From Ukraine to Syria to the South China Sea, the world is experiencing a spike in geopolitical crises. Yet markets have for the most part been remarkably unperturbed by recent events. The lack of systemic ties between flashpoints might explain how we’ve so far avoided a wide-scale conflagration.

Investors, it seems, are still largely confident that today’s geopolitical crises will remain relatively marginal and mostly isolated. Bad as they may be, according to this view, the flare-ups in Ukraine, Syria and elsewhere are not manifestations of some paradigm shift threatening to set the global economy ablaze. Rather, they are to be treated as worrying but temporary blips on the radar.

Is the business community correct in staying so cool-headed, or could investors be missing a fundamental transformation in the way our world works? The risks from underestimating the implications of geopolitics on the geo-economic landscape and on businesses, an area in which numbers and probabilities are after all tricky to assign, are significant. With the frequency of crises increasing, we should consider the possibility that there may be a signal amid the noise; that our world may be changing for the long term.

While a rise in geopolitical tensions need not necessarily lead to de-globalization, much ink has been spilt over the rising prospect of such a world, marked by a gradual breakdown of the geo-economic commons on which we rely, from safe seas to open skies and clear communication channels. Despite noticing this emerging possibility, however, few observers have thought through what such a world would look like and what it could mean for our daily transactions as decision-makers in business, government and civil society.

Doing so has become critical in light of recent events, and foresight can be a most valuable tool to help us prepare for a fast-changing environment. Let’s use our imagination to ask ourselves whether the acclaimed fiction writer William Gibson might have been right in saying: “The future is already here – it’s just not very evenly distributed.”

The de-globalized future

Imagine that seas and skies can no longer be assumed to be open: getting from one country to another involves time-consuming detours, when it’s possible at all. Imagine that having a passport from a wealthy country no longer guarantees you’ll be able to travel the world: strict visa regimes mean some countries are effectively out of bounds to the citizens of others. Imagine that restrictions on physical travel extend to the virtual world: from certain countries it is technologically impossible to send an email, make phone calls to, or access websites hosted in others.

Imagine that international law has broken down, the memory of a so-called international order fading into the distance. Mechanisms to cooperate on global issues such as climate change are long deceased. Instead, relationships among countries are based on dozens of fragmented and overlapping alliances, pragmatically oriented to specific purposes: a country might have one set of allies for its natural resource needs, another for its technological needs, and so on. These alliances are based on soft affinities and ideologies, rather than on objective factors such as historical trade links or geographical proximity. They shift often and quickly. Welcome to the de-globalized tomorrow.

The route to this imagined future does not involve anybody deciding that de-globalization would be a good idea – yet it could still emerge from the unconscious choices of political decision-makers. Think about how even greater protectionism than we see today could spread: game theory dictates that as a first batch of governments exert more control over their domestic economies, strongly supporting their proud national champions, others, though perhaps initially cleaving to the ideals of free trade, will eventually bow to the external pressures to “protect” their private sectors as well. We’ve avoided this scenario by such a thin margin in the past.

In a difficult economic context, the path of least resistance can be to prioritize short-term national interests over long-term global ones, as has been seen many times in recent years. Political tensions can lead to face-offs and tit-for-tat sanctions, even when decision-makers recognize, intellectually, that each country is inflicting economic self-harm. In a climate of fear about cyberattacks or online ideological contagion, concerted global efforts to manage the internet could become so fraught with difficulty that governments decide it is easier to “protect” their population by cutting off their national internets from the world.

The path to a de-globalized world is not about small attacks on the global order by exogenous non-state actors – on the contrary, such attacks would be more likely to rally a coalition to protect our prized geo-economic commons. Nor is de-globalization merely the much-discussed shift from the global to the regional; so far, regionalism has tended to sustain an economic order broadly compatible with its global umbrella. Nor is what we are talking about here merely a new cold war, for the de-globalized world we explore would involve not just two or three blocs but multiple overlapping alliances.

Today’s geopolitical narrative is of emerging powers acquiring what they viewed as their rightful place, where great power relations are increasingly dominated by strategic competition in the face of eroding strategic trust. This raises the question, what will keep them together, what will maintain coherence in their management of global political and economic affairs once these emerging countries reach a relative level of political and economic maturation? Indeed, we are already seeing strong differences in approaches among the BRICS, and they represent only five of countless smaller rising markets.

Such a future may seem chaotic, confusing and depressingly gloomy. It would also be deeply unprofitable to most. But none of that makes it implausible. Just think of the many signposts that already point to such a world being well within the boundaries of plausibility. Aren’t the three pillars of our global economic commons – open communications, open seas and open skies – beginning to crack?

Open communications

Long-established national twists on the greater internet – from the Great Firewall of China to Iran’s “Halal Internet” and Russia’s Cheburashka – have been well noticed but also limited in their impact, for two reasons. First, they are mere filters on the global internet, not distinctly separate infrastructure projects to dismember or otherwise replace the world wide web. Second, they have for the most part been imposed by authoritarian regimes for reasons of censorship, rather than being the legitimate choices of democratic societies. Both factors may be changing as a BRICS cable initiative has begun, creating a BRICS-only hard undersea communication grid. Discussions about developing a national internet are also being taken seriously in Germany and other democratic nations.

The internet is not the only open communication system vital to the geo-economic commons. Access to the SWIFT payment system is critical for a country to function effectively in the global economy. In the past, only the likes of North Korea and Iran have been excluded from it. But, again, change is in the air as more recent calls to exclude Russia, though rebuked, have highlighted that targeting a member of the G20 – the very group meant to be managing the global economy – was no longer out of bounds.

