🔒 Eurasia’s Ian Bremmer picks 2019’s biggest risks – for investors and citizens

LONDON — Eurasia Group’s founder and chief executive Ian Bremmer tends to leave an impression. And owning his own powerful business gives him the rare luxury of being paid to tell uber truths that most other pundits steer away from. I met him at an RMB conference in Cape Town two years ago, when he explained how his interactions with confidants of then newly elected US President Donald Trump left no doubt that a trade war was coming, it was only a matter of when. In Trump’s mind, he said, China had to be stopped before it took America’s crown. And best to do it sooner than later. That was an extreme view back then. Trump was seen as all bluster and no follow through. But as we well know, Bremmer was right on the money. Such is his reputation that Bloomberg’s senior commentator Tom Keene has made it something of a tradition to kick off his own year by interviewing Bremmer on what he sees for the year ahead. He did so again this week and later caught up with Bremmer’s colleague, research strategy head Meredith Sumpter, who added some colour and detail. Trump, Brexit, populism, trade wars, tech giant bashing, extremism…looks like 2019 will have lots of 2018’s features. – Alec Hogg

This is The Rational Perspective. I’m Alec Hogg and in this episode, Eurasia’s Bremmer picks 2019’s biggest risks. Eurasia Group’s Founder and Chief Executive Ian Bremmer tends to leave an impression and owning his own powerful business that he started, gives him the rare luxury of being paid to tell the Uber truths, those things that most other pundits steer away from. I met him at an RMB conference in Cape Town two years ago, where he explained how his interactions with confidants with the then newly-elected US president Donald Trump, left him in no doubt that a Trade War was coming. It was only a matter of ‘when’, he told us. In Trump’s mind (Bremmer said), China had to be stopped before it took America’s crown and best to do it sooner rather than later. It was an extreme view back then with Trump having been seen by most people as all bluster and no follow-through but as we now know, Bremmer was right on the money. Such is his reputation that Bloomberg Senior Commentator Tom Keene has made it something of a tradition to kick off his own New Year by interviewing Bremmer on what he sees for the year ahead. Tom did it again this week, going along to the 5th Avenue offices of Eurasia in New York. Let’s eavesdrop as Bremmer starts with an overview.

If you look at the major things that are happening in the world today – the geopolitical trends – both domestically, within countries and internationally; all of them are trending in a negative direction for the first time since we started the company 21 years ago when we could say that. None of them are urgent, whether we look at the erosion of US political institutions or whether we look at challenges inside Europe as a whole and inside those individual countries… Whether we look at the system of global alliances – US/Russia, US/China, Transatlantic, and within the Middle East or the rise of populism and nationalism. None of these things are urgent. All of them trend in a negative direction. All of them mean that we won’t respond effectively to the next crisis when it comes.

I love your world. I’ve got to pronounce It right here – escalatory. What is our movement towards escalatory crises?

Well, I guess I would say with the global economy doing well, it doesn’t feel like 2019 is your challenge but if you think about when the big recession hit in 2008, everyone responded constructively so that we’d avoid a depression. the United States…

There were institutional strengths.

There was a lot of strength – 9/11 – the response came from the United States. The whole country came together behind Bush.

Can we do that now?

The coalition of the willing…the Russians… No. Whatever the next shock is – whether it’s cyber, terror, or more likely the next economic downturn, the reaction inside our country and internationally is going to be toxic and I think that’s what’s underappreciated.

What is our IR confidence right now?

The confidence in the economy is, I would say, reasonably strong. The IR (the International Relations confidence) is low and trending worse on a daily basis. A lot of the reason that IR confidence isn’t high in the markets is because of Trump, but it shouldn’t be that. It should be much more structural. It should be that the forces that got Trump elected in the United States. It should be the forces that led to Brexit in the UK. It should be the forces behind the Italian government as well as the rise of China

Is he a one-off? I mean, that’s the question. I see you are doing all the media for Eurasia Group and they never ask you just the pregnant question. Is President Trump a one-off phenomenon? I think of William Jones Bryan.

