Possible Tipping Points in 2012

In 2002, Malcolm Gladwell wrote a fine book on "tipping points", the places where small changes can result in huge shifts in what happens next. Different patterns, events and energies have come together, often unnoticed. Then a single event happens that sets in motion a host of new and often unexpected happenings. Something new is emerging, that only a short time before the triggering, or "tipping" event, would have been difficult to predict. Later, when people know what to look for, the pre-tipping point currents are visible (as they would have been before, if you knew what to look for).

Tipping points of historical importance are infrequent. As Newton told us, a body in motion tends to stay in motion. Things tend to go on as they have been going.And there's another Newtonian Law - to every action there is an equal and opposite reaction. So when some force pushes for change, other elements resist.

So what are some good examples of what I consider historical tipping points? The Declaration of Independence, which declared that "all men are created equal, with the right to life, liberty, and the pursuit of happiness." This had never been declared before. It had been thought about, written about. But it was the declaration of these words that created new possibilities and tipped the Western world toward democracy.

The Emancipation Proclamation, that corrected a fundamental flaw in the Declaration, and set in motion a chain of events that we are still working out today. The Assassination of Archduke Ferdinand, which set in motion a chain of events that led to World War I. The Japanese attack on Pearl Harbor, that stopped the powerful American isolationist movement in its tracks, bringing the US into World War II. And 9/11 that initiated the War on Terror.

And more recently, on December 17, 2010, Mohamed Al Bouazizi, a Tunisian fruit vendor, set himself on fire in protest of government policies. He died on January 4, 2011. Ten days later, Tunisia's President Ben Ali fled with his family to Saudi Arabia, and the Arab Spring had begun.

So the tipping points I am looking for are big deals, true pivot points in history. Looking to 2012, I see four possible tipping points:

          * collapse of all or part of the Eurozone
          * fracturing of the Republican Party
          * Iran standing down on nuclear weapons
          * Israeli-Palestinian two-state peace agreement





Let me take each in turn:

          Eurozone: I think there is a two out of three chance that one or more countries will exit the Eurozone in 2012. Why would this be a big deal? First, because it will be a gigantic economic mess that will certainly put us in a deep recession, and will likely involve the failure of one or more European banks, and one or more US banks. Back in crisis mode, we will have a chance to undertake the significant financial restructuring we failed to do in Round 1. We can finally hold one or more banks accountable for their past/ present malfeasance and mismanagement, and make it clear to markets that TBTF is over. Also, believe a second crisis could finally give us a chance to provide significant support to underwater homeowners on a scale that would make a huge economic difference.

The second reason a Eurozone breakup or restructuring would be a big deal is that this could put a marlinspike straight through the heart of the IMF/EU/ECB neoliberal orthodoxy that austerity works to generate growth and reduce deficits/debt. The world is simply dying economically under the weight of this bad economic thinking, negatively affecting the US and the UK, in addition to the Eurozone.

Austerity does not work. Period. Austerity only begets austerity, not growth. A Eurozone failure will give us a chance to reexamine the disastrous austerity/no deficits neoliberal agenda.

And finally, the German-French dominance of the rest of Europe through a kind of economic terrorism, forcing "technocratic governments" into place in Greece and Italy, moving economic decision making in key parts to a non-democratic Brussells' center, punishing the "lazy and irresponsible South Europe" in a kind of medieval morality play, goes completely against the upwelling of freedom and individual dignity that seems to be a deep current elsewhere in the world (Occupy protests, the Arab Spring, the democratic loosening in Myanmar, the new protests in Wukan, China, etc.).

I don't much like seeming to advocate for pain. A very good friend recently told me: "Watch out what you wish for." And I cannot claim I am indifferent to this scenario. If the ECB steps up and commits to underwriting sovereign European bonds, the crisis will most likely pass and I will feel an opportunity will have been lost to clean up our act and readjust certain key parts of our economic perspective: we must become Keynesians again, or we will sink into depression.

My forecast (mentioned above): 2 out of 3 chances that a Eurozone breakup/restructuring will happen in 2012.


          * Republican Party: I think there is a 50% chance that there will be a significant third party, conservative candidate if Romney wins the Republican nomination, and, if this does happen, a 50% chance that this will lead to an effective fracturing of the Republican Party. In other words: Romney has to get the nomination (Intrade puts the odds of this at 80%). Then there is a 50% chance of a 3rd Party run, and a further 50% chance of this leading to a true rupture in the GOP. Multiplying 80% x 50% x 50% gives us an overall (from my viewpoint) chance of a GOP rupture at 20%, or one chance out of five, not very high odds, but still a possibility.

