Remaking a World on Fire

Notre Dame – a sign of the times?

It has been an eventful year for me, but the most striking moment was witnessing the fire at Notre Dame cathedral. Having run towards it, I was unprepared for the extent of the conflagration, green and orange flames bellowing out of the church as the sun blazed angrily in the background. It was a traumatic evening, where thousands of onlookers were silenced by the significance of what they saw.

At the same time, it would be wrong of me to try to draw a parallel between such an apocalyptic event and the state of our fracturing world, though that thought is at the back of my head, not least given the way in which the ‘old’ world order is increasingly vandalized by politicians, not to mention the outbreak of protests around the world.

A better parallel, as supersized cranes moved around Notre Dame this week, is that the time it will take to rebuild and remake the church, some five or more years, will also be the period of time required to put the era of globalization behind us and have the makings of the ‘next world order’.

The roadmap towards this ‘order’ will look something like this – economically the world will grapple with the ‘next recession’ which will be more severe in indebted economic sectors (China’s economy, corporate USA and some emerging countries), and will eventually culminate in some form of world debt conference. Once this is accomplished, the quest for a model of organic economic growth will begin.

Politically, I hope that we will see more independent, bottom up efforts by individuals and new groups/parties to rethink what the contract between people and those who govern for them will look like. Then in terms of geopolitics, the world will be increasingly dominated by the ways in which the three great ‘powers’ – the EU, USA and China pursue different paths on issues like the internet, democracy, human development and finance. This is a limited, big picture sketch, the rest is of course in the Levelling.

Forecasting – really more a form of ‘macrotainment’ than a science – is easier on a five year view, but given it is the end of the year, I also want to offer up a few pointers on at least two events over the next few months.

First, I expect economic and political headlines to be first driven by the unravelling of China’s credit boom – we will hear more about defaults of indebted Chinese companies and resulting pressure on its banks. Expect ‘China is Spain’ to be a headline we see a lot. The policy task for China’s leaders will be complicated by ongoing protests in Hong Kong and importantly, the result of Presidential elections in Taiwan on January 11th. My guess is that one result will be a drop in Chinese interest rates in 2020.

Second, impeachment will deepen America’s divides. With the process now started, it looks for right or wrong, that the Senate will not vote to impeach President Trump. The trial itself, especially if likes of Mick Mulvaney and John Bolton are called as witnesses, will prove a spectacle.

If we bear in mind that Bill Clinton responded to his impeachment with airstrikes on Iraq, then Trump’s emotional letter to Senators is mild by comparison. He may try other means of weaponizing impeachment – link it to the stock market (Trump has sent 21 tweets about the stock market in the last 30 days, the most since 2018), trade policy with Europe or immigration.

The immediate political implication of the Senate not impeaching the President is that the Democrats lose their ‘silver bullet’ against Trump, and with it the sense that morality, the law and institutions are powerful buttresses against bad behavior. In turn, this will colour the Democratic Presidential selection process. The Democratic candidate will need to have a very clear policy message, an ability to scrap with Trump in the political gutter (see my October 13 blog ‘Don the Robber’, https://thelevelling.blog/2019/10/13/donthe-robber/). So far, none of the leading Democratic candidates is strong on these points (someone like Mike Duggan of Detroit could fit this bill in my view).

For Trump, and his supporters, a failed impeachment will open up the road to the acceleration of his policies on immigration, trade (EU) and on identity-based politics. Mounting, structural risks like climate damage and indebtedness will get worse. The next election will be driven by identity, race and values, and there is a very good chance that Trump could win.

So, enjoy this Christmas, there is plenty of disruption to come in 2020!

I am back in touch on January 12.

With best wishes, Mike