Ian Bremmer: The Big-Picture Trends Investors Should Watch
April 26, 2016
by Adam Jared Apt
International affairs always matter to U.S. investors, but recent changes in U.S. attitudes toward foreign policy, accompanying events and policy changes abroad are unsettling our assumptions to a greater extent than at any time since the end of the Cold War. It was therefore timely that the Boston Security Analysts Society featured, as the speaker at its annual Market Dinner in March, Ian Bremmer, a Boston native, who has established a reputation and a career as a leading independent foreign policy consultant and is the author of several books, including the recent Superpower: Three Choices for America’s Role in the World (2015).
His presentation comprised a short series of “big-picture items” that established his view of the current state of the world.
He began with technological change. The latest Davos meeting was the first in 10 years to have a theme: the “Fourth Technological Revolution.” This revolution is causing such a high degree of change across a range of industries that it is possible that in 10 years, many occupations that currently exist will be no more. Ian Bremmer cited a study by Oxford scholars that showed that 47% of the top 700 jobs in the U.S. had a high probability of disappearing.
Moreover, the role of emerging markets in the world economy has changed. For the last 30 years, he said, we have thought of emerging markets as a single entity participating in the commodities “supercycle,” with relatively low personal incomes and therefore much room for growth, and with relatively quiescent populations. In contrast, today, he’s heard that Goldman Sachs has shuttered its BRICS fund – rather late, he wryly noted, as it was down 88% from its high. We no longer talk about BRICS as a single basket of countries, and we shouldn’t. Russia is clearly not an emerging market, but rather a petro-state, and it’s not a place to believe in for the long term. India is a radically different story. Brazil, which is in trouble, may turn around, he thinks. Some of these countries are well governed, and others are poorly governed.
But, Bremmer said, if those who talk about a “fourth technological revolution” are correct, then in 10 years, we’ll once again be able to talk about emerging markets as a single basket of countries: “But not a good basket; a bad basket.” This is because they are most vulnerable to the consequences of the income and wealth inequality that Thomas Piketty has discussed in his book, Capital in the Twenty-First Century.
Bremmer argued that Piketty wasn’t really addressing issues of the middle class. He pointed out that France is a wealthy country, and indeed, all of Europe is wealthy. Even Greece, which has gone through a depression nearly as great as the U.S. Great Depression of the 1930s, has had virtually no riots, no violence, no revolution during its recent troubles, and, Ian Bremmer argued, that is because Greece is still comparatively wealthy. He said that he is much more worried about what would happen if the same dislocation were to occur among the world’s “real” middle classes, in China, say, or Brazil, where institutions are far more brittle, and the social safety nets are much more modest.