Category: POLITICAL RISK

Forecasting Political Instability

What signals indicate the onset of severe political instability, the worst-case scenario being state-collapse or civil war, with enough lead-time to take preventative action?

This question was asked at the end of the Cold War leading to the creation of the Political Instability Task Force (PITF) in 1994, funded by the Central Intelligence Agency (CIA). The goal was to create a model to determine reliable indicators of instability at least two years prior to the onset of a major crisis.

The PITF devised a model for determining the onset of severe political instability by correlating open-source data variables from over 140 episodes of major instability worldwide stretching back to 1955, and claims an 80% post fact success rate. The model categorizes episodes of major instability as Revolutionary Wars, Ethnic Wars, Adverse Regime Changes, and Genocides and Politicides.

The PITF model* examined hundreds of factors including political, economic, demographic, geopolitical, social, and environmental variables to determine an ‘association with vulnerability to political instability’ through correlating data with the historical record. PITF researchers found that “relatively simple models, involving just a handful of variables and no complex interactions, accurately classify 80% or more of the instability onsets and stable countries in the historical data.”

The main independent variables incorporated by the PITF model includes regime type and political factionalism, infant mortality, neighborhood insecurity, and state-led discrimination.

  • Infant mortality figures provide a reliable standard of living indicator as this reflects a country’s level of socioeconomic development and public wellbeing. This is in turn a product of low levels of governmental effectiveness and quality of political leadership. model confirmed that poorer and underdeveloped states are generally at higher risk of experiencing political instability.
  • The neighboring component refers to general regional instability. The model found that regional security has a measurable impact on the stability of states within the regional system. Part of the risk is that conflict spillover from states experiencing violent conflict may aggravate domestic political tensions in neighboring states. The model also includes other geopolitical risks including the security effects of land-locked states and countries with large land masses.
  • State-led discrimination refers to the degree of institutional, or official political and economic discrimination against specific groups within society. This reflects the nature of communal relations and incorporates religious, ethnic and racial components which may prove divisive.
  • Regime-type refers to the type and nature of states, some of which are more prone to instability than others. This includes regimes along the spectrum of full or partial autocracies, to full or partial democracies. Factionalism refers to social and political polarization linked to the degree of inclusive or exclusive political participation – a leading indicator affecting the probability of unrest and violence.

Jack Goldstone, a former PITF team member explains the salience of regime-type, when anticipating political instability, stating “surprisingly few other factors mattered”.

 Regime Type and Factionalism

As stated, the PITF model found that geopolitical stability, including outbreak of revolutions, ethnic wars, and adverse regime changes (defined as abrupt turns from a more democratic system to one that is more authoritarian), is “overwhelmingly determined by a country’s patterns of political competition and political authority”. Economic conditions, the record of prior instability and conflict, ethnic and regional tensions, and regional security remain secondary, yet important independent, and interdependent variables. The PITF model determined three main dimensions affect regime stability (bullets are direct quotes):

  • the degree of openness and electoral competitiveness in the recruitment of the chief executive (Executive Recruitment);
  • the degree of institutional constraints on the authority of that chief executive (Executive Constraints);
  • and the degree to which political competition is unrestricted, institutionalized, and cooperative rather than repressed or factionalized (Political Competition).

These dynamics are relevant when assessing political risk in all types of regimes as they reflect the degree of inclusiveness, and by extension the probability of opposition to the staus quo.

According to the PITF, factionalism has proven to be the ‘most statistically powerful, precursive condition in modeling the onset of serious political instability’ as this influences ‘patterns of executive recruitment and political participation under those regimes’. The model describes factionalism as occurring when “when political competition is dominated by ethnic or other parochial groups that regularly compete for political influence in order to promote particularist agendas and favor group members to the detriment of common, secular, or cross-cutting agendas.”

Figure A demonstrates the relative importance of aforementioned variables in determining the onset of instability, particularly the risks associated with highly factionalized partial democratic states.

