The Future That is on Its Way to You!

We should be preparing for a set of major macro trends, Bernard Marr has written, after a discussion with Scott Smith of Changeist. Some of the trends already pre-dated the Covid-19 pandemic, but have been accelerated by it, and both men warn that these trends are ones we should not ignore.

Decoupled economies

According to Marr and Smith, the ‘decoupling’ of economies has been happening for around a decade. The result is a turn to nationalism in some of the world’s biggest economies, such as the USA, the UK, Brazil, Russia and India. As they say, ‘globalization is in the rearview mirror’ now, and we can expect a ‘multipolar world’ where three or four large regions with their own “distinct economies, security networks, cultures, and laws.”

Social change

Education, transportation, energy, food, and healthcare are in the midst of massive changes, much of it spurred on by the recognition that climate change is not a hoax. We are seeing a swell in the numbers of vegans and vegetarians due to livestock production accounting for 14.5% of greenhouse gases. There is also a transition to cleaner transport, and in the energy sector there is a move to meet the emissions reduction targets agreed to as part of the Paris Agreement on climate change. Covid-19 has also produced a transition to more working from home, and we are still grappling with this sudden change in our work life.

A new social contract?

The traditional social contract between citizens and government is no longer working for a significant number of individuals. Marr writes, “Societies have become divided between the haves and have nots, and any differences, whether religion, race, or sexual orientation, create chasms rather than common ground in the echo chamber of social media.” Automation threatens some workers, while the idea of a universal basic income has become a much hotter topic, as will debates about the nature of the future social contract between people, businesses and governments.

An AI reset

Currently we are seeing what is called an ‘AI reset’. The technology presents challenges that need to be carefully considered now, such as the regulatory obstacles and cost of development. On the other hand AI is accelerating and Smith believes another big wave is on the way.

Who are you?

Our personal identity would seem to be solid, yet thanks to digital technology it is varied and complex. Marr writes, “Today we have the ability to represent ourselves as a “stack” of identities that account for various affiliations, situations, values, and more.” Virtual and augmented reality has added to this ‘stacking’. As Marr says, “Given the tools at our disposal, smartphones, social media, and technology, we are free to create a digital narrative about who we are that might not match our physical world persona.”

Finally, we are facing life in a “blend of the physical, biological, and digital worlds.” The ‘new normal’ will be a combination of the physical and digital, and “Every organization must now consider how they provide products and services equally as well and complementary, whether interacting online or in the physical world.”

Some will welcome these trends, while others will be less enthusiastic. Whatever your view, it’s not difficult to see that regardless of opinion, this is our direction of travel.

China’s alarming plan for tech dominance

China has been using robotics in its manufacturing for quite some time, and it has some very powerful AI tools as well that automate processes in its factories. This is going to push other countries to match China, particularly the USA.

However, while America may be regarded as a world leader in tech, China’s President Xi has a plan to take that role for his country, and ensure that China is not using US-made tech either.

In an article published by the South China Morning Post, in May of 2020, President Xi presented his vision for China and his goal of achieving global tech supremacy by 2025. This is an extract from the piece:

“Beijing is accelerating its bid for global leadership in key technologies, planning to pump more than a trillion dollars into the economy through the roll-out of everything from next-generation wireless networks to artificial intelligence (AI).

In the master plan backed by President Xi Jinping himself, China will invest an estimated 10 trillion yuan (US$1.4 trillion) over six years to 2025, calling on urban governments and private hi-tech giants like Huawei Technologies to help lay 5G wireless networks, install cameras and sensors, and develop AI software that will underpin autonomous driving to automated factories and mass surveillance.

The new infrastructure initiative is expected to drive mainly local giants, from Alibaba Group Holding and Huawei to SenseTime Group at the expense of US companies. As tech nationalism mounts, the investment drive will reduce China’s dependence on foreign technology, echoing objectives set forth previously in the “Made in China 2025”programme. Such initiatives have already drawn fierce criticism from the Trump administration, resulting in moves to block the rise of Chinese tech companies such as Huawei.”

Tim Bajarin in Forbes, asks us to consider Xi’s use of the term, “tech nationalism.” He explains that Xi plans to “nationalise everything in China so it is the main provider of goods, services and tech-related products to China itself.” He wants China to be completely self-sufficient in tech by 2025, and nationalised tech will “receive a huge financial boost from China’s $1.4 trillion dollar fund.”

In early September former Google CEO Eric Schmidt commented that China’s leadership in AI posed a security threat and could lead to “high-tech authoritarianism” worldwide.

According to Bajarin, the US government is aware of the problem, but so far nobody knows exactly what actions it might take. Will it counter China’s influence by remaining a tech powerhouse, or what? If China is successful in fulfilling Xi’s vision, then it is also likely that “there could be a time when products we get from China are no longer available to the west.” Currently, China is still committed to globalisation, so its products will continue to reach us, but if it scales back on that, then those products will need to be sourced elsewhere. The question is, where might that source be? It is time the USA and any other countries likely to be negatively affected by a lack of good from China form a plan – the clock is ticking!

