2019 and the Rise of Technology-Enabled Nationalism

By January 16, 2019Uncategorized
Its worth noting, 2018 could’ve been much worse. We careened into the year smarting from a horrendous hurricane season – one of the most expensive in US history – with the US President and Kim Jong Un hurling literal nuclear twitter threats at each other. So before we get too pessimistic, let’s be thankful for small miracles (and military restraint). Nonetheless, beneath those big big-ticket stories, a lot happened that’s worth considering as we look ahead to 2019.

Over the last several weeks, as we built our 2019 outlook and considered 2018 in retrospect, the two words that most resonated were nationalism and technology. These two concepts are sending us into 2019 with a thorny set of problems to solve. And they are changing the world – literally – faster than we can account for it. And so, it is through consideration of these concepts that we should also think about what they mean for the future. And before we lament over the major downsides of what is happening (because we are risk managers after all), it’s imperative that we recognize that no matter which side of these debates we sit on – the world is changing, mostly, because the old systems, as most seem to agree, were broken. And thus, new ideas and new solutions are needed.

Growing Nationalism

Over the past several years, a tide of nationalism has risen across much of the globe. Elections in Europe have ushered in new, far right, populist administrations in countries such as Italy, Austria, Hungary and Poland. These wins at the polls reflect electorates that have grown increasingly skeptical of the benefits to European Union membership and weary of the migrant populations that have entered their borders – migrants fleeing war, starvation and economic inequality. Perceived as stealing jobs, draining welfare systems, altering culture and demographics, and posing threats to every day security. Similar emotions have emerged in the United States, where the administration has campaigned upon, whether founded or unfounded, concerns over insecure borders and perceived risk of violent crime and terrorism by illegal immigrants. In China, a general populace whose information consumption is closely controlled and curated, has experienced spikes in patriotic, nationalist sentiment, driven by government-influenced messaging suggesting the Western world, and especially the United States, has violated its sovereign rights and taken aim at crippling its economy to prevent it inevitable ascension and historic return to leading global superpower. In Brazil, the country’s newly seated president has rejected United Nations initiatives such as the Migration Pact, threatened rights of its indigenous peoples, talked of nationalizing key industries and stirred international concern over his admitted nostalgia for past periods of military rule.

While fully acknowledging that there is a fine balance between being a borderless country and being completely closed to the outside world (ala North Korea) and that there are those who view nationalism as a means of giving citizens more power to affect the trajectory of their own country’s future; the level of nationalism currently facing the world has necessarily also lowered the world’s ability to avoid international conflict and complicated international commerce. This perspective is encouraging countries to retreat into their own borders; attempting to protect “a way of life” by protecting against outside influences – whether through tariffs, physical and monetary barriers, immigration, rhetoric and/or psychological warfare against “the other.” The unintended consequence for business is that this stymies growth, making it increasingly difficult to steer a prosperous global enterprise that holds increasing (and at times, contradictory) regulatory requirements, financial burdens and shareholder expectations. The movement has also created suspicion of brands associated with one country or another, driving away potential customers and creating new regulatory hurdles.

While there is no question that trade imbalances and considerations of economic espionage needed addressing, in 2018, new trade barriers resulted in a major re-order of global trade. The abrupt – and at times non-sensical – changes increased costs to business around the globe, threatened corporate brand and reputation and by the end of the year pushed the global economy into a downward spin that economists increasingly worry could worsen in China and the US – dragging much of the rest of the world down with them. 

But it’s the trust factor that is perhaps most concerning. Suspicions over spying, arrests of company executives and an increasingly pervasive sense of distrust between countries has, and will continue to, filter down to the corporate and even working level between international employees. This is not only true of US and Chinese colleagues, but also US and Russian colleagues and, as more nationalism and as protectionism grows, this may soon extend even to countries that we’ve traditionally treated as allies like Canada and Germany.

Rising nationalism hasn’t just slowed commerce, it’s led to an almost across the board increase in hate crime in the West; from the United States and Canada to Europe. In the US, hate crime targeting ethnic and racial minorities has risen steadily in the last four years with other categories of hate crime remaining relatively flat. The same is true of the United Kingdom, Germany, Switzerland – and if we looked deeply enough – likely nearly every other country in Western Europe.



