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LONDON — “It could have been worse!” say the pundits. There was no repeat of Sept. 11, and there has not been a major conflict. Nor has there been a world-shaking financial crisis. But 2002 was not a good year for many people, and 2003 may not be any better. The balance sheet is not easy to calculate, but probably the world overall is not in much worse a position than it was this time last year.

In the fight against terrorism, there have been some successes but also some serious setbacks. The Taliban were ousted from Afghanistan and the pacification of the country began, but it is going to be very difficult to complete. Al-Qaeda leader Osama bin Laden and his henchmen apparently escaped, and if the intelligence services know where, they are not letting on. Murders in Bali, Moscow, Mombassa, Israel and Palestine reminded the world that terrorism is not one dimensional.

The unanimous approval by the U.N. Security Council of the resolution on Iraq was a gain for multilateralism, but the growing pressure on Iraq, including the buildup of U.S. forces in the region, may well not ensure a peaceful outcome. Dictators such as Iraqi President Saddam Hussein will sacrifice their people’s lives and prosperity to survive.

The Israeli/Palestinian conflict worsened during the year. The cruel and insane suicide attacks on Israelis led to retaliation that resulted in many more deaths among Palestinians than had been caused in Israel. Policies based on revenge will not lead to peace, and the expansion of Israeli settlements makes achieving it more difficult. Continued American support for Israeli Prime Minister Ariel Sharon and the lack of an evenhanded approach to the conflict have sharpened anti-American sentiment in the Middle East.

The Financial Times declared U.S. President George W. Bush as “man of the year.” Some in Europe think the accolade belonged to U.S. Secretary of State Colin Powell. At any rate, it seems that Bush is now less inclined to pursue unilateralist policies. Terrorism ignores frontiers and cannot be eradicated by military means alone. Even the United States, which is likely to remain the only world superpower for years to come, must seek international cooperation in pacifying places like Afghanistan.

Sadly this recognition of the value of multilateralism and international cooperation has not yet led to any change in U.S. policies regarding the Kyoto Protocol and the International Criminal Court. It is doubtful whether the Bush administration, which continues to be heavily influenced by rightwing Republicans, can be induced in 2003 to recognize that a shortsighted view of some U.S. interests is not in the long-term U.S. interest.

In Asia the real fears that a war, possibly leading to a nuclear exchange, might break out between India and Pakistan were fortunately not realized, but the problems that aroused these fears have not been solved. Kashmir remains a major issue. Hindu fundamentalism and Islamic fundamentalism are even more of a threat to peace and stability.

During 2002 the threat from North Korea increased sharply. The tough U.S. response to North Korea’s admitted nuclear reactor program was only to be expected. Negotiations with the North Korean dictatorship, whose capacity for deceit seems boundless, are particularly difficult, as Japan discovered following Prime Minister Junichiro Koizumi’s visit to Pyongyang in September. The U.N. Security Council needs to take up the problem of the threat posed by the regime, and further efforts must be made to persuade the Russians and Chinese to pressure North Korea.

From Africa the best news was the triumph of democracy in Kenya, as the corrupt Moi regime was replaced. In Zimbabwe, Robert Mugabe, another selfish dictator whose sole aim seems to be to retain power, has not been deterred from destroying the country’s economy, causing starvation and exacerbating poverty. In South Africa and elsewhere on the continent, little seems to have been done to combat the AIDS epidemic effectively.

In Latin America, opposition to the Chavez regime in Venezuela has led to a halt in oil exports. This, combined with instability in the Middle East, has resulted in increased pressure on oil prices that could damage global economic recovery. In Brazil, President-elect Luiz Inacio “Lula” da Silva will, it is hoped, pursue economic policies that will stabilize the Brazilian economy. The Argentine economy remains in dire straits, while Colombia continues to suffer from a serious insurgency. Mexico, on the other hand, seems to have had a good year.

In the European Union the most significant development was the decision reached in December to admit 10 additional countries in 2004. This will make the EU a block of 25 countries, large and small. In 2003, progress will need to be made to find ways of improving governance of the union. There is as yet no consensus between those who want a more federalist union and those who see the union more as a confederation of fully independent states. Reform of the Common Agricultural Policy has unfortunately been put back.

The fact that the world economy did not suffer a major crisis was a plus, but the financial bear market has continued for a third year. Stock markets fell on average by some 25 percent. This has exacerbated the problem of funding pensions and has been a major blow to the life insurance industry. There have been many reasons for the continued bear market. Apart from falls in demand following Sept. 11, various corporate scandals have embroiled major U.S. companies and aroused doubts in many other countries about the effectiveness of corporate governance.

Markets have also been affected by the continuing deterioration in the German and Japanese economies, where deregulation has been slow or obstructed. There seems little reason for market optimism in 2003. The technology sector shows no signs of revival.

As a Japan watcher, one of the saddest things for me has been the general pessimism about the Japanese economy. Japan is rarely in the news these days, and when it is, the news is mostly gloomy. It seems unlikely that there will be much change in this situation in 2003.

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