Figure A. Goldstone, J.A., and Ulfelder, J. 2004. How to Construct Stable Democracies. Washington Quarterly 28(1):9-20

Jack Goldstone notes in his writings on revolutions that divisions among elites are not enough to generate instability as competing elites can be managed by an authoritarian leader; however, ‘what is crucial for political crises to emerge is for elites to be not only divided but polarized—that is, to form two or three coherent groupings with sharp differences in their visions of how social order should be structured’.  A good current example would be split between the pro- and anti- socialist camps in crisis-ridden Venezuela.

The high correlation between regime type and insecurity relates to the vulnerability or resilience of certain states when confronted by multiple challenges. According to Goldstone, when the resilience of the state is tested, the “most important factor is elite loyalty and commitment to supporting the existing regime”. The model found that full or consolidated democratic, and fully autocratic regimes exhibit greater levels of stability, while partial, or illiberal democratic states, (called anocracies) characterized by factionalism are most prone to instability. The record suggests that anocracies are least able to weather bouts of severe instability; once a social, political, conflict, or economic challenge becomes unbearable, marked factionalism among elite groups may occur as alternative visions of order emerge, leading to infighting, spoiler politics, opposition and regime sponsored violence against opponents, elevated levels of political instability, and state collapse. Anocracies may remain stable depending upon the degree of elite cohesion: the overall unity and loyalty of high-level political and military elites explains how the Mugabe regime remained in power for over a decade after the country’s economy flat-lined, despite widespread  socioeconomic collapse.

Figure B demonstrates level of instability between the range of regime types defined by the PITF.

Figure B. Regimes and levels of political instability.

Politics in quasi-democratic/anocratic states is frequently seen as a winner-takes-all competition, where state control is the ultimate goal due to the party’s ability to capture the state and manage the distributions of spoils, often building extensive patronage networks that strengthen the regime, or the faction within the regime with access to the levers of power.  The regime may limit the ability of the opposition to mobilize support in order to undermine its prospects for inclusion within government. Inconsequential ‘managed elections’may be permitted, but have limited impact on the selection of the prime minster or president. A national leader may enjoys unlimited power due to the absence of institutional or legal constraints. The regime may lock up or kill the opposition, triggering episodes of mass unrest, contained through state violence. This could have the long term effect of fostering a simmering yet intense opposition to the regime, which may result in civil war as armed conflict remains the only viable option for the opposition.

Politics in fully democratic or autocratic states are generally more stable as political competition (or lack-thereof) is institutionalized and at least tacitly accepted by most major players. While the absence of electoral competitiveness, restraints on the leader, and degree of political participation is restricted in an autocratic regime, contributing to its stability by containing all or most power within a clique that has loyalty instilled by fear, or rented, autocracies are nonetheless prone to violent overthrow, as demonstrated by the fall of the Shah in Iran in 1979. Fully democratic regimes by contrast have established avenues for peaceful political competition, yet are also subject to breakdown owing to changes in ideology, elite composition or other internal/external influences.

Regime types and the nature of political participation can thus be seen as structural causes of instability, while immediate causes include a broad range of factors, such as the lifting of fuel subsidies or imprisoning a popular opposition leader, which are able to trigger a crisis.

Visualizing vulnerability

The Center for Systemic Peace (CSP) continues some of the work of the PITF, and publishes occasional reports on global security. The following map from the CSP (Figure C) lists regime types globally. This presents a global spatial risk model, with states colour-coded along a spectrum from democratic to autocratic. One could say this represents a ‘horizontal’ risk map, as it reflects a current, yet dynamic, political topography. Anocratic regimes in grey and purple indicate highest risk areas.

Figure C. Polity IV Individual Country Regime Trends, 1946-2013.

A ‘vertical’ risk map (Figure D) , based on the historical experience, can be found in the study “State Fragility and Warfare in the Global System 2016,” which lists 328 major episodes of political violence from 1946 to 2016 — including over 30 that are ongoing. This map reflects areas of elevated political instability, using the definitions above.

The World Wars are not included in PTIF model, as the model only began measuring politics since 1956 due to the lack of reliable data before this date. These wars occurred in part due to the changing global geopolitical order, what Halford Mackinder called the post-Colombian era. In this regard, the PTIF model measures the post-colonial world order, many parts of which were beset by violent post-independence struggles, including highly destabilizing factional struggles within new democratic and quasi-democratic regimes. According to the data series, Sub-Saharan Africa was the most unstable part of the world during this period, followed by the Middle East and South Asia.