When I see Alexandria Ocasio-Cortez on 60 Minutes yesterday saying I may get the facts wrong but you need to focus on the underlying morality of what I’m saying right. That’s exactly what Trump was saying. Take him seriously but not literally. That’s exactly why the Brexit forces won.

Okay. Well, let me flip it. Is the liberal progressive new confidence that we see in the house; will that be a one-off or is it a real sustained move back to a more liberal theology in America?

What I’m saying is I think the centre not holding is not a one-off and while Trump himself in terms of his volatility – his character or lack thereof – that is indeed an extreme outcome in the US. The likelihood that the next president or series of leaders would come from the farther right and farther left, I think it’s growing.

Do you have an optimism that we can do and practice democracy, given this polarity? That middle ground seems to be gone.

I have an optimism that American political institutions are surprisingly strong and resilient and they can withstand Trump and what his administration has to offer against it, but that’s different from saying that democracy fundamentally is working for a majority of Americans. I think that when Trump says the system is rigged against you and people respond to that it’s because he’s right. Now. Trump has made the system less rigged against them but he did identify the problem and a lot of people out there are telling their constituents liberal democracy has been gained to create much greater inequality and to give access to power and speak power to truth and that’s not a useful thing for most voters.

When I look at bad seeds: US/China – cyber gloves off, Euro populism Mexico/Ukraine and the rest, I want to go back to the arching theme of surveillance for last year, which is technology and you’re calling for an innovation winter. What is that?

Innovation winter means that a combination of a fragmentation of the most important technology trends, so 5G which is going to be the backbone not just of smartphones, but the internet of things – smart cities – is not going to be one system like 4G was. It’s going to be a China-led system and a Western-led system and they won’t interact. That’s one part and the second part is the growing tech-lash…the political trends against the big tech firms in the western Pacific.

Let me ask you this question, Ian. Does technology enhance or accentuate the gilded age so many of our listeners feel we’re living in?

It makes those that don’t participate in the gilded age more aware of the face that they’re left behind. It makes it easier for them to connect with others that feel the same way. It also speeds up the ability of those in the gilded age to build walls that effectively differentiate these people.

You’re a great student of domestic politics. What will the new Democratic Party look like?

Because they’re all focussed on 2020 after these midterm elections…

Are you sure they have focussed on April of this year?

…and Trump. Well, they’re going to be focussed on impeachment proceedings as well and I have a hard time seeing Pelosi keeping that off of the agenda, but I do think that it helps to coalesce the Democrats when they are all kind of on message against the American president. But let’s be clear: 17 Republican candidates…most of them were pretty established in the middle. You’re going to have 20 – 30 democratic candidates and there are going to be some in the middle, some on the left and, some complete outsiders. That does make the 20/20 race from the Democratic perspective much more of a crapshoot.

A crapshoot… Not swearing, but an American’s way of saying ‘it’s like the roll of a dice’ or an outright gamble.

The irrepressible Tom Keene is a regular visitor to the World Economic Forum in Davos. I’ll doubtless see his towering frame once again in two weeks’ time. Having attended the event enough times to know where the big news lurks, Keene also used his visit to Eurasia’s New York offices to swap notes with the firm’s Head of Research and Strategy, Meredith Sumter.

I was a bit surprised. Here’s the first time I’ve brought it up. President Trump – a huge distraction at Davos. Last year, he goes for a redux. This year, if he can get through the TSA at the airport to fly there… I mean, President Trump against speaking to the international community

Yes, Davos is certainly a critical stage for him and for his brand globally.

I like that – his brand.

His brand, for sure and I think his speech at last year’s Davos played fairly well according to the White House so look for a repeat performance there but also, watch for President Trump to have a sideline meeting with Chinese vice-president Wang Qishan at Davos. That is something that all of us will be watching for signs as to how the ongoing round of negotiations between the US and China are faring.

