The state we're in.......

 

The average voter is not much interested in the wider world; his concerns are domestic issues - the economy, whether an interest rate rise will make his mortgage unaffordable, immigration, a good education for his children, crime.

 

But we are seeing a revolution in the world order which may well become the hallmark of the 21^st Century.

 

This revolution  is a triple clash between politics, economics and radical changes in society.

 

Society is changing radically as people become better-off, better informed especially through the advent of social media, and better educated. They are increasingly impatient with the status quo. There is trouble in store if politics does not adjust to the changes and respond to the associated economic challenges.

 

First, America.

 

It  swings from excessive foreign interference to extreme isolation. It is now in isolation mode

 

Congress is obsessed with political self-interest,  prepared to scupper Obama’s world trade negotiations, with economic considerations side-lined in favour of taking every opportunity to make life impossible for Obama.

 

After four years of painstaking negotiations by the Administration, Congress is now blocking reform of the  IMF although it doesn’t have a dog in the fight since it will be Europe that is most affected by the agreement to alter rates of contributions and voting strength. The European Free Trade Agreement is beginning to look dead on in the water. The Trans-Pacific FTA appears to be going nowhere. The common factor is lack of confidence by the participating nations of Obama’s capacity to deliver in the face of a hostile Congress.

 

Obama himself made major strategic blunder when he remained in the White House during the farcical ‘shut-down’ last October instead of attending the APEC conference in Bali, leaving China to do all the running, and resulting in foreign policies being adjusted to reflect signals from Washington that America has lost its appetite fr global leadership.

 

The Asian tigers are beginning to look a tad mangy.

 

There is a danger of China’s  banking system imploding in a re-run of 2008. The days of double digit growth are almost certainly over as it becomes a mature economy. There is a menacing housing bubble. China has to make the change from supply-side economics to demand side, creating  greater domestic consumption. Society has changed with the creation of a burgeoning middle-class who want up-scale housing, the Mercedes and foreign travel. The authority of the Communist Party will be undermined if it is unable to respond adequately to rising expectations.

 

Indonesia is having serious problems from politics intruding on economics. The recent ban on mineral exports has thrown whole communities out of work. Cambodia is rent with troubles in the textile industry and widespread corruption in government. Social unrest beckons in both countries.

 

 The troubles in Bangkok are now having noticeable economic effects. The Baht has fallen quite sharply against hard currencies; tourism is down at the height of the season; FDI is drying up; investors are dumping Thai bonds. This is triple whammy again. Politics is clashing with the economy and with changes in society. The democratic nexus is coming apart because the old elites refuse to recognise that democracy can only work if the losers accept the result. The masses no longer accept that they are too ill-educated and ignorant to be entrusted with the vote. Already there is talk of the Lanna north, solidly ‘red’ (for Thaksin), seceding from the yellow south, representing the old elites.

 

The BRICS are no longer the world’s poster boys. Brazil has double-digit inflation, huge capital flight, social unrest and endemic corruption. India has a dysfunctional system of governance, breath-taking corruption, and a rapidly slowing economy. South Africa has yet another mining strike, perhaps the biggest ever, which will result in loss of investor confidence.

 

And that old elephant is back in the corner again, this time as a nascent energy revolution.

 

The US is within reach of energy self-sufficiency.  The geopolitical shock will be immense. Iraq and Iran are planning to triple oil production with potentially major political, economic and social impacts. The OPEC cartel will be seriously undermined if solidarity over production volumes is breached. The security of the house of Saud will be seriously, perhaps fatally, undermined  if it is unable to buy security and social tranquillity from its oil revenues. The economic effect in the west could be dramatic, with lower prices at the pump and increasing access to new energy sources.

 

Amidst the many uncertainties, one thing is clear. Radical changes are taking place in the world order. Fasten seat belts; we are in for a bumpy ride.