Geopolitical Risks Could Create Gloomy Economic Picture

American Economist Thomas Sowell famously said, “Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do, and nothing is more unpredictable.” 

Imagine politics, but with actors who are of different nationalities, cultures, ages and even mental stability—and none of them are at all accountable to you. That’s geopolitics! Let’s dive into the key geopolitical risks in 2024.

First of all, the world is facing two ongoing wars that are on the verge of turning into an economic catastrophe. The growing fatigue of international support for Ukraine is putting the war in a position where Ukraine is losing but Russia has no way to win. Desperation on both sides could lead to increased attacks on economic infrastructure, particularly grain facilities on the Black Sea and Russian oil infrastructure. This scenario would again lead to commodities inflation. The other ongoing war between Israel and Hamas has been mostly contained for now. With each passing day, however, other Mideast groups may be dragged into the conflict. There are too many actors ready to fuel the war. The war in Gaza may be only the beginning of a wider regional war. Unlike with the Russia-Ukraine war, the United States is isolated in its support for Israel. Both wars, however, have the potential to impact the global supply of commodities, especially oil.

Another geopolitical risk is the U.S. identity crisis. It cannot be overlooked that America’s global standing is vital to its economic prosperity. U.S. Treasury issues are considered a safe haven not because the U.S. government is a financially responsible borrower. The U.S. dollar is the world’s reserve currency not because we have responsible monetary policy. These economic benefits and many others are the result of the U.S. identity as the global superpower. Withdrawing from responsibilities that come with this identity would put the U.S. in an economic disadvantage. 

2024 is a critical presidential election year that will shape the economic standing of the American people directly through the economic policy that will prevail and indirectly—but not less impactfully—through the prevailing foreign policy.