Conference Presentation, Panel
Global Overview: Navigating a World in Transition
Milken InstituteGillian Tett, Thomas Barrack, Lord Mandelson, Hiro Mizuno, Ed Royce, Peter Mandelson, Bill Hanway, Richard Blum
- Rising levels of cyber attacks from China and other regions are expected to cause systematic confusion and potential trauma to global capital flows, with outcomes remaining uncertain if the financial system itself is breached or breaks down.
- Political instability in the US and UK is predicted to generate populist and nationalist pressures that could derail the post-war international system, making public policy unpredictable and complicating decision-making for investors and businesses.
- Increased global diversification in investment portfolios is forecast to heighten vulnerability to systematic shocks rather than reduce it, while overwhelming market optimism is viewed as a potential "black swan" event despite the absence of extreme asset valuations.
- Failure to finance education and human capital in developing countries poses a significant, albeit uncertain-timing, systematic risk that could trigger large-scale refugee issues and undermine global security.
- The proliferation of nuclear weapons by North Korea and Iran is identified as the most concerning future threat, alongside Russia's continued weaponization of information affecting democratic processes in Eastern Europe.
- China is expected to continue bypassing international trade rules and transferring assets to its regime in Africa and South Asia, prompting a need for US leadership to counter initiatives like "One Belt, One Road" with alternative frameworks.
- A breakdown of multilateral systems due to rising nationalism risks jeopardizing the international trading system, climate change agreements, and the Iran nuclear deal, while simultaneously hindering the management of Russian revanchism and China's resurgence.
- US administration strategies labeled "dynamite diplomacy" are anticipated to send shockwaves through the global system to disrupt existing conditions, though the speaker warns this could leave the system in ruins if not handled carefully.
- Current trade protections, such as tariffs on aluminum and steel, have not yet been initiated, but the assumption that globalization lowers consumer prices is being challenged, potentially leading to higher US consumer prices described as "Trump inflation."
- The US is projected to experience "very full employment" and act as an "economic juggernaut" driven by tax reforms and productivity increases, similar to historical periods under the Reagan and Kennedy administrations.
- Europe is expected to have emerged intact from a decade of crises, though the absence of a Franco-German agreement may prevent the rest of the EU members from converging on Eurozone reforms, and Brexit may necessitate further parliamentary scrutiny or a second public referendum.
- Latin America is predicted to become a major economic opportunity for the US, where exports are expected to be three times those to China, resulting in a trade surplus.
- Technological advances over the next decade are expected to solve numerous problems and shift ideological debates into practical commercial discussions, while the assumption of a free-trading world continues to be shaken.
- Potential positive surprises include an ultimate solution to the North Korean nuclear crisis, a UK referendum result to remain in Europe, and the ability of the US and China to align on trade and industrial policy matters if China accelerates its reforms.
- The US is expected to pass the "BUILD Act" and reauthorize the "Millennium Challenge" and "AGOA" to double engagement and business in Africa and the developing world, focusing on sustainable development and education.
- Removing central bank interventions and "life support" like quantitative easing is advocated to reveal true market conditions, though concerns remain that unaddressed wealth disparity between the rich and poor will lead to significant domestic problems.
- If policymakers effectively control over-leverage and moral hazard, the historical boom-bust cycle could potentially be eliminated, and the system could be reformed rather than destroyed to allow for sustainable growth driven by global cooperation.