Coming out of the pandemic, against the backdrop of a war in Europe and the prospect of climate change, the world felt terribly confusing. Anxiety, depression and violence are up; we can see around us the traumatic effect of pandemic isolation. The chaotic presidency of Donald Trump shook America’s faith in itself, and many people’s confidence in U.S. leadership. In the business world, Big Tech lost its luster, and everyone remembered that inflation is real, and markets can go down as well as up.
But a few events and pieces of news offered some clarity in the past few weeks. There is a new era coming into focus, as the U.S. presidential election cycle begins in earnest.
Climate Change
The reasonable world has coalesced around the goal of combatting climate change, and now the conversation is shifting to how to get it done. The absurd effort (“the anti-ESG movement”) to stop stock market investors from putting money into companies moving away from fossil fuels is a sign that the fossil fuel companies have shifted to defense.
The major challenge ahead of the world is how to handle and slow climate change; meeting this complex goal will require a huge commitment from within companies and governments to professional ethics, skills and teamwork.
Framing Competition With China
The U.S. economy and military are still the world’s strongest, and that will frame a new competitive relationship with China. There is a recession looming, but on almost every measure, America leads its peers and the rest of the world. That includes GDP, per-capita income and equity markets. There are statistics from a recent article from The Economist:
GDP: “America’s $25.5trn in GDP last year represented 25% of the world’s total-almost the same share as it had in 1990.
Income per person: In America, it was 24% higher than in western Europe in 1990 in PPP terms; today it is about 30% higher.
Stock market performance; A hundred dollars invested in the S&P 500, a stock index of America’s biggest companies, in 1990 would have grown to be worth about $2,300 today. By contrast, if someone had invested the same amount at the same time in an index of the biggest richworld stocks which excluded American equities they would now have just about $510
Janet Yellen, the U.S. Treasury Secretary, was quietly triumphant in a speech at the School of Advanced International Studies outlining a newly competitive relationship with China, which is struggling to counter a predicted decline in population. Economic competition is driving a lot of new manufacturing in the United States, which I’ve reported on. The danger is that competition will become military confrontation.
Political Dysfunction
America’s political dysfunction is a growing danger. On issues including gun regulation, abortion rights and taxes, political institutions have been unable to enact policies favored by the majority of the American people. That political dysfunction – which is so great that it’s creating wedges among the states and putting the climate change agenda at risk — is in my view linked to the decline of the middle class. The wealthy are doing great. America’s social safety net, while still full of holes, is getting stronger. But the average, middle class American has seen their life expectancy decline and their chance of moving up in the economy shrink. That’s no way to run a country.