Figure D. Major Episodes of Political Violence 1946-2016.

Figure D. Major Episodes of Political Violence 1946-2016.

One can question the degree of cause and effect in the development of the model as areas characterized by the prevalence of anocratic regimes may have weak or factitious political systems precisely because of post-independence nation-building related conflict. This suggests the possibility of a vicious circle of instability as renewed bouts of conflict undermine the development of effective governance and elevate militarily successful groups to high office, perhaps the exclusion of others, producing factionalism. Nevertheless, the model attempts to use current indicators to anticipate future instability, and appears well founded in this regard.

The components of the PITF model are useful for gauging country risk conditions by giving the analyst a credible methodology for anticipating bouts of severe political instability. While the model has predictive capacity, it is not able to predict the duration or intensity of conflict or political crisis. It is less useful as a barometer of real-time fluctuations in political risks, which require a more nuanced and complex index or methodology. In this regard, a fusion between the PITF and the World Bank’s 300 odd factor Worldwide Governance Indicators (WGI) could be useful. Experts agree only a combination of matrices, together with the contribution of expert opinion or subject-matter expertise is required to accurately gauge political and country risk.

*The “PITF global model uses a triple-matched, case-control methodology and a conditional logistic regression statistical application to specify key, precursive factors that characterize the imminent risk of the onset of a political instability (state failure) condition in any of 163 countries in the world”. One of the few semi-official publications of the PITF, describing the workings of the model is available here.

Global Trends

Intelligence analysts have long debated whether their discipline is an art or a science.  For the most part, forecasting remains an exercise in structured analytic reasoning. Analysts have to factor in past and present dynamics to sketch out possible and probable future trends, to guide clients such as policymakers. This also requires imagination and factoring in unknowns. In as much as geopolitical risk analysis uses the history of the present to set the tone for the immediate future, thinking through a vision of the future also helps to illuminate the present. In this regard, much value can be derived by studying strategic forecast analyses, specifically those by national intelligence agencies that have the resources to employ worthy minds to this end.

The US National Intelligence Council’s (NIC) report Global Trends: The Paradox of Progress, offers fascinating insights into possible and probable geopolitical, social and economic trends. The report explores “how the changing nature of power is increasing stress both within countries and between countries” and tries to understand what transformative impacts these stresses will have.

Global Trends notes that the next five years will see an increase in tensions between and within countries, and that the future will likely be marked by greater conflict risks of due to “diverging interests among major powers, an expanding terror threat, continued instability in weak states, and the spread of lethal, disruptive technologies”. Cooperation on global issues is likely to be hampered by ‘veto power’ due to competing strategic visions and the expanding interests of the great and regional powers and their UNSC allies (think Syria in recent years). Conflict prevention norms and human-rights provisions will be weakened, including by states such as Russia and China, leading to more violent localized conflict, while preventing multilateral diplomatic solutions. Conflict will also move away from traditional defeat of the enemy on battlefield towards disruptive attacks targeting critical infrastructure and undermining social cohesion to secure advantage and force an opponent’s hand.

The report notes that the lines between war and peace will be blurred through these increasing range of tools that actors may employ, ‘undermining old norms of escalation and deterrence’. Deniable state-sponsored cyberattacks on an opponent’s electricity infrastructure during an election period to sway the vote may be a good example here. Terror attacks may become more consequential due to the spread of lethal and disruptive technologies, including precision weapons, robotic systems and cyber arsenals. State sponsored sabotage could employ these same tool, likely in the targeting of enemy industrial infrastructure. The report also notes that noncombatants will increasingly be targeted, perhaps to incite disruptive intra-state tensions and conflict. Long-distant and remote attacks will become increasingly possible, risking escalation due to the temptation to engage in preemptive attacks. This includes attacks on enemy communication technology such as military satellites. There may also be greater doctrinal acceptance of using low-yield tactical nuclear weapons.

