By David Born and Christian Krys

In Trend 6 of our Trend Compendium 2050 we analyze trends in the political sphere. We look at the future of democracy, governance challenges, and geopolitics and global risks.

Future of democracy: Democratic erosion is on the rise

The decline of democratic traits accelerates: Autocratization trends and dissatisfaction with democracy are rising developments in many democratic countries. Dissatisfaction is more pronounced in younger generations than in older generations. Many citizens in democratic countries believe that the political system needs to be comprehensively reformed. To strengthen the future of democracy, participatory citizen engagement is key.

The future of democracy lies in the accountability of its leaders, the protection of fundamental freedoms, a free media and a strong and engaged citizen voice. These days, participation in the political process is increasingly taking place digitally: Citizens can now make their voices heard not only at the ballot box. Public opinion is increasingly formed via social media and online platforms.

Globally, voter turnout has been declining for years although nationally the picture varies. Looking ahead, 2024 shapes up to become a bumper election year with several important nations casting their votes. Meanwhile, world leaders in liberal democracies are united to combat democratic backsliding and authoritarian trends.

Governance challenges: There is much to do – in many areas

Good governance is characterized by sound levels of participation, equity, effectiveness, transparency, accountability, strategy and the promotion of the rule of law. International organizations measure indicators of good governance. They use them to make countries and regions comparable and show where there is room for improvement.

Governments also encounter uncharted territory in accomplishing their tasks – and in some cases, quite literally. For example, due to climate change dealing with the Arctic is becoming a strategic challenge for national governments. New shipping routes are possible, resources are becoming accessible. As a result, the Arctic is garnering the attention of governments beyond its immediate area. Due to technological progress and entrepreneurial elan, space is also becoming an area where a growing number of actors require a new global regulatory regime. A prominent example of concerted efforts by governments is the issue of international taxation.

Geopolitics and global risks: The future of the global power balance appears to be in a state of flux while global risk perceptions have shifted from the economy to the environment

With the number of conflicts on the rise, persistent and emerging geopolitical flashpoints threaten the political stability of nations and regions. Conflicts, tensions and regime changes cause humanitarian crises. Increasingly, power battles also take the form of other methods, such as state-sponsored cyberattacks.

There is hope that in the future, digital technologies such as AI will be used in conflict prevention as part of international early warning systems. Soft power exerted via trade sanctions will continue to play an important role in managing conflict through non-military means.

Compared to previous years, global risk awareness has shifted from the economic to the environmental. With a view to the next ten years, half of the top 10 risks are concerned with effects stemming from climate change, environmental damage, biodiversity loss and resource crises.

International risk mitigation efforts are comparatively advanced in areas concerning trade, crime, and the financial system, yet they are perceived as insufficient in areas of AI, biodiversity, and climate change.

How companies can take advantage of megatrends

When companies invest, they need to consider and compare local and national regulations to evaluate the potential success of doing business in a country. Recent developments such as the rise of autocracies and trade conflicts make it clear that these assessments of the regulatory business environment are very important and must continue once active in a country.

Companies are faced with increasing scrutiny from a variety of stakeholders concerning the way they run their businesses – at home and abroad. To avoid potential pitfalls, companies need to be clear as well as consistent in what they are saying and what they are doing.

Beyond legal compliance, standards, self-regulatory codes of conduct and guidelines, having evolved from industry bodies and associations, are of high importance. Companies should contribute to such bodies to define standards, particularly in areas where frameworks are only just emerging or are facing an overhaul.

For companies, dealing with risks starts with risk awareness, how risks relate to their business activities, and the ability to develop a strategic risk response. Improved risk management capabilities make companies robust and open up opportunities that arise from risks.