The world will enter a geo-political “recession,” according to Ian Bremmer, resulting in a large list of failed states. The U.S. will be relatively insulated from that crisis, but faces its own challenges driven by globalization and wealth inequality.Image source: The Blue Diamond Gallery
Bremmer is the president and founder of Eurasia Group, a leading global political risk research and consulting firm. He delivered a keynote address yesterday at the Schwab IMPACT conference in San Diego. It is the industry’s largest conference, with approximately 2,000 advisor attendees.
“We are used to boom-and-bust cycles,” he said, “like recessions every seven to eight years. But we don’t talk about geopolitical recessions, because the cycles are much longer.” Bremmer said the last time the world fell apart was after World War II. When it did, we rebuilt the world with U.S.-based values and standards – indeed, he said, globalization became Americanization.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
A profound geopolitical recession
Now we are entering a period of profound geo-political recession, according to Bremmer.
The U.S. will not be badly affected, nor will be Japan or China. To understand why, consider the U.S. approach to the risk of terrorism, which is part of what is driving the geopolitical recession. Terrorism is a problem in the U.S., Bremmer said, but nowhere close to the concern it is in Europe, which is nowhere close to the level of concern in the Middle East. Angela Merkel, who Bremmer said is the strongest leader in Europe, took the lead in the refugee crisis. That was “massively courageous,” he said, but can’t be called leadership, since nobody followed her. Merkel offered to pay Turkey to keep refugees, he said, after German citizens pushed back when she tried to increase immigration.
The Middle East could count on oil money and stable populations, according to Bremmer. Now, OPEC has been “fundamentally destroyed,” he said, and the U.S. is no longer willing to provide military support to those countries. As a result, popular unrest will turn Syria, Libya, Yemen, Iraq and Afghanistan into failed states, among others.
“The biggest refugee crisis and the worst terrorist organization in history are not a problem for the U.S., China and Japan,” he said.
The challenge, according to Bremmer, is that there is no pressure on U.S., China or Japan to do anything about the refugee and terrorism crises. As a result, there is no support for the TPP and an “America first” attitude has gained popularity.
Bremmer said the recent criticisms of the U.S. by Philippine President Duterte were similar to events in the U.K. a year ago. The U.S. pressured the U.K. to not join the China-led infrastructure bank, because it would compete with the U.S.-led World Bank. But the U.K. joined anyway to show the Chinese that they were independent of the U.S., he said, and to encourage China to invest in U.K. nuclear facilities.
The Philippines looked at South China Sea and saw that America was turning away from the region, according to Bremmer, and said “let’s get on board with the Chinese.”
The U.S. is stable and not in decline, according to Bremmer. China will be the largest economy in 10 years but we will have by far the best military and will be the leading producer of food and energy. “This is not a bad story for the U.S.,” he said.
“But our footprint globally is decreasing,” he said. “Our allies are looking for alternatives, and the one that is at the forefront is China.”
By Ian Bremmer, read the full article here.