14 Jul 10 The New Deal

Those of you who are regular readers of my blog will be familiar with my view that the real impact of any recession is felt when the economists call the recession over. It’s only after a recession is technically closed that the real driving forces of change (I’m talking primarily political and socio-demographic drivers here) come into play. If you’re interested in the phases of change that I think come after the economically declared end of a recession – take a look at this post – Navigating the Waves of Change.

Martin Wolf makes a good job of focusing our thinking on the post recession world in his article Three Years and New Fault Lines Threaten[1]. Apart from supporting the view that there is more turbulence ahead (especially for the developed economies), he draws attention to:

(a) The fact that the “deals” that we have been used to in the developed world are bust – permanently bust. These deals are, in Europe, the great social safety net and in the US the goal of full employment.
(b) Potential problems with the “export panacea”. There are calls, particularly in the developed economies of the UK and US with a high financial services sector dependency, to go back to a tangible goods export-based economy. But the point that Wolf makes is that this in turn exposes the exporting countries to a range of risks (not just economic) within their foreign target markets.

So where could we be going?

Wolf points to the real dangers of deflation and the double-dip recession.

If these do events occur, then many, if not all, of the assumptions that we have made about globalization will seem like a Panglossian dream.

Consider:

• New political and economic alliances
• Economic “iron curtains”
• The prospect of significant political change especially in the hardest hit of the developed economies.  If the “deals” that consumers in the developed world depended upon are dead then consumers will look for new sources of security.  In the dim light of a slow, largely jobless recovery, even the sight of a centrally state planned economy  could look like an attractive New Deal.

And who said that we just had to sit this one out?

References
[1] Wolf, M. Three Years on and New fault Lines Threaten. Financial Times. July 13 2010.

Tags: communism

15 Jun 10 Waiting for change

My proposition has always been that it is the period after a recession that is most relevant for business strategy. Typically, changes in, for example, consumer behaviour that we witness during the recession are merely short-term reactions.

The time to get out and find out how customers’ needs are more permanently changing is after the recession. In the past I have predicted at least two waves of permanent change in customers’ needs and behaviours during the months and years after the official end of the recession. The first change being the realisation that we are not returning to the pre-recession halcyon days of debt-fuelled growth, the second wave taking place when the macro economic structure of countries (such as the highly financial services dependent UK) changes, again to reflect the new reality.

Recent research[1] tells us that this first post-recession wave of change has not yet started. This survey reveals that under 1 in 4 (23%) feel that the UK’s government’s impending austerity measures will affect them. So a surprise is in store for many.

It is also the time for astute businesses to identify the emerging needs and behaviours that may shape business strategy for the next decade.

Reference
[1] Eaglesham, J Pain message yet to be heard, says poll. Financial Times. June 14, 2010

Tags: business strategy, consumer behaviour, customers needs

27 May 10 Creative Destruction: The political dimension

Get a group of people in a room and ask them what the drivers of change are  – the forces that could reshape the world we live in.  I would hazard a guess that the list of change drivers that we would generate would be headed up by:

• Climate change
• Energy supply
• Sustainability
• Technology, e.g. Web 2.0
• Economic prospects
• Food supply

The problem is that, at least in Europe, there is another force staring us in the face that has the potential to drive through change that just 3 months ago would have been inconceivable.  And that is the force of New Politics.

This issue has surfaced in earlier posts.  For example, New Politics is on my list of trends to watch. Other posts include The Seeds of Change and Greece, Debt, Contagion and Political Change.

The scale of change that we could see across Europe and other members of Bloc #3 – the losers of the great recession – could be immense and the position with regard to Europe (or rather the end of Europe as we know it) is summarised by Etienne Balibar[1]. The major points in Balibar’s article are:

1. Europe does not consist of a series of aligned economies. Efforts to do so have failed. I would also add that the concept of aligning states around their  geographic proximity is a dated one and does not reflect the global value chains that have emerged over the last 10 – 15 years.  The idea of geographic proximity as a mustering point goes back way before the Internet age to the early 1950s.
2. A sound economic system relies on “trust” and trust is a product of (i) a stable currency, (ii) a rational system of taxes and (iii) policies aimed at ensuring full employment (Europe in its present state could fail all three of these tests).
3. We are facing a new economic order that fundamentally challenges the macro-economic structure of most, if not all, developed economies. In my view, the coming decade could well be “The Great Battle for Jobs” as employment in both the public and financial service sectors shrinks in the developed world. In Balibar’s words “Europe, or most of it, will experience a brutal increase of inequalities: a collapsing of the middle classes, a shrinking of skilled jobs, a displacement of “volatile” productive industries, a regression of welfare and social rights, and a destruction of cultural industries and general public services”.
4. It is the last point, The Great Battle for Jobs, that could well stimulate political change driven as Balibar puts it “from below”.
5. The real problem is that Europe faces at least in part a political vacuum – the politics of the last decades have lost credibility – so what will fill the vacuum?