Political stability may be affected by increasing bouts of populism and nationalism, partly in response to disillusionment with failing economic policies, and against established political institutions and the elites that maintain them. Populist and nationalistic leaders may increasingly use democratic legitimacy to consolidate executive power, while quashing domestic opposition, leading to an erosion of civil society and the rule of law. Politically convenient waves of anti-immigrant and xenophobic sentiment are possible. Global Trends notes that “exclusionary religious identities will shape regional and local dynamics in the Middle East and North Africa and threaten to do so in parts of Sub-Saharan Africa between Christian and Muslim communities.” Political stability may be further threatened by mass protests as public distrust and expectations with authorities erode, compounded by the inevitable corruption scandals amid political polarization and fiscal constraints on effective governance. The report also notes that governance will become more challenging due to the multiplicity of influential actors, such as NGO’s, corporations, powerful individuals, that must be co-opted or whose interests need be taken into account.

Global Trends outlines three scenario-based models of the future which may emerge in response to certain trends in the decades ahead. These scenarios involve national (Islands), regional (orbits) and sub-state & transnational (communities) level scenarios.

Islands – This scenario ‘investigates a restructuring of the global economy’ as states attempt to become self-sufficient ‘islands’ in a slow process of rejecting globalization. Measures could include protectionist economic policies and retreating from multilateral cooperation. This process could be in response to bottom-up pressure from a domestic audience disillusioned with globalization and wealth inequality, seeking new forms of economic and social security, perhaps a result of long periods of weak or no economic growth, compounded by the disruptive role of automotive and artificial intelligence (AI) technologies. Changing regional and global trade patterns could result, as well as renewed local entrepreneurship amid a slowdown in global economic integration.

Orbits: The great powers, and increasingly, powerful regional states, will carve out territorial spheres of influence where they will enjoy political hegemony. Factors such as rising nationalism, domestic insecurity, conflict and strategic trends, disruptive technologies, and a weakening of multilateral cooperation will increase the risk of interstate conflict. The scenario envisages the use of a nuclear weapon by a belligerent, highlighting the danger of new weapons technologies, such as a possible use of low-yield tactical nuclear weapons. Non-state actors assume increasing power and influence, including terrorist and criminal groups.

Communities: This scenario sees non-state and private actors, including nonprofit organizations, multinational corporations and religious groups increasingly assume responsibility for service provision due to the failure of, and despite the resistance of, national governments who are unable to provide due to fiscal constraints or political ineffectiveness. This is an era of new public-private relations. This scenario also sees as enhanced role for local governments as they negotiate greater concessions from the national regime. Information technologies, including expanding social media penetration will give these actors increasing social and political influence, able to shape public opinion. As in Orbits above, the corporation and the terrorist emerge as two non-state actors on different sides of the spectrum, although both can be seen as deeply intertwined with, or in opposition to the state.

Geopolitical Risk Analysis

Geopolitical risk analysis is the attempt to quantify internal and external risks to the state by assessing the local, regional and global security framework. A range of interdependent factors affect political and strategic stability including local and transnational actors, economic and political geography, regional geopolitics, and complex social and cultural  forces. Lebanese political stability for example, is as much dependent on its unique social and political composition, influenced by a divisive physical geography, as it is by the influence of outside powers, such as Saudi Arabia and Iran.

Political factors include the degree of democratic representation and popular support, character of political competition, government effectiveness, the record of political transitions and political violence. The security environment depends on factors such as internal and external conflict, the strategic role and role of foreign powers, terrorism, ethnic or religious tensions, levels of civil unrest, crime and kidnapping. Political, human, and economic geography forms the backdrop to this type of risk analysis. In the tradition of classical geopolitics, even physical geography has a measurable political impact .

Geopolitical risk occurs at multiple levels, including at the global,  country,  and operational level. Global-level risk refers to those processes which affect multiple countries, or events that have global implications. A conflict in the Persian Gulf leading to the blocking of the Straits of Hormuz would be felt worldwide as international crude oil prices presumably soar. Country-level risk refers to challenges affecting a particular country, typically related to issues such as political instability or conflict. Operational-level risks are industry-specific challenges that organizations face; the crucial role of community politics in Shell operations in the Niger Delta, for example.

