Who died? Who thrived? What happened? Who cares? It was 2018. It’s over! So, let’s take a look at what happens next.
Foreign affairs: All eyes are on Syria and ISIS as we end 2018. But, the country to watch is Turkey.
It is said that nature abhors a vacuum. Pundits adopted the phrase as an idiomatic description of President Obama’s strategy in the Middle East. His “Pivot to Asia” intended to leave Middle East wars, terrorism and the refugee crisis for Europe to deal with while the US worked to develop beneficial trade relationships with the fast growing economies of Asia. It seemed to make sense in the context of a shrinking defense budget and economic competition from China and the EU. President Trump’s decision to withdraw our troops from Syria is another step in this direction.
There’s one big problem with this strategy: the vacuum it creates will be filled by Russia. It’s fair to say that Russia is not much of a military threat to the US. Their economy is in shambles and, lacking economic power, they don’t have the military might to challenge our global interests. But, to understand their motives, you must brush up on your geography because geography is destiny.
To play a role in the global economy, you need access to the sea. Russia’s access is limited. Bounded by China to the East, Europe to the West, the Arctic to the North and the southern Asian countries from the Himalayas to the Mediterranean, they are choked off from global trade. In that context, it’s easy to understand why they would annex the Crimea, support the Assad regime in Syria and create an alliance with Iran. Ultimately, they hope to exploit cracks in the NATO alliance. So, I expect them to increase pressure on Turkey, a NATO member, by increasing their troop presence not only in Syria but also in Ukraine.
Is it any wonder Russia wanted Trump in the White House?
Economics:Both the US and global economies have been pumped up by Central Bank interventions and extraordinary growth in government and corporate debt.
Is the party over? Well, the US Federal Reserve took the punchbowl away when they stopped buying up bonds and started raising interest rates. So, construction is slowing and the stock market is taking a hit. Compound those troubles with the economic inefficiency of a trade war and you have the making of a recession.
It’s fair to say the new Fed Chair is taking appropriate steps to restore interest rates to their natural level. My greater concern is that they do so while allowing the Fed’s balance sheet to run off. In other words, they are playing with two independent variables simultaneously. So, when the economy responds, how will we know the cause of that response?
As rates rise, many corporations will incur permanent damage from too much debt and a drop in consumer demand. Our recession may be brief but the deadly combination of overleveraged companies, shoppers rapidly moving from bricks to clicks, a trade war and the Fed’s actions will have a longer lasting effect.
Going local: As a nation, we have ceded too much control to a federal government ill suited to address our needs. Liberals have long argued for federal solutions to problems; and lately, conservatives, from the Tea Party to Trump, making bold promises of federal intervention, have joined them. Yet, nearly everything we need is generated at a local level. We need better healthcare, better schools, more new businesses, more innovation, more financing, more giving, more connectedness… In short, we need more local control over the institutions that affect our communities.
It will begin with our schools. Federal and state mandates have imposed unfunded costs on the last important institution over which we have a modicum of local control. Here in Rochester, our inner city schools have been rated worst in the nation. Our progressive governor told our local editorial board that he would support reform if and only if it was initiated at a local level. He was being politically crafty a la Pontius Pilate. He also created an opening for local initiatives to make a difference.
I hope it will be the beginning of a trend.
Business: Low unemployment and a workforce lacking the skills demanded by highly technical work environments will accelerate the adaptation of artificial intelligence (AI) to practical uses. It’s already showing up in marketing, warehousing and machine maintenance. The next wave will likely affect selling. AI will identify cross-selling opportunities, optimize prices and forecast revenue. It will improve itself by learning from the results.
Like all disruptive technology, the pioneers in this field will be big corporations that can afford the R&D expense. And, like all disruptive technology, it will eventually become affordable to smaller businesses and trickle down.
Companies that succeed in this new environment will be those that can best capture data, analyze it and generate actionable insights.
*********
Predictions are a tricky business. Will these trends and events take root in 2019? I’m not sure. However, I am fairly confident we’ll see them soon enough.
WHO WILL LEAD?
No comments:
Post a Comment