and 2009 were in the Asia-Pacific. Many of these were caused by overpopulation – too many people living in too little space. In Dhaka, Bangladesh almost 30 per cent of the city’s 14m live in slums along the water’s edge, in a city that really shouldn’t exist where it does. It’s not alone. In Jakarta, for example, 40 per cent of the land area is below sea level.

The potential problems of overpopulated, under-infrastructured cities is not exclusive to Asia. Africa’s cities are growing fast. In 2013, Lagos will overtake Cairo as Africa’s largest city, with a forecast 11.7m people. The combined GDP of Lagos, Cairo and Johannesburg is greater than that of all of central and eastern Africa. Dealing with vast influxes of people, in terms of improving transport, power and sanitation is one of the great challenges ahead for Africa. For politicians it may become critical. According to the Economist, over half of all Africa’s city dwellers will be under 18 and every African election in 2013 will be decided, statistically at least, by first-time voters. A failure to promote inclusive growth in Africa could be just as damaging in terms of internal disorder as Asia’s inter-state problems.

The likely focus of western diplomacy in the Middle East will be the unfinished business of Iraq, Libya and Afghanistan. This is more likely than events in Europe to trip up Barack Obama’s much-vaunted pivot to the Asia-Pacific region. But it may also allow the Israeli-Palestinian conflict and the Iran nuclear dispute to run on unchecked. The Assad regime in Syria seems to be slipping towards its end, but that is likely to lead to more chaos because a military resolution, as opposed to a diplomatic one, will mean a violent power struggle and subsequent period of sectarian retribution.

After the fall of the Berlin Wall, it was fashionable to declare the role of politics in international affairs dead. It would be all about economics and consumers in the future. Unsurprisingly, the world has proved a more complicated place. We can safely predict that trading screens and TVs will light up with news of political conflicts. Some of these markets will be ready, others won’t. Victory on the trading desk may go to those who have stopped for long enough to consider, and plan for, these longer-term trends.

Lord Malloch Brown is chairman for Europe, Middle East and Africa at FTI Consulting, and a former Foreign Office minister.