For 2024’s first edition of Geopolitics & the Day After, we discuss the prospects for what the new year may hold. We begin with an examination of the record number of elections slated to take place around the world this year. Then, we look at the threat of a wider regional war in the Middle East, and the effect that conflict is having on Gazan civilians. Next, we analyze potential market risks for 2024. Finally, we end by considering how two vital components of the modern world – internet access and energy – may be under threat.

Global Democracy is on the Ballot in 2024

Can democracy survive 2024?

Alec Russell, Financial Times

2024 brings wave of elections with global democracy on the ballot

Ishaan Tharoor, The Washington Post

2024 Will Be a Year of Elections That Could Reshape Global Politics

Paul Poast, World Politics Review

2024 is being labeled “the ultimate election year.” More than 60 countries, with some 4 billion people, are set to undergo elections in 2024, a scope which will not be seen again until 2048. This unprecedented number of elections will take place against a backdrop of a global decline in democracy. According to Freedom House, a US think tank that monitors the health of democracies, global freedom declined for the 17th consecutive year in 2023. Similarly, the V-Dem Institute, which assesses democracies’ health on five principles (electoral, liberal, participatory, deliberative, and egalitarian), asserts that the quality of democracy enjoyed by an average global citizen in 2022 is back to the levels of 1986. Worries persist that the outcomes of the upcoming elections will intensify this decline.

International relations may also be dramatically altered by this year’s elections. According to the World Politics Review, there are five elections worth keeping a close eye on. Elections in Taiwan and India may drastically influence the geopolitical landscape of South and East Asia for years to come. In the UK, Prime Minister Rishi Sunak is expected to call parliamentary elections before the end of the year; the outcome of which could determine the future of the UK in the global economy. Also in Europe, President Volodymyr Zelenskyy is slated to stand for reelection in Ukraine, though he has indicated that the election will be delayed given that the country is mired in war and under a state of marital law. Finally, there is the US presidential election in November, in which it appears likely that former president Donald Trump will face off President Biden. While the outcomes of this unprecedented number of elections are uncertain, what is clear is that the elections of 2024 could mark an inflection point for democracy globally and, by consequence, international relations.

Fear and Famine in the Middle East

War, hunger and disease stalk Gaza’s 2.2m people

The Economist

Half of Gazans Are at Risk of Starving, U.N Warns

Liam Stack, Gaya Gupta, & Abu Bakr Bashir, The New York Times

The edge of the abyss looms in the Middle East

Emile Hokayem, Financial Times

In the Middle East, wars do not stay within state boundaries. Fears of regional escalation move toward reality due to underlying emotions and grievances, foreign interference, the absence of a regional security process, and persistent weakness of local diplomacy. Recently, Israel has been suspected of killing the top Iranian commander in Syria and the deputy Hamas political leader in Lebanon, and it has been alleged that the US is responsible for the death of a senior Iranian-backed Iraqi commander. The 2006 war between Israel and Hezbollah, and previous assassinations of even more important Hamas, Hezbollah, and Iranian leaders, did not trigger broader conflict. However, the difference now is that more senior leaders are being killed and more attacks of significance are being conducted across borders in a compressed period. Meanwhile, Israel’s assault on Hamas continues, with both sides having scant regard for Palestinian suffering.

The war in Gaza has created a humanitarian catastrophe. The most pressing concern for most families is food. In a recent report, the United Nations said that half the population is at risk for starvation, with 90 percent saying they regularly go without food for a whole day. The territory meets at least one criterion for declaring a famine. Arif Husain, chief economist at the World Food Program, said that the humanitarian disaster in Gaza was among the worst he had ever seen. Human Rights Watch has accused Israel of using the starvation of civilians as a method of warfare, but Israel rejects the allegations and blames Hamas for stealing supplies and international aid groups for not sending more. There is evidence that the former claim is true, regardless, the aid entering Gaza would be insufficient to feed the population. Aid workers also wish to bring more into Gaza but face many logistical obstacles. If there is not more done to facilitate the entry of humanitarian aid into Gaza, it will face a man-made famine.

Potential Market Risks for 2024

What can investors expect from 2024?

Philip Coggan, Financial Times

These Are the Five Potential Trouble Spots That Could Knock the Global Economy Off Course

Malcolm Scott & Enda Curran, Bloomberg

Investors warn governments about high levels of public debt

Mary McDougall, Financial Times

In 2024, investors should closely monitor two key categories of developments impacting global markets: economic and political factors. On the economic front, the focus is on inflation, which appears to be decreasing and leading major central banks, including the Federal Reserve, to consider interest rate cuts this year. Some economists express concerns about a potential economic slowdown resulting from the macroeconomic tightening observed in 2022-2023. However, there is optimism that the Federal Reserve has set the stage for a “soft landing”, successfully controlling inflation without inducing a recession. Additionally, questions surrounding China’s economic slowdown, primarily driven by a property crisis, raise uncertainties about its duration and global implications, especially given China’s historical role as an engine of growth. Europe, particularly Germany, faced challenges in 2023, contributing to concerns about the region’s economic performance. Economists are also expressing worry about the escalating level of government debt across developed nations driven by sustained government spending.

On the political front, the potential US election rematch between Biden and Trump is expected to bring political turmoil. The geopolitical landscape remains uncertain with Russia’s unpredictable actions under Putin, and the ongoing conflict between Israel and Hamas holds the potential for broader regional implications. There is also a looming question about the possibility of a Chinese invasion of Taiwan, adding to the geopolitical tensions that could significantly impact global markets. Investors are advised to closely monitor these economic and political developments throughout the year for their influence on market dynamics.

Geopolitical Tensions Threaten the Needs of the Global Economy

Big tech and geopolitics are reshaping the internet’s plumbing

The Economist

Shale Is Keeping the World Awash With Oil as Conflicts Abound 

Collin Eaton, Wall Street Journal

The modern global economy heavily relies on continuous and increasing flows of communication capacity and energy. Geopolitical tensions, however, pose potential threats to both of these crucial elements. Regarding communication infrastructure, undersea data cables, responsible for about 99% of intercontinental internet traffic, face increasing demand driven by the surge in international communications infrastructure needs since 2019. The data-centric artificial intelligence (AI) boom further exacerbates this demand. Major tech companies like Amazon, Google, Meta, and Microsoft have invested in their own undersea cables since 2010, becoming significant players in this space. The geopolitical rivalry between the US and China is evident in such projects, as seen in the example of a 13km data pipeline linking the American west coast with Hong Kong. In 2020, the cable reached the Philippines and Taiwan, but concerns about China’s access to American data drove the US government to deny approval for the final leg to Hong Kong.

Simultaneously, the surge in US oil and natural gas production is impacting global energy prices amid conflicts in the Middle East, particularly the Red Sea. Houthi rebels, backed by Tehran, have launched attacks on ships in the Red Sea, impacting global shipping. Despite initial concerns about energy prices skyrocketing, a surge in US oil and gas production, reaching record levels, has contributed to a significant drop in prices in recent weeks. This surge is partly a result of higher energy prices in 2022, driven by Russia’s invasion of Ukraine, which incentivized shale drillers to increase activity. However, uncertainties remain about the sustainability of US production, as rig counts fell last year, and drillers are proposing smaller budgets for this year. The conflict with Iran, a key player controlling the Strait of Hormuz, poses potential risks to the deflationary effect of American energy supply, especially if it disrupts the flow of the 18 million barrels of oil passing through the Strait daily.