These are critical issues to consider now.  Here are some potential questions that should be debated:

(a)  Could Europe dissolve?

(b)  Could a two-tier Europe (with possibly separate currencies) emerge?

(c) Could a new economically aligned group appear – with members not limited to mainland Europe?

(d) Which countries are exposed to the risk of political change and unrest?

(e)  What form could “New Politics” take in such countries?

(f)  What impact could New Politics have on the business environment and your organization’s strategy?

These are not just questions of theoretical intellectual interest. The forces of change are staring us in the face.

Reference
[1] Balibar, E. Europe is a dead political project. The Guardian. May 25, 2010.

Tags: europe, neo-libralism, new politics, political risk

26 May 10 Fragmentation or Sustainable Recovery?

Every morning I spend about an hour or so scanning news feeds from a range of sources with the primary of objective of updating my database of world trends – and of course getting ideas for blog posts!

Living here in London we have a saying about buses. When you’re waiting for a bus (sometimes longer than anticipated) they arrive together at the same time. Sometimes articles and thoughts in news feeds are the same.

This time it’s the turn of commentary on the prospects of failed globalization and the emergence of a fragmented world – something that regular followers of my blog will be familiar with.

The first to hit my screen was a piece by Robert Kagan[1] pointing towards the signs of increasing US isolationism and more particularly a feeling in some countries that if the going gets tough in terms of future military stand-offs, then the US might not be there to back them up. Incidentally, if you want a view of the challenges facing globalization try reading Kagan’s book The Return of History and the End of Dreams.

The second[2] was the issue of North Korea and the implications of a regime collapse fuelled, interestingly, by failed attempts at state controlled capitalism. Apparently, East Germany went down a similar route immediately before the collapse of the Berlin Wall. The process of North Korea’s collapse could of course bring the first test of the US’s willingness to open a third front bringing us back to Kagan’s point. For those of you interested in looking a a range of scenarios around the collapse of North Korea, please see O’Hanlon’s work[3].

The third article[4] took really the same underlying perspective as the second, of nations and interests seeking recognition on the world stage, warning that a failure to find a lasting settlement in the Middle East could spawn a new wave of international instability.

So, what has all this to do with business and strategy?

Well quite a lot. The President of the World Bank, Richard Zoellick[5] points out that the challenge for us all, but particularly the developed economies, is securing sustainable growth. From the perspective of the developed economies (and arguably even more so for those in my bloc #3 – the Great Recession’s losers), sustainable growth depends upon investment in and demand from the developing world.

So a sustainable recovery depends upon a largely united world.

References
[1] R. Kagan, “A hollow ‘reset’ with Russia,” The Washington Post, May. 2010.
[2] I. Bremmer, “Dangerous Insecurity,” The New York Times, May. 2010.
[3] M. O’Hanlon, “North Korea Collapse Scenarios,” Brookings, Jun. 2009.
[4] S. Hariri, “Mideast peace: It’s a global issue, says Lebanon’s prime minister,” Los Angeles Times, May. 2010.
[5] R. Zoellick, “Look to the developing world,” FT.com, May. 2010.

Tags: capitalism, fragmented world, globalization, north korea, world trends

14 May 10 Euro and New Politics

In my review of major trends to watch I talk about New Politics – in short the prospect of quite fundamental change in the political environment due largely to the toxic confluence of the end of consumerism and austerity.  If you want to explore this concept further Kagarlitsky[1] paints a succinct, but challenging, scenario. Broadly, the main points made are:

1. Greece’s loss of economic determination (when joining the Euro) eroded the power of the electorate. The electorate therefore feels distant from the true economic decision-makers.
2. Even if the current levels of unrest can be managed, with the prospect of more economic problems ahead, there is bound to be more social unease.
3. With other European economies in doubtful positions such social tension could spread.

Ultimately, the impact will be felt in the political arena. A trend to watch.