Technology enabled bias and nationalism

Technology has changed our lives, in most ways for the better, yet has lost some of its luster to weary populations who increasingly see it as a tool to manipulate unsuspecting users – rather than as one that improves lives and livelihoods. The truth of technology innovation perhaps lies in how you look at it; but in the past several years especially, technology has been blamed for increasing polarization around the world; or more specifically for how it has come to change the lens through which we view the world, and perhaps dominate our lives. The way we work, play, consume information and educate (or mis-educate) ourselves have all changed. Social media echo chambers; the idea that people are attracted to the posts of social media contacts, pundits and content that validate and confirm narrow perspectives on unknown groups, cultures or points of view, have been blamed for forging stark societal divisions, lowering tolerance of competing ideas and consideration or pursuit of facts – driving – though certainly not causing the nationalist/populist trend overtaking much of the world. Extensive government-sponsored disinformation campaigns, launched by Russia against targets across the globe and designed to breed discontent and confusion – and skepticism over alleged, wrongful acts by the Russian government; launched by China in the West to promote Chinese economic initiatives and downplay its risks to competitors; and launched by countries such as Saudi Arabia and Turkey to stifle and threaten opposition voices have all put today’s media – especially social media – in the crosshairs of blame for rising intolerance, societal retreatism and growing toxicity in our relations and discourse.
 
That is the focus right now. But we need to be cautious not to throw the baby out with the proverbial bathwater. From Facebook to Twitter to encrypted messaging platforms to the news media, the worst of the worst stories rise to the top and become the grievance clause for everything we see that is distressing in the world – particularly as it pertains to technology. At the same time, the sheer amount of economic benefit that these platforms have created for small business, entrepreneurs, and minority owned businesses, not to mention larger businesses, is grossly under-appreciated.
 
So, what do these two trends over 2018 mean for the year to come?

First, we don’t expect to see nationalist governments going away or changing their views any time soon. Retreatism, both at the government and the societal level, is going to be a continued theme in 2019, and it’s going to continue to alter trade patterns, impact diplomacy and, unfortunately, continue to drive increases in xenophobic if not hateful discourse for the near term. Companies will need to continue to consider longer term strategies for protecting revenue, planning for international supply chain flexibility and continuity while considering ways to (legally) overcome regulatory schemes designed to advantage domestic interests over foreign providers. Technology companies, and especially social media platforms, will need not only to plan for tighter regulations on data housing, sources of investment capital and import/export controls, but will also suffer increased pressure to moderate user content and serve as a policing mechanism, for purposes that may both serve the public good and leave companies exposed to accusations of supporting maligned efforts to control populaces and suppress opposition.

Those choosing to take their ideals to the extreme such as has been the case in the US and Europe in 2018; in the worst of cases committing acts of violence in belief they promote their cause, will continue to challenge law enforcement and security organizations, forcing them to shift resources, intelligence collection strategies and delicately consider political and reputational ramifications of the cases they may be forced to pursue and arrests they may make. And in this age where corporate leaders have increasingly been looked to by the consuming public as potential sources of moral leadership – a trend in business unlike any we can recall over the course of history – executives will be challenged to balance expectations of growth with the ideological demands of customers, not to mention their own employees.

What might alter these trends? In our view, it will most likely be pain in the pocketbook or in a worse scenario, heightened conflict between states or within states that causes us to rethink our perspectives on our common humanity. Continued stalls in trade that ultimately lead to a rise in unemployment, persistent losses in stock value and signs (or onslaught) of recession will most likely prove the pressures that force a political re-think – particularly as countries that remain more open attract more foreign direct investment, more entrepreneurs and more innovation. And while the trade war will have ups and downs in the first half of 2019, a real shift back towards a more open and less protectionist world order will likely require the experience of a compounding series of negative consequences that pile up and weigh down institutions before the current trajectory re-orients.

But while polarization may be here to stay for a while, we’ll all be charged with finding ways break down barriers, build bridges and seek a common, less unequal prosperity, despite circumstances. And those that do stand much to gain. No, it’s definitely not all doom and gloom out there, but we do believe that 2019 is going to prove an interesting, if not challenging year. But challenge always comes with opportunity, forcing us to bring our A game. This year, we’ll all need to bring our best selves to our work each day, force ourselves to think in new ways, tackle new challenges and pursue creative and innovative solutions to what are, in many ways’ old problems, but with a very new twist.

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