martes, 12 de noviembre de 2019

martes, noviembre 12, 2019

China, Brexit, and the U.S. Election — What Eurasia Group’s Ian Bremmer Expects

By Leslie P. Norton


                                      Ian Bremmer Photograph by Erik Tanner          

  When something big happens in the world—pretty much a daily event at this point—Ian Bremmer is there to explain it. The political scientist, founder of the Eurasia Group consultancy, and PBS host has lately been telling everybody about what he calls the GZero World, in which post–World War II institutions are rapidly losing influence. We caught up with Bremmer, 49, to talk about the geopolitical unwinding that has massive implications for investors. An edited version of our conversation follows.

Barron’s: You’ve written a lot about the geopolitical recession, which isn’t an economic term.

Bremmer: Geopolitics, like economics, are cyclical. People don’t recognize that because geopolitical cycles are a lot longer. We had a good run of U.S.-led global institutions [like the G-7, the seven largest advance economies], reflecting a new order after World War II. Now they’re unwinding. We’re entering an interregnum where the institutions increasingly don’t work. We need to build new ones.

Why is this happening?

It’s extraordinary when you have Western-led global institutions, but economic, political, and even military power increasingly residing outside the trans-Atlantic. The U.S. can talk about a pivot to Asia, but it’s really hard for the global architecture to do this. It’s hard to get troops out of the Middle East. It’s hard to compromise with the Chinese, who have very different institutions and values and norms.

The U.S. foreign-policy establishment once believed that as China became wealthier, it would align more with the U.S., or fail. That was just wrong. In the past three years, the biggest change was created not by President Donald Trump in the U.S. but by President Xi Jinping in China, with his anticorruption program, consolidation of power, end to term limits, the Belt and Road infrastructure initiative, and the AI 2030 and Made in China 2025 policies. This is world-changing stuff.

Are there other reasons?

A growing inability of Western governments to perform for their populations.

There’s extraordinary division with the rise of populism. Other countries, like Russia, are looking to exploit it and make it worse, and China is trying to move into the space created when the West isn’t doing much.
 
Finally, technology increasingly doesn’t serve the purposes of liberal democracies. It has moved from undermining authoritarian states to supporting them, as the data revolution [enables] surveillance data and social media. These things make the U.S. weaker and more divided, and make China and other authoritarian states stronger. That’s exactly the opposite from what technological advances achieved 10 years ago.
The United Nations secretary general recently observed that the world is splitting into two camps—the U.S. and China.

It’s more West and China-plus. When you have two groups of investors with such dramatically different views of the world, it creates a lot more volatility and risk. Right after the 2008 crisis, a number of Chinese said, “Maybe [the U.S.] economic model doesn’t really work; maybe we can move away from the dollar.” Very quickly they were disabused. It’s different now: Asians think the U.S. is in very serious, inevitable decline; that Trump is driving America off a cliff; and that the Asians are the ones doing long-term strategy. They’re also much more resistant to the kind of populism seen in so many of the democracies in the West.

Do you agree?

Not completely. I do think that U.S. influence and power is in very serious—and structural—decline. And Trump is not helping, to put it mildly. However, the U.S. is not in decline as a country. Look at the biggest objective transformations of the past 10 or 20 years—the energy revolution, the rise of extraordinary technologically and data-empowered companies that are functional monopolies. These are U.S., not Western trends. Americans aren’t experiencing the geopolitical recession the way our allies do, so we’re not incentivized to do much about it.
What countries are most affected by the geopolitical recession?

Turkey is massively affected, as America and NATO’s consistent, strong global-policeman role [is diminished]. Another group is the countries under the American security umbrella in Asia, which don’t know how to balance China’s economic rise: Japan, Singapore, South Korea, Vietnam. Then you have countries in Africa, which have been accommodated by the Chinese model and Chinese money.