Reference
[1] Kagarlitsky, B. High Price of Losing Economic Sovereignty. The Moscow Times. May 14, 2010

Tags: euro, greece, political risk, scenario

22 Apr 10 Who will be the new Masters of the Universe?

The current debate on the size of bankers’ bonuses and new regulation approaches emerging from both the US and EU may miss the most important point. The most important point is that the developed economies’ grip on the international institutions that shape the working of the global economy will weaken and faster than you may think. Just take a look at a new 40 year study of economic prospects published by the Carnegie Endowment[1]. If we look at their low growth scenario (and being a contrarian I think that may be the one to look at) we can see that:

(a) Only the BRICs exceed an average annual GDP growth rate of over 2% during the period 2010-2050.

(b) Some of the developed economies actually go into reverse post 2030 (Japan, Germany, Italy) – the remainder of the developed economies barely growing at all post 2030. The UK manages only some 6.7% total real growth during the period 2030-2050, France 4.7%. The US is the only battle-hardened survivor to achieve significant growth in this period. Brazil, India and China are all achieving stellar growth rates of over 60% whilst all this is going on.

Ah, but 2030 is too far ahead for the warning bells to be ringing you may say. Well, let’s look at growth rates projected 2010-2030. Here we see this picture emerging:

(I) Italy, Germany and Japan’s total real GDP growth 2010-2030 is in the region of 12-15%.
(II) Brazil, India and China all enjoy at least 60% growth.

Using the proposition that economic growth rates are a good leading indicator of the balance of political power, there are some big changes going to occur over the next decade. The BRICs will emerge as the true architects of regulation and as this article reveals[2], they are on a mission. To quote Brazil’s President:

“At the Group of 20 summit, we [the BRIC members] proposed anticyclical policies, market regulation, curbing tax havens, and renewal of the Bretton Woods institutions. On this last score, we are determined not to let the incipient signs of recovery in the global economy serve as an excuse for abandoning a democratic remodel of these organizations. The BRIC members have not injected nearly $100 billion into the International Monetary Fund just to leave everything as it was before.”

“The collapse of financial markets revealed the failure of paradigms previously considered to be unquestionable. Truths about market deregulation collapsed. The ideal of a minimal state also collapsed. The easing of labor rights is no longer a mantra to fight unemployment.

When all these orthodoxies collapsed, the visible hand of the state protected the economic system from the failure created by the invisible hand of the market.”

So, we had better listen to what the BRICs have to say now if we want to get a glimpse of what regulation and the global business environment will look like 5 plus years from now.

There are three messages here:

Message #1: The real influencing architects of the business world will be China, India, Brazil and potentially Russia. Those developed economies in bloc #3 (see this post) will fade quickly in terms of influence.

Message #2: Are the above views of  “Capitalism 2.0″ considered in your strategy?

Message #3: What growth assumptions are in your business plan?

References
[1] U. Dadush and B. Stancil, The World Order in 2050, Carnegie Endowment for International Peace.
[2] L. da Silva, “Brazilian President Lula: BRIC countries must forge a transparent system of global governance,” The Christian Science Monitor, Apr. 2010.

Tags: economic growth rates, economic prospects, gdp growth rate, IMF, international institutions

08 Apr 10 Thoughts of an L-Shaped Recovery and Future Worlds

Overview
This post considers the implications of a long , slow L-shaped recovery in the developed economies. The outcome could be a divided world, with the developed economies split into two groups or blocs. In the scenario presented here, the lasting effects of the Great Recession are felt as seismic changes in both the political arena and consumer behaviour. There are material implications for businesses ranging from choice of markets, definition of customer segments through to sources of competitive advantage.

Introduction
The dominant thinking at the moment is that there is a real risk (at least in many parts of the developed world) of an L-Shaped Recovery, in other words, a protracted period, possibly measured in decades, of very low levels of economic growth. And all this will take place whilst the emerging economies power ahead.

The voices supporting this view include, for example, Butler[1] Johnson et al[2] and Wolf[3].

The arguments underpinning the L-Shaped “risk” range from (I) the high levels of national debt that weigh-down the developed economies[1],[4], (II) the real danger of another consumer-debt fuelled boom if confidence returns too quickly[3] to (III) the need for economies with a heavy dependency upon the financial services sector to return to a more traditional, export-led, foundation [5].

So, economically, what might an L-Shaped recovery look like? The National Bureau of Economic Research[6] is looking at a four-year recovery period for employment here in the UK – a situation that may well apply in other economies too[7].

