Stock markets are at record highs, and recession is nowhere in sight. Yet, the threat to all this exuberance — rising international tensions and instability — arguably looks greater than any years since last century's great wars, Axios future editor Steve Levine writes in his geopolitical forecast for 2018.
- Steve's quick take: What stands out is the brittleness of politics across the planet — in Iran, the Korean peninsula, Russia and Saudi Arabia, to name a few flash points. A wrongly lit match involving any of them could turn disastrous.
- Threat level: High. The biggest danger is miscalculation — because the combination of high-stakes politics, willful leaders needling each other, and unpremeditated error might be fateful. Hawaii's mistaken warning shows the potential peril of fast decisions with imperfect intelligence.
This is Steve's sixth year of making these forecasts — first for Quartz, and now for Axios. His mega-trends to watch in 2018:
1. The U.S. will opt to live with a nuclear North Korea
- One sign of President Trump's flexibility was a Jan. 4 tweet in which he crowed that his being "firm" had driven the north to the negotiating table with the south. This is a man seeking an exit from conflagration. The main working dynamic here is the Precipice Rule, which says that sides will squawk, shout and threaten but back away before a cataclysm.
- Bottom line: As long as Trump feels he can credibly claim to have "won," he's likely to threat but not contront.
- Wild card: Trump could still order a limited lightning strike on North Korea. The True Believer Rule — which says events can be determined at the extremes — can overcome the others.
2. The Iran protests will soften the regime.
- Iran's supreme leader, Ayatollah Ali Khamenei, is feeling rightly threatened by the breadth and source of last year's popular uprising: not the disdained Tehran elite, but a cross-cut of Iranian society in the conservative hinterlands.
- Bottom line: Khamenei wants a virtuous regime that stays in power, with the visible support of the Iranian people. Don't look for changes in Iran's aggressive regional policies. But inside, Khamenei will adopt a softer touch.
3. Elon Musk will have a great year.
- Disrupting Detroit: Last July, the Tesla CEO could have averted much personal misery by postponing the release of his game-changing, mainstream Model 3, and instead released a year late. Instead, he had an excruciatingly slow production buildup.
- This year, Tesla will fix its factory automation, and churn out Model 3s at promised volume.
4. The Big Tech uprising will go populist.
- Look for criticism of the tech giants to be part of the campaign platforms for both parties in numerous elections at the state level.
- An early example is Josh Hawley, Missouri's Republican attorney general and U.S. Senate candidate, who launched an anti-trust investigation of Google.
5. Why midterms matter: the future of Trumpism.
- If Democrats capture the House, which seems likely, they almost certainly will tie up Trump by blocking his agenda, investigating him, and initiating impeachment proceedings. If they win the Senate, too — not likely, but not far-fetched — the most powerful man in the world will suddenly look weak.
- For Democrats, the stakes are also existential: if Republicans keep control of Congress, Trump will spend the next two years continuing to dismantle anything with Obama's name on it, then go after FDR's New Deal legacy.
- Bottom line: The Rule of Averages is on Democrats' side. It states that people can embrace wild bouts of extremism, but tend to drift back toward the middle and seek thriving and stable futures for themselves and their children.