Farewell the American World Order. How 2024 Looks From China and Russia and What Will Happen To The Global Economy – Plus More!
And a happy new year!
Grüezi! I’m Adrian Monck – welcome!
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1️⃣ Goodbye to the American World Order
Hello confusion, competition and grudging cooperation.
As we enter an election year, America’s global security guarantee is breaking down. Fareed Zakaria – who used to edit Foreign Affairs – warns in its pages that the red lights are flashing:
🚨 💥 The defence of Ukraine. US support is mired in political in-fighting. Putin’s gamble that Russia can sacrifice its soldiers longer than the US public can pay attention seems well calculated.
🚨 💥 The Israel-Hamas conflict. America finds itself unable to control its ally as debate moves to who will rule over the rubble of Gaza. The war could escalate further.
🚨 💥 The Red Sea. Iran-aligned rebels in Yemen have used Israel’s war as an excuse to attack tankers heading for the Suez canal, the shipping shortcut that knocks thousands of miles off global trade routes. Egypt gets 15% of its foreign currency from canal tolls. 10% of global trade – much of it headed for Europe – comes through it.
Zakaria concludes that American protectionism and isolationism offer little protection for its global interests:
You cannot destroy the rules-based system in order to save it.
And yet its citizens – perhaps with a better sense of their own priorities – are more concerned by fentanyl than foreign policy.
⏭ The return of isolationist Republicans.
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2️⃣ The Year of the Dragon?
To understand how 2024 looks from China, go further east.
2024 will be the year of the dragon. There are no official 2024 predictions from Beijing, but across the Taiwan Strait there are folks strangely in tune with its worldview.
Julian Kuo is one of them.
TL;DR? The US and Europe weaker. India rising. Old alliances fragmenting.
Here’s Kuo’s list:
United States’ support for Israel will weaken it internationally. Middle Eastern and ASEAN countries will pivot to ... China.
Europe’s divide over Russia will grow. The German and British economies will continue to underperform.
China will resume free trade talks. Indonesia and Vietnam to join the BRICS+.
China will export more cars than Japan.
India’s power is growing. Apple will assemble 20% of iPhones in India. India’s PM Modi will be easily reelected. China India trade will hit $120 billion+.
China’s yuan ¥ to overtake Britain’s pound £ internationally.
No predictions on the US election result.
⏭ The 2024 outlook for China.
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3️⃣ Red Square’s Victory Parade
What does winning in Ukraine look like for Moscow?
Andrey Sushentsov from Russia’s elite foreign policy think tank is a good guide to conversation in Kremlin corridors.
He lays out the “victory conditions” for Russia’s “special military operation”. (Notably missing – what victory for Ukrainians looks like.)
For Russia: “Ukraine must be neutralised, demilitarised and deprived of resources ... its allies must recognise the legitimacy of Russia’s security interests in Europe.
“For the United States, a relative victory will be the preservation of the existing front line and stabilisation of the situation: Ukraine will retain its mobilisation potential and industry…
“Some in the West are still considering the possibility of admitting Ukraine into NATO: if Kiev retains its industrial potential, it will be valuable to the US as an instrument of pressure on Russia.
“In this scenario, it would be in Russia’s interests for Ukraine to transform not into a well-armed ‘Israel’, but into a sort of ‘Bosnia’ — a divided country, devoid of industrial potential and unable to become a significant counterweight to Russia.”
People sometimes talk about ‘realism’ in international relations and geopolitics. Sushentsov’s piece has a level of cynicism beyond that.
But cynicism is baked into diplomacy on all sides.
In the WSJ military expert Phillips O’Brien questions the US commitment to defending Ukraine:
There are signs the [Biden] administration wants to force a sordid deal on Kyiv, one in which Ukrainians hand over large parts of their country, including Crimea, to Mr. Putin.
Cynical indeed.
⏭ My friend Felicity helps Bake for Ukraine. You can follow her story here.
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4️⃣ The Global Economy in 2024?
A quick guide to what everyone’s whispering.
🔍 Economic Slowdown & Mild Recessions Ahead.
2024 looks set to continue the economic slowdown, with mild recessions in some regions. The a silver lining? Disinflation might lead central banks to cut rates in the second half of the year.
🌍 Global Growth
Expect modest global growth around 2-3%. The US is bracing for a growth rate of just 0.5-1%, while Europe and the UK could hover around 0.5%. Inflation rates are likely to fall, but they may remain slightly above central bank targets at around 3%.
💰 Monetary Policy
Central banks might be at the tail end of rate hiking cycles. Anticipate rate cuts from mid-2024 as growth cools and inflation eases. The Bank of Japan remains the exception.
📉 Downside Risks
See above! Geopolitical tensions could flare, posing a significant downside risk.
📊 Market Insights
Bonds: Offering value and income opportunities post the 2023 rout.
Equities & Credits: Positive returns expected, though likely subdued. US equities seem more favorable compared to Europe, with emerging markets showing potential.
Sectors to Watch: Tech, healthcare, energy, and commodities.
🔮 2024 In a Nutshell?
Cautious optimism. Slower growth and market volatility are on the cards, but disinflation could lead to easing policies and rate cuts mean rallies.
Key strategies involve mitigating risks from geopolitical tensions and persistently high inflation.
⏭ #InvestmentOutlook2024 #EconomicTrends #MarketInsights 🚀🌏💹
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5️⃣ What Am I Worried About in 2024?
Funny you should ask...
Two things:
Eco-weariness. The world will keep warming but the political – and popular – impulse to actively ignore it will grow ever stronger.
Peace fatigue: The temptation to use force to redraw borders, settle scores and immiserate neighbours will grow.
W.H. Auden wrote this in early 1939.
Let’s hope anxiety does not prefigure action.
⏭ Auden’s poem is here.
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6️⃣ How To Build the Future
Try concrete with the carbon taken out.
⏭ The green cement market is worth billions – and it’s taking off.
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7️⃣ RIP The Economist
Not the mag, but Robert Solow. Nobel laureate. Good bloke.
Solow nearly made it to 100. In the 1950s he came up with a model of economic growth that brought together workers, money, education and technology.
But most of all he was an extraordinary human being who understood the roots of the real economy – people. Here he is on growing up in the 1930s:
“As a kid, say from the age of eight on, I was conscious of the fact that all my parents did in their free time was worry. And their worries were purely economic, what was going to happen? Could they continue to make ends meet...?”
This is what keeps real people up at night. This is what makes economics and economic policy important.
Solow never forgot that.
P.S. Solow also had a brilliant description of why you should never argue with people with flawed assumptions:
Suppose someone sits down ... and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I’m getting tacitly drawn into the game that he is Napoleon Bonaparte.
⏭ You can find out more about Robert Solow here.
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If you enjoy this newsletter – please recommend it!
Best,
Adrian