The research arm of one major bank[8] is looking at GDP growth for the UK averaging 1.8% 2010-2015. And that’s the middle-ground scenario. The best scenario produces a six-year average annual growth rate of 2.4%, the worst scenario an average of a mere 1.4%.

The Carnegie Endowment’s scenario of the world order in 2050[9] points to relatively low average growth rates for the developed economies during the period 2009-2050:

UK 2.1%
France 2.1%
Italy 1.3%
Germany 1.4%
Japan 1.1%

The US does somewhat better in this projection, averaging 2.7% GDP growth, but all these projections must be contrasted with annual average growth rates well in excess of 5% over the next 40 years for India and China.

Other observers talk of the “W” – another period of economic contraction following an all too brief recovery. The new banking sector stress tests announced by the FSA[10] that factor in unemployment rising to 13.1%, give us a snapshot of the worst probable outlook for the UK.

With so many brains pointing towards, at best, a prolonged period of sluggish growth, we must ask the question “what will this mean for business?”

A conventional answer might be “belt tightening” and “preparing the business for real strong recovery – whenever it appears”.

But the implications of a slow, lumbering L-Shaped Recovery are far, far deeper.

The problem is that talking about the future in purely economic terms clouds our eyes and takes our attention away from what the real emerging issues actually are.

Two Elephants
I will argue that standing in the darkness, right in front of us, are two elephants. And we really need to consider, right now, the messages that these elephants bring for businesses in the developed world.

Elephant #1: The Political Scene
Both elephants are very closely related in terms of their DNA, but I will start with implications for the political environment. I will write here largely with reference to the UK, but the broad implications hold, I will argue, for most developed economies – including large swathes of Europe.

Some interesting research has been published here in the UK during the past few months that strongly indicates growing political ambivalence[11] on the part of the general public. In other words, a lack of faith or confidence in the established political parties.

Other observers[12] argue that the financial crisis has dealt a final death blow to the liberal views that have under-pinned both the western political establishment and the rush to globalization over the past decade or so[13].

There is already some evidence that support for new political groups is emerging.[14]. Some even say that communism could fill the space left by capitalism[15].

Without doubt a vacuum is forming. If nature abhors vacuums, we must ask what will fill it. Here in the UK we now face the real prospect of either a hung parliament or, at best a winner with the slimmest of majorities. Both outcomes would return us to a period of short-lived governments and provide, probably in two – three years time, an opportunity for new voices to fill the vacuum and punch above their weights.

But be under no illusion, this is not just a problem for the UK. As I have noted in an earlier posting, the developed economies are fragmenting into two groups – those that have weathered the storm in a reasonable shape (US, Canada and Germany for example) and those that emerged with higher levels of debt and a reduced level of public support for the necessary corrective measures[16], [17], [18] The so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) come to mind, with the real risk of sovereign debt default[19].

But there could be other nations queuing up to join this club too.

It is in these developed countries, the real losers in the Great Recession, that the most fundamental of changes could be witnessed.

Rather than producing a united world, in this scenario, the Great Recession will have produced very much a divided world with the developed economies split into two distinct groups.

So, the ground is set for some major changes in the political environment in elements of the developed world. As an example, the long-awaited May election here in the UK could be the last to be dominated by three long-established parties. The landscape for the post-2010 election could be far different, with new entrants taking influential positions and, potentially, the place of one of the traditional “big three” parties.

Elephant #2: The Socio-Demographic Scene
All this brings me directly to the second elephant, which shares much of the DNA of the first.

In the final analysis, the shape of the post “Great Recession” world will be decided by the public, not economists’ projections, and the going will be challenging for the consumer during the L-Shaped Recovery:

• There is the prospect of a jobless or a near jobless recovery as developed economies face the challenges of industrial re-orientation and competitive employment pressures from those emerging economies that continue to power ahead[20].

• Getting credit will be difficult (as it will for businesses in this scenario). This applies especially in the UK where doubts have been raised regarding capital availability to fund a recovery[21].

• Social bifurcation becomes an increasingly significant issue in developed economies. In short, the gap between the “haves and the have nots”. This is again a notable problem in the UK where some areas have not yet recovered from the late 1970s recession, let alone the current challenge[22]. Some argue that the demise of industry and the rise of financial and professional services have only added to this divide[23],[24].

Again, we are faced with an emerging vacuum. The L-Shaped Recovery signs the death warrant for debt fuelled consumerism and everything that went with it. In the eyes of many, free markets and globalization will have failed to deliver. So again we have a question, this time “What will replace consumerism?”

