The Return of Political Risk

That may now be changing, according to the folks at Eurasia Group. I recently had lunch with Eurasia's head, Ian Bremmer, who pointed out how irrelevant the old "BRICs" term to describe high growth emerging economies is, when at least one of the three letters (R for Russia) is endanger of falling out of out of the acronym altogether thanks to recession related economic and political turmoil. China, too, is at risk longer term for upheaval if it can't keep its economy growing at the magic 7-8 percent a year rate (no mean feat in this environment).

To that effect, Eurasia just released a list of countries that are most likely to see regime change thanks to the financial crisis. Some, like Pakistan (the most likely, at 30 percent), Russia (20 percent) and the Ukraine (15 percent) are no brainers. Those in the mid-range, like Mexico, Nigeria, Turkey and Argentina, are also very plausible. But there are others on the list, like Japan (which is going into elections), UAE (weak institutions and increasingly ugly politics), and Poland (the return of nationalism and populism) that are more surprising. It doesn't really matter whether all of these countries end up with new governments or leaders -- the point is that political risk is back, with a vengeance. We've left a relatively peaceful and prosperous era, for something else. We don't know yet what the something else will look like. But its a fair bet that there will be plenty of unexpected political outcomes and alliances as it unfolds.

For more on this, it's worth picking up Bremmer's new book, The Fat Tail. He argues that we're not thinking enough about the changes that might be caused by all these shifts, and what it will mean for our jobs and our lives.