Even the mere thought of such moves could create a self-fulfilling prophecy in which SWIFT and its cousin institutions begin to break apart as countries seek to pre-emptively escape the leverage represented by threats of exclusion and begin creating their own parallel cooperation schemes. It has been widely reported that Iran is already partnering with Latin American countries on an alternative payment system, driven by ideological distaste for US dominance of global monetary transactions. The numerous currency swap agreements that China has conducted with its trading partners can also be seen as pointing in the same direction: creating an alternative to a long-dominant global system, in this case the convention of the US dollar being the world’s leading trading currency.

Open seas

As most business readers will know, the global economy relies on open sea lanes for approximately 80% of its trade. This is partly why US protection of the seas was so critical to the rise of international commerce in the post-Second World War era. Recent spates in piracy occupy most of the headlines dedicated to the breakdown of our safe and reliable shipping lanes. But such a phenomenon may actually help to preserve rather than undermine the openness of the seas by uniting states against a common threat. One of China’s valuable contributions to global crisis management has been fighting piracy in the Gulf of Aden.

More of a threat to the system, however, are the deteriorating relationships among states with the real ability to destabilize the ingrained patterns of trade. Recent tensions in the East and South China seas between China and its Japanese and South-East Asian neighbours are just one example. It seems paradoxical that Japan and China, both countries so economically reliant on dependable sea routes, would act to threaten such soft infrastructure in any way; yet when brinksmanship has some countries using civilian boats to rattle their neighbours’ military ships, the risk of an unpredictable escalation in security tensions with global repercussions becomes undeniable. Looking out further, the spectre of increasing naval tensions between India and China for control over Indian Ocean naval routes becomes equally concerning, as astute observers have already warned.

Open skies

Recent tensions between the European Union and Russia saw Europe banning a low-cost Russian carrier from flying to Europe and Russia talking about retaliation in the form of restrictions over its Siberian airspace to European carriers en route to East Asia. As has been widely noted, this would dramatically raise the cost of travel and put an end to our habits of easy transportation to an extent not fully appreciated by most. Some will welcome the easing of systemic risks such as the contagion effects of global pandemics, but one can be sure the costs of this new reality will far outweigh its meagre gains.

Air travel becoming noticeably more inconvenient, a naval conflagration blocking off a trading route, or the creeping fragmentation of communication channels spreading beyond authoritarian regimes are all noteworthy signposts of a potentially de-globalized world. But raising these possibilities poses a puzzle: given the costs they would impose on most parties involved, why are they even conceivable?

A changing world

Part of the reason for such a world having pierced into the realm of plausibility is that political rationales have seemed in recent years to take ascendance over economic ones, both domestically and internationally. Jay Ogilvy once famously speculated about CEOs becoming more powerful than presidents, as company budgets grew larger than that of many countries. But the rise of state capitalism in China is only the most visible sign of a more recent trend towards increasing government influence over the private sector, even in advanced economies.

Meanwhile, the Ukraine crisis suggests that economic interests seem to be becoming less able to prevent international tensions. The EU will continue to suffer heavy costs from its sanctions against Russia, given their economic interdependence, just as Russia will suffer loss of revenues from its gas-related disagreements with Ukraine. Elsewhere, tensions between China and Japan have been entrenched, despite China being Japan’s largest trading partner and Japan being China’s second most important commercial associate. That Ukraine and Russia, and China and Japan have recently made minor steps towards improved commercial ties is welcome, but the fragility of these efforts underscores my point.

International alliances, too, are becoming less dependent on their traditional variables of economics and geography. Take India and Japan. Both have China as their largest trading partner, whom they are far closer to geographically than to each other. Yet Tokyo and Delhi get along much better with one another than they do with Beijing, united as they are by their shared democratic principles and fear of Chinese assertiveness.

Finally, alliances are no longer as clear-cut and long-standing as they have traditionally been. Although countries such as Egypt or Israel may have swung from one bloc to the other during the Cold War, for the most part countries belonged to one group and stuck to it. Today’s alliances are much more lean and adaptive, with specific issues bringing together partners who would otherwise never consider collaborating. Striking examples come from Syria, where Western countries supporting the fight against the Assad regime have also been reported to have exchanged intelligence with it. Or think of the raging debate about the very real prospect of US-Iranian collaboration in the struggle to contain ISIS.

Implications for business

If these signposts indeed prove to be pointing towards a de-globalized future, the consequences would be dramatic for globally reaching businesses, given their dependence on a harmonious or at least coherent set of geo-economic commons. Multinationals would face a difficult balance between attempting to remain independent while accepting government support and choosing to engage with governments to jointly face the challenges of this new world. In return for that support, governments would probably expect more of a say in what sources multinationals use for technology, labour and capital – creating a form of import substitution. It would also put multinationals at the mercy of potentially erratic political decision-making.

Remaining independent would be increasingly difficult, though perhaps not impossible as governments may value relationships with multinationals who have international expertise as a source of information and backdoor diplomacy. Whichever path a business chooses, proximity to political power would be critical, with government connections being even more important than they are today. Diversity of supply and distribution channels would also be a major success factor, as per best practice.

Every world has its winners and losers, and winnings are always relative. If a de-globalized world materializes, the winners among multinational businesses will be those that have recognized the value of thinking about possible futures by using tools such as scenario planning, and prepared accordingly. Such a de-globalized world must be contemplated, given recent worrying signals to its effect. Even if this particular world does not fully play out, thinking about it has inherent value as a strategic exercise. For one thing, it could create the motivation needed to take action in preventing us from heading in this direction.

Author: Kristel Van der Elst, Senior Director, Head of Strategic Foresight

Image: Flags of different countries fly from posts on the Uyuni salt lake, which holds the world’s largest reserve of lithium, located at 3,656 meters (11,995 ft) above sea level in southwestern Bolivia, November 6, 2012. REUTERS/David Mercado