When faced with the task of visualising the effects of a potential seismic shift, it is often helpful to look at a position that is the exact opposite of the one that we have enjoyed. So where could the pendulum swing towards? John Quelch of Harvard Business School[25] got part of the way there when he talked of the importance of experiences and personal contact replacing material purchases, but the real opposite of consumerism is valuism, a term that I will loosely define as an environment where individuals focus upon and gather around guiding moral principles and standards of behaviour. Perhaps Adam Smith had a glimpse of this writing some 200 years ago when he referred to the solid virtues of “prudence, restraint, industry, frugality, sobriety, honesty, civility, and reliability”[26].

A concern for values and moral standards replaces a concern for material displays of wealth and assumptions of unbounded growth.

Some implications
The product of the Great Recession could be significant changes in the political landscape and consumer behaviour in parts of the developed world. So what are the implication of the L-Shaped Recovery scenario for businesses in these economies? Well, here are some thoughts for starters, contrasting what we have been used to what an L-Shaped Recovery presents:

If “consumerism” and “debt” were the words of the last decade, “values” and “security” will be the words of the next.

But this is just one view
To conclude, it is important to note that it is impossible to predict the exact course that the global business environment will follow. We are still in uncharted waters.

In times of change it is best to consider several views, or scenarios.

Remember that the L-Shaped recovery is just one picture. Others are more hopeful, pointing towards the prospect of a sound recovery[27] and resilient political systems that can weather all storms[28].

So plan for a minimum of two worlds, not just one.

References
[1] E. Butler, “The boom and bust,” Adam Smith Institute, Mar. 2010.
[2] S. Johnson, P. Boone, and J. Kwak, “Get Ready for an L-Shaped Slump,” Peterson Institute: Real Time Economic Issues Watch, Dec. 2008.
[3] M. Wolf, “The world economy has no easy way out of the mire,” FT.com, Feb. 2010.
[4] U. Dadush, “The Future of Europe and the Euro,” Carnegie Endowment, Mar. 2010.
[5] A. Posen, “The Path of True Recovery Is Never Smooth,” Peterson Institute, Oct. 2009.
[6] C. Reinhardt and K. Rogoff, “The Aftermath of Financial Crises,” The National Bureau of Economic Research, Mar. 2010.
[7] H. Shierholz, “A massive jobs gap,” Economic Policy Institute, Mar. 2010.
[8] S. Hayes, “The Economic Outlook and the Risks of a Sterling Crisis,” Feb. 2010.
[9] U. Dadush and B. Stancil, The World Order in 2050, Carnegie Endowment for International Peace, .
[10] B. Masters, “Turner orders tougher bank stress tests,” FT.com, Mar. 2010.
[11] S. Wilks-Heeg and D. Ellis, “The state of a politically ambivalent nation,” OurKingdom, Mar. 2010.
[12] S. Zizek, First as Tragedy then as Farce, Verso, 2009.
[13] Y. Hatoyama, “A New Path for Japan,” The New York Times, Aug. 2009.
[14] P. Giddy, “MPs WANTED: FOR CRIMES AGAINST DEMOCRACY,” OurKingdom, Mar. 2010.
[15] N. Lezard, “First As Tragedy, Then As Farce by Slavoj Žižek,” guardian.co.uk, Oct. 2009.
[16] C. Caldwell, “The Weekly Standard,” The Weekly Standard, Apr. 2010.
[17] G. Andrews, “Italy still unable to see beyond Berlusconi,” FT.com, Apr. 2010.
[18] “Greeks take to the street over austerity plans,” FT.com, Feb. 2010.
[19] W. Munchau, “Greece will default, but not this year,” FT.com, Apr. 2010.
[20] R. Freeman, “What Really Ails Europe (and America): The Doubling of the Global Workforce,” The Globalist, Mar. 2010.
[21] D. Smith, “Honey, I’d shrink the banks,” TimesOnline, Oct. 2009.
[22] Cities Outlook 2010, London: Centre for Cities, 2010.
[23] J. Manzi, “Keeping America’s Edge,” National Affairs, Feb. 2010.
[24] M. Brewer, A. Muriel, and L. Wren-Lewis, “More unequal – but why?,” Institute for Fiscal Studies, Dec. 2009.
[25] J. Quelch, “The Next Marketing Challenge: Selling to ‘Simplifiers’ — HBS Working Knowledge.”
[26] Y. Levin, “Recovering the Case for Capitalism,” National Affairs, Jan. 2010.
[27] D. Bowers, “Corporate recovery could take investors by surprise,” FT.com, Mar. 2010.
[28] Z. Davis and T. Carothers, “The Economic Crisis and Democracy: A Year Later,” Carnegie Endowment, Mar. 2010.