Trump pushes China to the limit

Never mind Mueller’s report, Trump has his sights set on China this week, and as usual he has been tweeting about it. On 6th May he tweeted: “The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”

The President appears to be determined to escalate the US-China trade war and it appears to be ‘personal’, although he portrays it as a move in the national interest. He’s raising the trade tariff on Chinese imports to 25% this Friday, a large hike up from 10 percent.

Trump says that Chinese exports to the USA worth $200 billion will be slapped with this tariff. Furthermore, the same tariff will be imposed on other Chinese goods worth $325 billion, which are currently untaxed.

What effect has the announcement had?

Obviously there have been more than a few very miffed Chinese. And Chinese investors had a wobble, because they dumped stocks following the announcement. As a result, China’s major stock indexes plunged by the highest level since February 2016. Stock indexes also took a beating: the Shanghai Composite Index and the CSI 300 index fell by over 5 percent. Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong told Reuters, “The market is re-pricing the situation, as investors had thought trade negotiations were coming to an end.”

Why escalate a trade war now?

Trump’s decision to raise the tensions between two of the world’s biggest economies came at a moment when the US economy is in boom mode. As Mark Emem writes at Forbes: “The non-farm payrolls jobs report which was released Friday indicated that the unemployment levels had fallen to 3.6 percent. This was the lowest figure since 1969.”

Some commentators have suggested that the positive state of the US economy has led the President to believe that the country is in such a strong position that he has the upper hand in any trade negotiations. One Twitter user, Jim Cramer tweeted: “Is this the art of the deal? Or a recognition that our economy is stronger than theirs is and we don’t need them???”

And to quote Trump from his book “The Art of the Deal”: “MY STYLE of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.”

As Emem writes, Trump smells blood, because China has more to lose than the USA, therefore Trump is following his own philosophy of simply piling on the pressure wherever he can. It was thought that a trade deal between the two countries would have been agreed by the end of this week, but that looks unlikely now. And unless they agree a deal on 9th May, China will have to start paying the higher tariffs from the following day. That doesn’t leave much time for the negotiations, which are supposed to start on 8th May.

Will the talks collapse due to Trump’s game play, or will he get what he wants from China? We don’t have to wait long to find out.

Top Risks in 2019

According to the Eurasia Group, a consultancy founded by Ian Bremmer, the global geopolitical environment is right now the most dangerous that it has been for many decades. So what is likely to impact on businesses, regional economies and society during 2019? There are around 10 areas of concern for us all.

Bad Seeds

There used to be an Australian band called The Bad Seeds, but we’re not talking about them. What the term ‘bad seeds’ means in this instance, is this: decision makers are so obsessed with an array of global crises in a world without trued global leadership, that they are allowing a range of future risks to take root and germinate, but these future risks are the ‘bad seeds.’ For example, the future of the European Union, the WTO and the relationship between Russia and China are negative.

US-China relations

The US leadership used to try and keep things smoothed over, but with Trump in office that approach has been dumped. Expect to see more confrontations between the two, especially in the areas of technology, economics and security.

Cyber Power

The US is going to exert its use of cyber power more seriously this year. However, it’s likely to backfire on it rather than create a system of global deterrence.

Populism in Europe

Europe is holding elections in May and it is likely that we will see more eurosceptics win seats. We have seen the rise of eurosceptics in the last two years, the UK and Italy being two prominent examples. These populists blame Brussels for their domestic problems and now they are winning support at home by promising to flout EU rules, or leaving the EU. They will win more seats and undermine the ability of the EU to function.

US domestic politics

The government has been closed down since before Christmas 2018. This year will bring more chaos and volatility to US domestic politics.

Reduced innovation

There will be a reduced level of investment in driving technological development. Eurasia Group believes this will be driven by concerns about security, privacy and economics, as leading countries “put up barriers to protect their emerging tech champions.”

Mexico

The new Mexican president Andres Manuel Lopez Obrador –or AMLO—wishes to improve Mexico by taking it back several decades. His strategy includes more spending and poor policies that are more interventionist. While Mexico was ahead of other Latin American countries, expect to see it look more like them this year.

Ukraine

Putin wants Ukraine to be within Russia’s sphere of influence. It is likely to interfere in Ukrainian elections this year, which will pose a problem, for Ukraine and leaders in the European Union who will have to decide how to respond.

Nigeria

This year Nigeria is about to hold one of its biggest and most fiercely contended elections since the country became a democracy in 1999. Neither of the two leading candidates have anything to offer the country, or policies that will reduce its problems.

Brexit

At the time of writing, the Parliament at Westminster is about to vote on the Withdrawal Agreement negotiated by Prime Minister Theresa May. Neither those who want to leave the EU, nor those who want to remain in the EU like it. Nobody knows what will happen when the deal is most likely voted down, but it is going to be an even bigger shambles in the UK throughout 2019 and that will affect the rest of Europe as well.