by Stephen Archer
Stay with me, this piece will end on a positive note.
40% of business leaders (according to a survey in the Financial Times) do not believe that the UK will retain access to the European market after Brexit. So presumably the same people believe that the other 27 European countries do not want access to the UK, the 5th biggest economy in the world? This is madness!
If 2016 has taught the world anything then it is to take any survey with a quarry full of salt. Surveys, polls, focus groups and halls full of experts failed to predict that the UK would vote for Brexit; that Trump would be President (elect at least) or that Russia would be vilified as the western world’s cyber nemesis. Spoiler alert, from here on I will offer some expert opinion. Please consider it then ignore it, or maybe consider it again?
It is hard to find a time in history in the past 60 years with so many significant events, changes in the status quo and so little certainty about the consequences and the outlook. Maybe the biggest comparable events are the Berlin wall going up and the end of the cold war. But they looked simple issues even without the benefit of hindsight compared with the geopolitical issues going on now. Take the cooling of relations of China with the west, the apparent shift in European politics to the far right and the rise of ‘populist’ politics of all hues. Is Putin really re-opening the cold war too?
So how should businesses react and act to current world events given the scale of change and uncertainty?
A key guiding principle here is globalization. The scale of globalization and its value to the global economy is simply immense and it has been growing for 100 years or more. The level of capital both financial and human tied up in the march of globalization is huge. The importance of globalization to any trading economy is now at a level of virtually irreversible mutual dependency. When Trump rattles Beijing, he forgets that China owns two thirds of US debt – which he wants to greatly increase by the way.
Corporations, not just the bigger multi nationals, are feeding the survival of every economy as are the smaller enterprises. Feeding them in turn are the global financial institutions. All have too much at stake to stand by and watch politicians wind back the clock on the global economy to the pre-industrial revolution age whereby closed borders were the barrier to growth – until empires were built at least. Empires will not be built again, growth and prosperity will come from enlightened trade and access to human and financial capital. That has been the world order for the past 70 years and I cannot see that changing – nor any leader or state seeing the merit in attempting to change that order. The capitalist, global geni is out of the bottle, we are all global citizens now.
So what of 2017 and beyond? It will be complex and even worrisome as we listen to bellicose talk from some EU leaders regarding Brexit. This is so much posturing but it is out of step with logic, pragmatism and popular opinion and this year has shown that popular opinion is more radical and reactive than previously thought possible. Jean- Claude Juncker take note.
Populist politics will take a greater foothold in Europe and may even be sustained in the US (at least for one presidential term) but the politics of populism is limited by its lack of depth and sustainable arguments. This tide will turn back as a result, though it may take some years.
The next leader of the free world as an isolationist, ill informed, thin skinned corporate bully is on the one hand terrifying and yet unlike the less than illustrious George W. Bush, the next president is so obviously ill suited to the role that every possible check and balance will be permanently poised to act. Unless Trump abolishes the upper houses and the free press (i.e. copies Russia) then he only has one shaky term in office to look forward to and even the mid terms at 24 months in may shake things down a bit too.
Brexit’s form will be guided by the mutual interests of all countries which are already far more aligned than not. The process will take years and be difficult but assuming that Merkel is re-elected in 2017 (likely) then the process will be guided by the steady hand of the largest economy in Europe: Germany. In France, Hollande will disappear in 2017 and its new President will be more to the right. France and Italy need a relationship with Europe similar to that desired by the UK, this will become clearer in 2017. In the end, the ambitions of the European project probably will be reined in. The stars seem to be aligning thus.
So to the final positive note. No leader or change is bigger than the power of citizens in a globalized economy. Business must move forward and societies must and will do so. I am optimistic. But with optimism goes action, not waiting to see what will happen. The world is (mostly) open for business. Lets all get on with it.
Oh, Trump, he may make some smart moves!