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2017 Forecast: Year-end Report Card

Dec. 21, 2017 It’s time to look back on how we fared this year.

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It’s December, a month that for most companies means the year is winding down and vacation is just around the corner. For GPF, December is the busiest month of the year, and there is no rest for the weary. In addition to our regular offerings, we publish our two most important analyses: the annual forecast for the coming year and our report card, a document we use to assess our performance during the previous year. Of the two, the report card is arguably more important for a simple reason: It’s easy to forecast, it’s hard to forecast correctly, and it’s harder still to hold ourselves accountable in such a public forum.

Overall, our 2017 Forecast was less accurate than our 2016 Forecast. In some areas we shined, thanks to our predictions of Russia’s internal struggles and the general trajectory of U.S. foreign policy. In other areas, though, we fell short of the standards to which we hold ourselves, particularly in North Korea and in the marriage of convenience between Turkey and Iran.

The full report is included as a graphic below. It contains an exhaustive list of our forecasts of 2017 and the reasoning behind the grades they earned. But before you peruse a year’s worth of our successes and failures, we’d like to draw your attention to a few highs and lows.

The Lowlight: North Korea

Let’s start with the bad: North Korea. In our 2017 Forecast, we rightly said there would not be war on the Korean Peninsula, but we also said the North Korea issue would be negligible, for lack of a better word. It didn’t take long for us to realize that we were wrong as tensions began to flare early into the Trump presidency. We misjudged how far along North Korea was with its nuclear and missile programs and so ignored how strongly the U.S. would react to North Korean provocations. We promptly issued a correction in March, but our correction was in fact an overcorrection insofar as we said the U.S. would strike North Korea by year’s end. Embarrassingly, we predicted both war and peace on the Korean Peninsula in the same calendar year.

Needless to say, our North Korea forecast earned an “F” in our internal valuation. The reason for our mistake was complacency, the unrelenting enemy of analysts. For years, North Korea had issued threats and tested various devices, and we assumed 2017 would be no different. It is a sobering reminder of the importance of context and detail. Had we more carefully understood North Korea’s technological advances, we would have seen that North Korea was going to cross a line and that Washington, one way or another, would have to respond. Our mistake in predicting a U.S. strike before the end of the year was more forgivable. It came not from complacency but from a misreading of South Korea’s imperatives. Our analysis indicated that Seoul would go along with a pre-emptive U.S. strike. South Korea has not gone along. In fact, it has obstructed conflict at every turn.

It’s an unfortunate blemish on an otherwise sterling forecast for the East Asia region. But we were wrong. We have internalized the reasons for our mistake, and we enter 2018 having learned some valuable lessons.

The Highlight: China and Europe

Fortunately, we learn as much from our successes as we do our mistakes. And our forecasts on China and Europe were right on the mark. In China, we correctly said President Xi Jinping would tighten his hold on the reins of power to become a dictator in all but name. We also correctly said that in spite of Xi’s liberal use of stimulus to pacify the public ahead of his coronation, the government would be unable to solve its structural economic problems. The two forecasts are equally important because they are fundamentally related. Xi’s coronation, we said, was not a validation of China’s strength; it was an indictment of its weakness. For all the talk of China’s supplanting the U.S. as a global power, the country is still poor and politically divided, unable to bring wealth – and thus social stability – to its impoverished interior provinces. The next few years promise to be tumultuous as Xi, with all the power he can bring to bear, tries to save China from itself.

In Europe, we said there would be renewed calls for secession and independence from the Continent’s untamed regions. That is exactly what happened. Catalonia voted to leave Spain, forcing the government in Madrid into its worst political crisis in decades. (The issue remains unresolved.) Regions in northern Italy found broad support in their calls for autonomy. Even in countries such as the United Kingdom and Germany, two unquestioned European powers, secession was an issue. The status of Northern Ireland and Scotland continues to impede Brexit talks, while political divisions in various German regions have greatly complicated coalition talks for the new government. On both these issues, we fared exceptionally.

The Pale Light: Central Asia

The last area we would like to bring to your attention is Central Asia. In the spirit of transparency, we admit that we struggled to assess ourselves fairly in this region. We said economic duress – brought on by reduced oil revenue and the financial problems in Russia, to which their economies are so closely tied – would destabilize the region. True enough, Central Asian countries had their fair share of economic hardship, and their residents expressed their fair share of discontent. But “destabilize” can mean all manner of things, and we never really defined what it meant. And if we can’t make ourselves clear, then we can’t hold ourselves accountable.

We therefore gave ourselves a “B.” The forecast was correct, but it was not nearly as clearly articulated as it should have been. Our point was not that there would be revolution or outright warfare. Our point was that Central Asia would become fragile, surrounded as it is by geopolitical forces from Asia, Europe, the United States and Russia. So far, Central Asian states have persevered, in no small part because of the longevity of the authoritarian regimes that have governed them since the fall of the Soviet Union, but this is no permanent state of affairs. Kazakhstan and Uzbekistan must answer questions about political succession. Every country has economic issues it must manage. As people struggle to make ends meet, they often turn to ideology to cope. Enter Islam, which can play a similar role in Central Asia as it has in the Middle East. (The November attack in New York, after all, was carried out by an Uzbek transplant.)  “Destabilization,” then, meant the ruling class would lose legitimacy, unable as it was to solve its countries’ economic problems. Such was the case in 2017.

Our report card, and indeed our entire methodology, is based on accountability. We make forecasts, and then we spend the rest of the year attempting to break them down, looking for the things we missed. We try to always be right, but when we’re wrong, we admit it, explain why and attempt to forecast once more. Like I said, no rest for the weary.

Jacob L. Shapiro


(click to enlarge)