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Ian Bremmer
Author

Ian Bremmer

Ian Bremmer is author of The Fat Tail: The Power of Political Knowledge for Strategic Investing (with Preston Keat) and president of Eurasia Group, the global political risk consulting firm.

Leading in an Unstable World

Leaders of all stripes -- lawmakers, policymakers, and business decision-makers -- will grapple over the next several years with the fact that politics and political risk will play an increasingly large role in our lives.

The energy that will fuel our cars, heat our homes, and power our economies will come more often from politically unstable (and potentially unstable) parts of the world -- the Persian Gulf, West Africa, and the Caspian Sea Basin. Much of the global economy's growth over the next decade, the source of our future prosperity, will come from emerging market countries -- states like China, India, Russia, Brazil and others where political factors matter at least as much as economic fundamentals for the performance of markets. Technological advances of various kinds will empower small groups and even individuals to punch above their weight on the international stage. Think of more developing countries with nuclear technology, terrorist groups with access to more sophisticated and dangerous weapons, and even pirates using GPS technology to intercept oil tankers. Finally, the US inability to continue to play the role of dominant international superpower will create a vacuum of international leadership -- as emerging powers focus on the health of their domestic economies, their political capital, and foreign-policy problems closer to home.

The ongoing financial crisis and the first truly global recession have only added to the importance of politics. Economic decision-making power has shifted from capitals of finance like New York, Shanghai, Mumbai, and Dubai to centers of political power like Washington, Beijing, Delhi, and Abu Dhabi, as political officials and lawmakers craft plans to spend hundreds of billions of dollars to kickstart domestic economies.

The leadership implications of this trend are many. Corporate decision-makers, bankers, and portfolio managers will have to reckon with the problem that they can no longer trust the credibility of their long-term strategies. The global financial crisis will have a number of second- and third-order effects -- events that will prove difficult to predict and will develop quite quickly. The threat of significant civil unrest in many countries -- even transformative social upheaval -- is real. It's no accident that U.S. Director of National Intelligence Dennis Blair has identified political instability generated by the financial crisis as the largest threat to U.S. national security in 2009.

History shows us that an economic meltdown doesn't immediately trigger large-scale public anger. There is generally a 12- to 18-month lag before the worst effects are obvious. In other words, when it comes to destabilizing public protest, the worst is almost certainly yet to come. For business leaders, that means sticking closely to short-term planning with a number of potential outcomes built in to their longer-term projections.

For political leaders, the challenge is to act with the health of the global economy in mind. Analysts have warned for years of a "decoupling" of the rest of the world from industrialized states -- a process by which other economies develop immunity to downturns in Western markets. Political decoupling is already a fact of life. China, Russia and other emerging states can worry less about the leverage that the Americans and Europeans exert in international politics. But economic decoupling remains a few years off. The financial crisis has demonstrated that a steep drop in US economic activity will still have serious implications elsewhere.

That means that policymakers in Washington, Beijing, Berlin, Moscow, Tokyo, London, and Delhi must look beyond the immediate needs of their constituents and their own domestic political vulnerabilities. We shouldn't expect too much from the G20 summit meeting in London on April 2. But it's possible that the assembled leaders can go some distance toward the drafting of plans to reform existing international institutions to more accurately reflect the true global balance of political and economic power. That's increasingly important in a world that lacks clear leadership.

Ian Bremmer answers reader questions: Read his real-time responses to reader questions on how politics is increasingly driving the world economy and having direct implications for investors and multinational corporations.

By Ian Bremmer

 |  March 24, 2009; 3:39 PM ET
Category:  Leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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I agree with Ian. Politics do play an important role in economic prosperity and health. In a connected economic field, all players must play with team spirit. But will it work? China plays a unique game.Eu plays another game while the US plays different game with irresponsible liberal spending policies. The administartion is using this opportunity to promote leftist ideas to the extreme whether in environment,regulations or porky budgets. This type of irresponsible behaviour cost us to this point and I wonder what would be the fruits of current politicians in the white house!

Posted by: mmathew | March 26, 2009 12:40 AM
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Commie, Those that who claim to have a grasp on economic policy are the same one's who have brought us this depression as well as the last one.

Protecting jobs and our markets had nothing to do with either.

That's a heck of a grasp on history you got there.

Posted by: rcubedkc | March 25, 2009 3:07 PM
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rcubedkc- So basically you want what made the Great Depression so severe and widespread. Good thinking there, you really got a grasp on economic policy there.

Posted by: Comunista | March 25, 2009 1:39 PM
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Good article except for one thing. The Great Depression was pretty much world wide. At least in the developed countries. Now is much more widespread but not unique in history.

Posted by: luckytn | March 25, 2009 12:55 PM
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Bremmer states: "For political leaders, the challenge is to act with the health of the global economy in mind."

That is exactly why we are in the position we find ourselves in.

My hope is this intentional global economic meltdown leads to the dissolution of the WTO, World Bank, NAFTA, CAFTA, AFTA, MFN (normal trade relations) with China, and every other lousy trade deal that has been shoved down our throats against our will and that has caused the loss of so many millions of our jobs, entire industries, and the lowering of our standard of living.

Otherwise, we need a revolution.

Posted by: rcubedkc | March 25, 2009 12:32 PM
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