Why would this be important? In my opinion, America needs two moderate parties (center-left and center-right) competing aggressively against each other. I believe we have become almost incapacitated as a country due to the hard right movement of the GOP. The parties appear incapable of working together to address America's problems. There actually is some overlap in agendas on domestic policy (tax reform, spending/deficit/debt reduction); but when it looks like some Grand Bargain may be reached (the Obama-Boehner talks during the debt ceiling fiasco), the deals mostly blow up, because conservatives don't want to give Obama a win (even if their side gets a win too).

If there is no 3rd Party, and Obama manages to win in November (beating Romney), I believe conservative commentators will simply say that Romney was not a proper conservative. But if the Party has a true rupture, continuing after the election (and Obama's big win), it is possible (though not certain) that Republicans will say we need to move the Party back to the center, and a new moderate GOP will begin to emerge.

My forecast: One in five chance.


          * Iran: I do not think Obama will initiate a strike on Iran, nor will he allow Israel to strike on their own. There will be a lot of pressure on both Obama and Israel to launch such an attack, but I believe the voices for attack will not win the day. This would change completely, in my opinion, were Iran to try to blockade the Straits of Hormuz. If this happens (very low probability), we will attack shipping, air, and command/control assets to break the blockade, but do not feel we would move inland to bomb the country's nuclear facilities. Conservatives would be screaming for it, but I feel Obama's position would be the following: Short of all out war, the only way to get Iran to not go weapons nuclear is to have them make that decision themselves. If we bomb their facilities, we are just delaying the program, not ending it. They must make their own decision to disavow nuclear weapons, concluding that it is in their own interests. 


Why do I think there is a chance they will make that decision in 2012? First, I am assuming Iraq holds together in some sovereign, more or less manageable political form. If Iraq collapses, and Iran is able to take effective control through al Sadr, then the hegemonic ambitions of Iran will be hard to stop and they would most likely press ahead for nuclear weapons. Second, I am also assuming Bashar al Assad will be thrown out in Syria, and some form of national unity Sunni political party will take charge, effectively ending Iran's powerful influence in Syria. Over time, this would weaken Lebanon's Hezbollah, which has counted on Syria, as well as Iran for support. This will probably cause Hezbollah's leader, Hassan Nasrallah, to moderate his Shiite group somewhat; for they now will be going solo in a sea of Sunnis.

With Iraq holding on, Syria gone, Hezbollah isolated, and sanctions clearly starting to bite, Shiite Iran may decide it's time to let go of its regional hegemonic ambitions, and join up with the evolving Middle East (and beyond), before the Arab Spring becomes the Persian Spring. And my guess: if there is a second Green Revolution, this one will not end peacefully, after the examples of Libya and then Syria. Iranian leaders may want to head this freedom energy off at the pass. Making a deal with the West, removing the sanctions, and rebuilding the economy may soon appear to be a better route to regime maintenance than going nuclear,

My forecast: one in three chance.


          * Israel: We have learned one thing about Israeli-Palestinian peace negotiations: the US will never be able to force Israel to accept a peace agreement, or a two state solution that they do not want. So what's going on that might encourage Israel to actively seek an agreement? First of all, the current and potential changes happening in Egypt. The coming to power (eventually) of an Islamist coalition, at some point (I believe) moving into a true power-sharing arrangement with the Egyptian military, must give Israeli leaders great pause.

Second, if Assad is thrown out of Syria, and a Sunni coalition takes over, Israel has a second potential Islamist state on one of its borders. It would seem like it might be better to make peace and agree to the two state solution, to take the Palestinian canker sore off the region's radar. I will be accused of naiveté; but I have always believed that when the Israelis decide peace (and a two state solution) is desirable, they will find a way to make that peace secure and safe for Israel's future, backed by US guarantees.

Nevertheless, I do not think Israel will finally move towards peace and a two state program until Iran is credibly out of the nuclear weapons business. So if Iran "tips", following Syria's "tip", then I think there is a fair chance for peace.

My forecast: one in six chance.


It is possible none of these "tipping points" will happen in 2012, though my bet is that at least one will. So let's wait and see. 2012 promises to be an eventful, potentially history-changing year.