We spent a lot of time through the morning with really, up top, your Chinese risks. I want to address right now, your lengthy essay on Europe populism, which is decidedly different than it was 12 months ago – your Chinese roots as well. I want to address right now, you linked to USA and Europe populism which is decidedly different than it was 12 months ago. What is the threat to Democracy in Europe right now?

Well, 2019 is really the year where the populace will take centre stage in Europe and begin to erode the EU from within. We’ve written for several months now about the rise of populism and populist leaders and Europe’s third and fourth-largest market economies in other countries such as Hungary and Poland. What’s critical now is that we expect that populace…their numbers are going to fare even better in 2019 and keep an eye on the May parliamentary elections. We expect that their numbers are going to grow following those elections, which will put them at centre stage in Europe’s most important democratic institution.

In the dominant countries as well, Eurasia Group was so out front in the factions of Germany 1/2/3 years ago and of course, Mr McCraw and the challenges. Now, how does that read down back to Brussels where I was just two weeks ago, I guess? When I look at Brussels, what is the strength of this European Union within the media frenzy of Brexit?

Brussels is dealing with Brexit, but it’s going to have to deal with the growing voice and the growing influence of the populace –  not only in the European Parliament following May’s elections but Tom if the populace get enough of a strong showing in the May parliamentary elections and you combine that with their fairly solid basis of supports in several keys States, and you have a risk of a Eurosceptic populace having a voice not only in the parliament but also in the European Commission which oversees the day-to-day operations of Europe as well as the European Council. This affords them real decision-making power.

Is this within all of your top Eurasia Group? Is the system fractured (to steal a word from Francine earlier this morning)? Is the system fractured or are you optimistic with Dr Bremmer that we can see a healing if not in 2019, then on through 2020 after the Presidential cycle in the ensuing years?

So, is the question more so with Europe or broadly-speaking?

I think broadly-speaking. I think our listeners are interested in Europe and they’re interested in Wall Street and that, but it’s sort of a broad feeling of ‘okay, when does this heal?’.

Right. Look, it’s going to take several more years of healing but the length of time that it takes for us to actually heal depends upon the ability of leaders from largely industrialised economies tackling head-on the reforms that are necessary to bring more of their populations into the economy of the future. A lot of the geopolitical flux that we’re seeing now… part of it is a long-term process of evolving from the post WW2 order to what that new World Order will be.

This is critical. Do we know that New Order that’s out there – Sicario, post-American Order, Bremmer, G-Zero World, your own writings (Meredith Sumter) as well, and others. What’s the new consensus after the Washington consensus? I don’t see that.

Part of that will depending on what role Washington decides to play in this post WW2 Order and to what extent Washington can get along with other key power brokers.

Even if they don’t agree with them.

Even if they don’t agree with them, this fundamentally includes China/Beijing so regardless of whatever tariff deal is agreed to, our call is that relationships between these two world powers is going to get even tougher.

Okay. Let’s bring the immediacy of a shutdown where the President’s made clear it’s his way or the highway: is that his relationship with China? Is that what we’re going to see in the talks this week, the talks maybe at Davos and the subsequent talks after that? Is it a Trump lateral world?

It would be a Trump lateral world if we had an unending US economic growth and strength but that’s not necessarily what we’re seeing right now. Trump is fairly confident in the US economy but we’re all watching the increased market volatility. We’re all watching signs of a potential slowdown in the US economy and that could force his hand earlier than he would like. The key question is whether it’s Trump or post-Trump. To what extent is America going to lead and what does that mean for the post-World Order?

That was Meredith Sumter, Head of Strategy Research at the Eurasia Group following her boss Ian Bremmer. Brilliant minds for sure, but as we keep on learning the only certainty about the future is that it will be full of surprises and 2019 is certain to contain its fair share. This has been The Rational perspective. I’m Alec Hogg. Until the next time, cheerio.