In the 1975 political thriller film “Three Days of the Condor,” Robert Redford plays a CIA analyst working in a clandestine office where they endlessly read disparate books, newspapers, and magazines from around the world to discern trends, hidden meanings, and other useful information that might be buried in the noise. This paper is similarly an attempt to link myriad mega-trends and world events into a tapestry of potential outcomes, and the policies required to get there. Specifically, why did Populist movements in France, Italy, England, and the U.S. make such dramatic strides in upsetting the global order? Why did Russia annex Crimea, and why are they actively engaged in creating a civil war in Ukraine? Why has China created the Asian Infrastructure Investment Bank? Why did the U.S. remove its aircraft carrier group from the Persian Gulf for the first time in decades? These questions are strongly interrelated, and they have a direct impact on global economics and market direction. While there is no way to state unequivocally which way the future will trend, exploring possible outcomes can serve as a directional checklist as the future unfolds, and thus merits conversation.
The key trends today include the growth of globalization, aging demographics (See Implications of an Aging Society), the acceleration and adoption of technological change, and the effect of these factors on the world populace. Nobel Prize Winner Joseph Stiglitz wrote, “The disparity between what was promised from globalization and what was delivered has angered many and led to a growing distrust of the elites – in politics, media, and academia.”1 In his book, The Only Game In Town, Mohamed El-Erian states that “Fueled by an unusual combination of cyclical, secular, and structural factors, the worsening of income and wealth inequality has been so pronounced within countries that it now also undermines opportunities. This brings us naturally to the third issue. Or the extent to which individual countries have experienced a rise in what I call the inequality trifecta – inequality of income, wealth, and opportunity.”2 Both authors go on to say that while globalization over the past 70 years has increased living standards generally, the results have been by no means uniform. The rich have gotten richer, the poor relative to the rich have gotten poorer, and the middle class has been hollowed out. Liz Alderman, writing for the New York Times about Europe’s shrinking middle class said, “Since the recession of the late 2000s, the middle class has shrunk in over two-thirds in the European Union, echoing a similar decline in the United States and reversing two decades of expansion.”3 This inequality is what leads to discontent and politics of anger and populism worldwide. It seems a straightforward assertion that if large segments of the population are worse off they will vote with their wallets and elect those who claim to have a better way forward. Thus, we arrive at today’s world of Populist politics, a world in which the U.S. incites trade wars, becomes more confrontational and protectionist, and is less supportive of allies around the world.
In a world with a weakened global order, other nations will step up and challenge the existing structure. Russia’s policy agenda is to weaken the West and increase its own sphere of influence. Likely Russian meddling in U.S. elections has weakened trust in our democratic institutions. They may similarly have played a role in shifting England at the margin to move towards cessation from the EU (Brexit). Both outcomes weaken the cohesion of Russia’s adversaries, specifically, Western Europe and the U.S. (NATO). Both were accomplished without bloodshed and without major repercussions, economic sanctions notwithstanding. In a world where “fake news” runs rampant, we can expect destabilizing cyber propaganda to be an ongoing weapon of choice. The 1938 panic caused by the radio broadcast of “The War of The Worlds” by Orson Wells was an early insight into the power of media. Additionally, Russia annexed Crimea in 2014 and has been encroaching on Ukrainian sovereignty with little to no international reprisal. Here, Russia’s intent is twofold. Crimea houses Russia’s Black Sea Fleet at the port of Sevastopol. Stealing it back from Ukraine represents a huge tactical advantage in controlling access to the Northern half of the Black Sea, serving as both a defensive and offensive bulkhead. Additionally, Eastern Ukraine and Crimea are largely populated by ethnic Russians and Russia has a demographic time bomb ticking - by 2050, ethnic Russians will become a minority in their own country. Muslims will be the majority. At current rates of overall decline, Russia’s total population is expected to plummet 31% by 2050, from 144 to 99 million. A proud superpower such as Russia can expand its sphere of influence, defend its extensive and wide- open borders, even with a shrinking and aging population, by absorbing existing pockets of ethnic Russians and extending its borders to more defensible positions. If the pace of globalization unwinds, we can expect more aggressive moves by Russia in the Ukraine and then possibly north and east from Ukraine up to Estonia.