I recently chaired the ACT Annual Conference discussion on global risk. It is not the first such event I have chaired but it did have, I thought, just about the perfect panel of guests to discuss a huge subject.
On the panel were: Mark Gregory from EY, an expert on the UK economy; Claus Vistesen from Pantheon Macroeconomics; noted China-watcher George Magnus; and Dr Elizabeth Stephens, MD at Trendline Analytics, who is an expert on spotting and measuring global risks.
My overall impression was that there was an increased level of risk in many different parts of the world at the same time. Perhaps the collapse of communism and the spread of liberal democracy and capitalism have lured us all into a false sense of security over the past three decades, but things now are on the move again.
So here are my thoughts on risks in 2019 and the future.
In the UK, we have an economy that is failing consistently to increase its productivity and is managing a growth rate that, until the credit crunch, would have seemed to be fairly unimpressive.
The more worrying aspect of that is that the best forecasts are predicting that slow rate of growth will continue for many years to come and, remember, that is being achieved with very low interest rates and billions in quantitative easing; the room for boosting the economy in case of a recession is limited – despite the spending commitments made during the race for the leadership of the Conservative Party.
Looking further ahead, very well-respected institutions like the Institute for Fiscal Studies and the Office for Budget Responsibility regularly point out that, with an ageing population, the long-term prospects of balancing the budget are very difficult.
To be blunt, something will have to give in the next 10 years or so, either higher taxes or lower spending on health and social care. Those very services are used overwhelmingly by the elderly, all of whom have a vote and, unlike the young, use it.
And as for Brexit, most economists think it will seriously damage growth, but it is also absorbing virtually all the government’s time and effort, and has done so for the past three years.
There are a dozen areas of policy that need serious reform and government attention.
On the Continent, the eurozone has its own problems, but since people have been predicting its collapse since before it was created, I think it best to assume it survives for a while longer.
However, not all risks are economic ones.
Attacks on a free press, as well as on the independence of judges and political opponents by freely elected governments in Eastern Europe, suggest that the introduction of liberal democracy was not as deep-rooted and sincere as we hoped.
The same concerns could be levelled at Turkey, with the rather more worrying additional issue that it is a significant regional power in a region that has many countries on the edge of chaos. Furthermore, Turkey has long felt belittled and ignored in what it considers to be its own backyard. A heady concoction.
We all know about the increasing power and economic strength of China, but it is also important to remember it is at the same time a rising military power which, rather like the USSR during the Cold War, sees itself surrounded by countries that appear to be intent on containing its influence, reach and power.
China is obviously not a democracy, and while free-market economics hold sway, it is also very clear that the Communist Party is totally in control and intends to maintain that control, ruthlessly if necessary.
Economic problems happen with monotonous regularity, but what happens in such a country if the economy causes real discontent? Flexing those new muscles is often a useful displacement activity for such countries on such occasions.
That brings us to the US, the world’s one true superpower, economic Goliath, world policeman and the biggest winner by far from the spread of democracy, capitalism and free trade since World War II.
Just when we, in the West, are suddenly beginning to see that the world is not quite as safe and predictable as we thought, the US has elected a man who seeks to undermine the systems and institutions that have worked so well because he thinks they somehow impoverish the US.
Worryingly enough, this plays very well with his power base of voters that we would have previously called isolationists, but it is of course total tosh.
On my last day of work at the BBC, on 5 July, I had to discuss a report prepared by the International Monetary Fund on the prospects of a trade war between China and the US. The report used three different scenarios:
It will come as no surprise that the US loses out in all three cases.
Even if the US cuts a deal to halve its deficit, the benefits, such as higher exports of food and fuel, are more than offset by the damage done to domestic US industry, which is reliant on Chinese components.
There is also serious damage to many other economies.
Even in the US it is the poor who suffer the most, and poorer states suffer more than rich ones. That means it is the president’s core support that will be hurt the most. But the president doesn’t seem to know or care enough to change his policies.
For the rest of the world, the dangers of a US-led trade war are just one aspect of a much larger problem: how much reliance can you put on the US to do the right thing in a crisis?
Even though it would be extremely damaging for the US not to react as it has in the past, there are few guarantees with this president. Even if Trump isn’t re-elected, can we be certain the US will return to its old ways?
Indeed, President Trump is not the real risk; rather it is how he has altered perceptions of the US’s core interests and responsibilities. Would he support NATO in all circumstances? Does he back South Korea totally? Would he really risk a trade war?
Ultimately, that ambiguity matters, because there are plenty of countries that will be tempted to try to take advantage of it.
Jonty Bloom was formerly business correspondent for the BBC and is now a freelance journalist, speaker and presenter
This article was taken from the August/September 2019 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership