Around the world with Ian Bremmer
Political scientist Ian Bremmer, founder of Eurasia Group, provides a medium-term outlook on U.S. relations with key players on the world stage.
Political scientist Ian Bremmer explains the likely implications of challenges to the United States' once-preeminent role in global affairs and markets. As part of that discussion, he touched on the current state of U.S. relations with a number of key countries, including China, Japan, Russia, Saudi Arabia, India and North Korea.
China: Despite the "magic of Mar-a-Lago," Trump's Florida resort where he hosted President Xi Jinping while initiating an airstrike in Syria, U.S.-China relations are likely to take a step back on a number of fronts. These include security, North Korea, trade and technology. U.S. multinationals also stand to lose less in China, as rising labor costs and stiffer competition from Chinese corporations have diminished the business case there. "If the United States were to start a trade war with China, the U.S. is in a much better position to do so now than it was 10 years ago." But so is China. As China's neighbors in the region hurry to strike deals with it, Chinese corporations are growing in power and influence in the region. Other progress is anecdotal. China is the world leader in the production of industrial robots, which will help it address the failures of its amended one-child policy. China stands in stark contrast to France in this respect, where politicians are calling for a tax on robots to protect workers. And China is even addressing its long-standing problem of social mobility through promising innovation such as "social credit." This emerging socioeconomic grading system tracks day-to-day behavior such as personal connections and online activity, and it rewards high-scoring citizens by unlocking their ability to travel, move to a different city, and enjoy other social freedoms.
Japan: The threat that China poses is likely to keep Japan close with the United States. Prime Minister Shinzo Abe appears to be off to a strong start with President Trump, as evidenced by the fact that he was the first foreign leader to visit him after the election. Per Bremmer, "He brought the golf clubs… He said, 'I'm your buddy.'" The country's long-term situation is looking more promising, despite 25 years of "completely flat" growth. "I see Japan as a stable, single-party democracy. Shinzo Abe, despite some scandals recently, looks like one of the strongest leaders in the entire developed world." Critics point to Japan's aging population and lack of immigrants to replace them, but the country's homogeneity is aiding this stability. And, on a per-capita basis, the country is among the fastest-growing in the world.
India: India is headed in the right direction. It has a prime minister and people around him who are "incorruptible." We're seeing labor reforms, and the introduction of new taxes on goods and services. Infrastructure is being built at a higher rate. And these successes insulated Prime Minister Narendra Modi from the demonetization policy that made life inconvenient for millions. Plus, this developing giant is removing layers of bureaucracy, expanding access to bank accounts and making it easier for citizens to tap government benefits through its new Aadhaar universal identification system. "If you want to look at what the good stories are, because I've told you about a lot of risk, you've got a good story on India."
Russia: Russia isn't the big threat that the media makes it out to be. It's a country in decline, and it has been for some time. The issue stems back to the early 1990s, when U.S. multinationals and others recruited its top scientists away and the country stopped investing in agriculture and education. Foreign direct investment has dried up, and Russia still hasn't opened up its state-owned enterprises to outside capital. Russia may be focused on the U.S. right now, but it's going to have a much bigger problem with China in 10 years if these trends don't reverse—and it's not likely to be much of a global geopolitical threat in the meantime. "I don't actually think that Russia is a global threat in the near term… On balance, I think that Russia is heading for ruin."
North Korea: North Korea is much more worrying than Russia and that is because of the multidimensional nature of the threat it poses. The first is cyber terrorism: North Korea was behind the $1 billion SWIFT Bangladesh hack, as well as the WannaCry hack of the National Security Administration. Then there's the threat posed by its military and nuclear arsenal. "Trump believes and Trump's people believe that North Korea is a fundamental threat to the United States." That said, the relationship could go either way: The U.S. and North Korea could sit down to the negotiating table and work out a deal, or they could get embroiled in a direct confrontation precipitated by the U.S. punishing those like China who are doing business there.
Saudi Arabia: The biggest problem for the country is its reliance on oil revenues. The fracking revolution in the U.S. has made America the world's new swing producer, and Saudi Arabia realizes it needs to diversify its economy. The problem is that its workforce is not positioned to support this transition, particularly if the country doesn't relax restrictions on women working. Saudi Arabia's deep pockets will likely forestall the economic pain, but less of it will find its way to neighboring countries. "It's not like Saudi Arabia's going to fall apart in the next five years, no way… The ability of the Saudis to keep their country together and keep paying themselves, that's pretty high, but they're going to cut off a lot of people. And this is going to undermine the region in a very big way."
Germany: The country is witnessing very little populism despite strong anti-immigrant sentiment across the European continent. The strong German economy helps explain this relative political calm, as 82% of the population say they are optimistic about their future. But so does Chancellor Angela Merkel's about-face on taking in Syrian refugees after the United States refused to help. The decision will likely lead to her reelection, but even if it doesn't, the alternative is an "establishment" pick from the opposition party. "You don't have the National Front; you don't have the equivalent of Trump and Bernie Sanders doing anything significant in Germany, politically."
Singapore: This country is emerging as a model for succeeding in the new global economy. "It's globalized, it's open, it's transparent… and they provide enormous focus on digital training—not just for one year, not just in school, but all the way through your life." In addition, Singapore has invested wisely in its "incredible" infrastructure. "They're massively resilient. They see that the problems are coming in terms of labor, and they adjust."
This article is based on a Schwab event on June 15, 2017. Schwab events provide access to deep insights into industry trends and connect advisors from across the country with industry icons, entrepreneurs, leading academics, and analysts.
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