How It Could Go Wrong

The prosperity spreading around the globe confers enormous benefits but also increases the likelihood of major dislocations in the developed economies, East Asia, and the old Soviet empire. Capitalism can deal with many of these obstacles, but if they multiply, a major reversal could occur.

PROTECTIONIST BACKLASH
Speculative trading in currency derivatives triggers a bond market crash. A new pessimism brings global investment to a halt. As worldwide recession deepens, U.S. and European governments bend to pressures to shield domestic industries. Import curbs multiply, provoking trade wars that prolong the recession. Massive unemployment forces heavy government intervention in economies, undoing a half-century of free-market liberalization.

CHINA BREAKUP
Chinese provinces gain increasing autonomy as Beijing's authority erodes. Key provinces reject Beijing's tax levies and statist controls, triggering a chain of secessions supported by local army commanders. The political crisis brakes China's economic growth and disrupts agriculture, causing widespread unemployment and food riots. Fighting erupts among provinces, some armed with nuclear weapons. Fearful of spreading conflict, neighboring countries hunker down and capital flees, putting an end to Asia's boom.

ECO-TENSIONS
Booming economies and rising population cause widespread ecological damage, especially in developing countries. The resource base for economic expansion is eroded by destruction of forests and fisheries, shrinking water supplies, and loss of farmland to urban sprawl. Two possible scenarios ensue: Development grinds to a halt or squabbles over resources escalate military tensions in Asia.

RUSSIAN REVERSE
Russia's new capitalist sector fails to generate enough jobs to offset massive declines in old industries and agriculture. Polarization between poor and newly affluent creates fertile ground for demagogues, who revert to protectionism, frightening off foreign investors. Fanning Russian nationalism, politicians intervene in ex-Soviet republics in Central Asia, the Baltics, and Ukraine. Alarms go off in Europe and China, triggering a new arms race.

NUKES EVERYWHERE
Nuclear warheads spread, fed by black-market sales from the ex-Soviet Union and enhanced by Asian homegrown electronics. Limited nuclear wars erupt in the Middle East and the Asian subcontinent. Pakistan and India collapse after a nuclear exchange. The global economy plunges into recession as the U.S., Europe, and Japan impose draconian controls on trade, travel, and other exchanges to counter threat from mobile ``suitcase'' weapons.