Europeans are much, much more affected than the Americans—they’re a transmission belt for all the instability from Africa and the Middle East. Russia is able to do much more in terms of traditional espionage, political influence, and asymmetrical warfare on the ground in Europe, because its in its backyard.

One more point. The two countries that could best respond to a geopolitical recession are the ones that have benefited most by it: China because it represents an opportunity, and America because we’re insulated. We’re buggered. I’m sorry, you were saying?
How does this lead to a market view?

One, this is still pretty bullish for U.S. markets. Two, companies that don’t understand these changes are going to get hurt. Apple [ticker: AAPL] doesn’t get this. Its model is building the best possible consumer electronics with some privacy and data security. That’s just not going to work in China. Amazon.com [AMZN] has a much smarter model. It wants to work with the U.S. government. Its second headquarters, just outside Washington, D.C., will get a lot of big contracts, and it will be part of the infrastructure of the U.S. based Internet of Things.

Who wins the U.S. presidential election?

I don’t know. The impeachment issue is serious. There’s a low but real possibility that, if you keep having significant Republicans functionally turning state’s evidence against the president, you could start to lose some senators. The timing of the Syria [troop pullback] wasn’t great for Trump. If the Republicans do vote in favor of impeachment in the Senate, they’re basically giving up on the presidency in 2020. The bar is high. I don’t think it’s a 1% chance. I think it’s 10% to 15%.
Who will be the Democratic nominee?

Not Biden. Now that Warren is the front-runner, there’ll be a lot of money against her. I don’t think all of Biden’s support will go to Warren. A lot will be up for grabs, with more centrist candidates. No question in my mind that any of the Democrats will beat Trump by millions of the popular votes. That doesn’t mean they’re going to win the election. You’ve got to win these swing states, and Trump has a lot of money and a policy orientation that, for many of them, is very attractive. He’s also a relentless campaigner, and he likes campaigning. But he’s facing the worst set of objective facts around his administration.

What happens in the Middle East, as the U.S. steps away from Syria and tries to counter Iranian aggression?

This has been overstated by a foreign-policy establishment that hates everything about Trump. The Syrian war was lost under Obama. For legitimate reasons, the U.S. didn’t have a strong interest in Syria. We weren’t willing to fight another war there, and that’s why Assad won. Now, the Kurds have sided with Russia and Assad. It may be easier to move toward a U.N.-brokered peace settlement, in Assad’s favor. The Syrian people are getting screwed in all this, but that’s not new. The real concern is that you’ll see more attacks in the region from the Islamic State, maybe some in Europe, and maybe against U.S. assets in the region.

Regarding Iran, Trump was absolutely unwilling to support the Saudis with strikes, despite the [Iranian] attack that took 50% of their oil off the market. He sent some troops over that the Saudis are paying for, and he started a cyberattack. He doesn’t want a war. What he really wants is direct negotiations with Iran, like with North Korea. He really wants a deal. It doesn’t need to be much more than the one Obama already had with Iran that he pulled out of. [It] will be hard for Trump, because he doesn’t have a team to get the hard diplomacy done that Obama did.

Let’s talk about China and trade.

I don’t think there’s even a limited deal. The Chinese haven’t signed anything yet. They basically offered the same thing they offered when U.S. Trade Representative [Robert] Lighthizer walked away a few months ago. The only thing that has changed is that Trump is a little more concerned about the economy and his election—a little more desperate for a deal. The Chinese don’t trust Trump. Xi feels like he has given up a fair amount of political capital already, and hasn’t got anything done. So they’re willing to wait him out, particularly because they see that Trump’s appetite for further escalation with the softening U.S. economy is low. U.S.-China relations are objectively more confrontational today than they were three, six, 12 months ago. That trend will continue.

Your annual Top 10 Risks list won’t be out for a while. What is the biggest short-term risk for global investors?
The role of the U.S. on the global stage. Historically, when you think about global political risk, you think about rogues, you think about emerging markets, you think about country risk. You don’t think of the U.S. driving global political risk. That’s changing.

Thanks, Ian.

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