Global-level risks have been on the increase in recent years owing to an increase in the ambition and reach of both state and non-state actors. Great power competition, as well as the assertiveness of regional powers, has become more visible amid the rise of a multi-polar world and the unraveling of the post-Cold War order of hegemonic stability which pundits called the Pax Americana.  The relative US share of global power, expressed in economic and strategic terms, has been steadily declining amid the growth of emerging powers, particularity in East Asia. Political history suggests that as rising powers challenge the stability of an international system, the risk of interstate conflict increases. This occurs as a rising power pursues its national interests, challenging other power’s with established claims, or shaping the overall rules of the game if it powerful enough. ‎

A persistent idea views globalized economic integration as a restraining factor on harmful state competition: countries plugged into, and benefiting by the global trading system are prone to limiting their strategic behavior in the interests of both short- and long-term economic gain, the theory holds. These paradigms are at best unreliable, and at worst harmful insofar as the economic deterministic approach creates a flawed model of strategic behavior.

Conflict is driven by various factors, including political ambitions, economic motives, and ideological imperatives. The actors include states, parties within states, and transnational non-attendance actors. Increasing nationalism in recent years increases conflict risks through discriminatory politics, and the propensity towards military adventurism as means of directing and consolidating domestic politics.

Multi-polarity, specifically the rise of powerful regional actors mean the world is undergoing an incremental yet consistent revision of political relationships. Rising powers are altering the form and substance of world order through revising political and strategic norms and values. The annexation of Crime from Ukraine by Russia in 2014 was a clear challenge to the prevailing rules of territorial sovereignty, and the limitation of military aggression as an instrument of national policy. The US invasion of Iraq in 2003 was equally destructive insofar as it was based on false pretexts and essentially illegal under international law.

Map of Interstate Conflict Risk Cambridge Centre for Risk Studies & Cytora Ltd.

The decline of US power relative to the rise of other major powers, mainly in Eurasia, is resulting in increasing instability as regional powers take active steps to shape their respective geopolitical environments. Russia’s annexation of Crimea and proxy wars in Ukraine, China’s island building activities in the South China Sea, on territory illegally claimed, as well as the expansion of Iranian influence throughout the Middle East since 2003 are examples. Regional hegemons inevitably develop overlapping spheres of interest and influence with other regional, as well as extra-regional powers, increasing the risks of miscalculation and conflict, increasing geopolitical risk. These rivalries also impact the domestic politics of weak states caught in-between competing spheres of influence. Instability generated by regional and extra-regional powers is especially apparent in eastern Europe, the Middle East and North Africa, South and East Asia. Sub Saharan Africa remains highly unstable, due in part to domestic tensions aggravated by weak and ineffective governments.

The danger of strategic competition is that rivalries play out in the domestic politics of targeted states. This has the capacity to encourage and aggravate factionalism among elites, undermine political cohesion, and reduce effective governance, increasing the risk of policy paralysis or at worst, state failure. Lebanon in 2017, caught between Saudi Arabia and Iran, runs the risk of government destabilization, or at worst civil war if competing internal factions once again take up arms. Syria is an example of a politically motivated uprising turned civil war, where the interests and active support of various regional and extra-regional powers have contributed greatly to the extent and duration of the conflict.

Proxy warfare will likely be the weapon of choice between the great and regional powers, as it was during the Cold War. Nuclear weapons will continue to act as a restraint on conventional hot wars between great powers; however, brief skirmishes between these states, such as naval confrontations in the South China Sea, or a clash in the Baltic’s, are not unthinkable.

It is noteworthy that no great power war has broken out since the second world war; this has been attributed to the stabilizing bipolar Cold War order where nuclear weapons, in the words of Martin van Creveld, “cut the link between victory and survival”. The post-Cold War era, described as ‘unipolar’ due to US strategic preponderance, saw a continuation of restraint on the part of the great powers and lower levels of interstate war; however, civil war, insurgency, asymmetrical warfare, political violence and state collapse will remain distinct challenges in the years ahead.