Tags: consumer behaviour, developed economies, emerging economies

31 Mar 10 The B3 – The new face of globalization?

Markus Jaeger makes an interesting observation in his article The Great Risk Shift[1] noting that the Great Recession has had another unexpected outcome.

In summary, the terms “developed economies” and “emerging economies” are now anachronisms – part of the vocabulary of the pre-Great Recession world that are now of limited value. Jaegar’s main point is that the by-product of the Great Recession has been to produce new economic groups – or blocs – each with different risks that are yet to be fully recognised. The so-called emerging economies (that we should really re-label as the emerged economies), have now demonstrated their fiscal stability and therefore present a reduced risk of a sovereign debt default. However such economies do, the article observes, still face political risks.

Critically, a sub-group of the “developed economies” (most notably the so-called PIIGS[2]), have emerged with an increased debt burden.

So, looking towards the future shape of the economic world, we could be concerned with three blocs (the B3 in the title):

Bloc #1 as I will call it, represents those developed economies that have weathered the storm with, for the time being, their credit risk profiles intact. Obvious members of this category include Germany, US and France.

Bloc #2 represents the emerged, and now in most cases, decoupled economies of China, Russia, Brazil and South Korea that have come through with generally low government debt to GDP ratios.

Bloc #3 is a new club with a potentially expanding membership. These are the former developed economies that have fared the worst and come out of the recession with increased debt levels. These countries face a challenging future and could be, in relative terms, in long-term decline. There may be other “developed economies” that could join this club.

Jaeger suggests that each bloc faces different risks.

Arguably Bloc #1 is best positioned, followed by Bloc #2 where political risk replaces the declining risk of sovereign debt default.

Bloc #3 is the most interesting in view of increased debt levels. In future postings I will argue that in certain scenarios these countries could face volatility on the political front too.

Certainly, the “bloc” concept is an interesting way to perceive where the power to reshape the global economy will come from as it focuses upon potential groups of influence rather than individual countries. In the new post-Great Recession world, “countries” too could become an anachronistic term when considering where power really lies.

Notes
[1] M. Jaeger, “The “Great Risk Shift” – or why it may be time to re-think the developed-/emerging-markets distinction. See Illustration for the G3.,” DB Research: Talking Point, Mar. 2010.
[2] Portugal, Italy, Ireland, Greece, Spain.

Tags: emerging economies, g20, sovereign debt

08 Mar 10 European Monetary Fund: Steps to a multi-polar world?

Reports in the Financial Times today [1] that Europe is considering establishing its own European Monetary Fund may raise a few eyebrows.

The article asks what the react of the IMF might be. Possibly a more interesting question to consider is what the reaction of China and Asia as an economic region will be. Consider the scenario that economic recovery races ahead – but only in Asia. Europe’s move, if it is made, may be a catalyst to a multi-polar world, rather along the lines of that put forward by Fred Bergsten[2], where Asia establishes its own monetary fund and becomes increasingly independent of traditional international institutions.

References
[1] Barber, T. Brussels read to back monetary fund. Financial Times. March 8 2010.
[2] Bergsten, F. A Blueprint for Leadership in the 21st Century. Global Human Resources Forum. November 8 2009.

25 Feb 10 Why the next war will be the war of influence

It has always struck me as strange that when nations fight wars to extend their sphere of influence, they resort to destroying their opponent’s economic resources. The task then is one of investment to build something out of the rubble.

Well, this could all change.

The first thing that we have to do is to ask ourselves what will be behind the next confrontation? What will drive nations (or blocs) to come face-to-face?

The answer (in my book) is access to natural resources in the form of:

• Energy

• Raw materials

• Food and

• Water

So the issue, from a national perspective, is extending the sphere of influence.

Interestingly, this article[1] describes what could possibly have happened – in terms of influence over EU decision-making – if China had bolstered Greece’s crumbling finances.

For the first time in Generation X’s memory, we are facing a (potential) rival that will be wealthier in economic terms than the West is.

Interesting food for thought, if like me, you’re interested in the shape of the future world.

Reference
[1] F. Godemont, “Has the EU escaped a Chinese rescue?,” European Council on Foreign Relations, Feb. 2010.

Tags: economic resources, greece, natural resources