Global Market Uncertainty reaches new peaks in a world of Brexits and Trumps, that some are describing as “Post-Globalisation”
As one scrolls (or pages, for older readers) through the economic news articles that pile up in the average newsfeed, the resource that seems in highest scarcity is confidence. It does not take an avid search of business publications to uncover a skepticism towards the global market, and for good reason.
In 2008 the markets crashed, and whilst investors and executives scrambled to get a hold on the fragility of the global financial market, entire economies came to a standstill. However, the events of 2008 did more than just shine a spotlight on the shady dealings of major corporations and banks, it altered our very perspective and understanding of globalisation.
Countries that were hardest hit by the crisis became sharply aware of their economic place in the world, and economics became more central to political discourse than in any recent period.
And in no time the economic turnaround promises came thick and fast. Politicians would (and still do) pull out any economic paper that implied any form of major growth, no matter the basis for the statement. Once again the world would see nations rise to embrace higher GDP growth rates , and with a little easing of market controls, small businesses would burst forth from the trough to lead the march on progress. It was all that easy. Until it wasn’t.
Prior to 2008 the global economy seemed as peachy as it would ever get. World renowned publications like The Economist and The Times had their cover pages plastered with their rising economic star of the week, gushing over the billions to be made through the IMF-backed liberalization of various economies. This was an era of growth. An era symbolized through the emergence of a middle class in Africa and the rise of the Asian tigers. The demand for resources was at an all time high, maintained mostly by the steady appetite of the manufacturing giant that is China, whilst the digital boom brought millions of consumers online.
It is however unfortunate that during times of widespread economic success, economists seem the most clueless. In hindsight it actually makes the most sense. The chief role of an economic advisor is to ensure that policies are structured to create growth, and if that growth exists then they’ve done their job. This is partially why the outlooks given by many economists during the pre-2008 boom period mostly expected the trends that undercut global growth to continue.
“Just keep doing what you’re doing, have you seen the numbers? It seems to be working”. No one pays you to say that you’re not sure of something.
So without the forewarning of proclaimed experts the walls came crumbling down, and we’ve all been left feeling rather empty handed. So now we perceive our only path to return as one that is the repetition of past successes. Unfortunately for many looking to replicate the glory of the past, the present is a very different place.
In July the IMF revised their global outlook on growth to 3.1% for 2016 and 3.4% for 2017. This was already the second downward revision of the global growth outlook by the institution this year, and indicates the potential damage done to the global market by Brexit. But even more than that was the indication by the IMF that the majority of this growth would be lead by emerging markets.
Now for many of us who live in countries deemed “emerging markets” this comes as a relief, but it implies a deeply troubling story for many of the worlds richer countries.
Developed economies in the west have been a pretty safe bet for investors and are the homes to which investors flee when their escapades into emerging markets fail. However, following the events of Brexit and the continuing fragility of the EU this may change.
So why should this be of any concern to developing economies?
Despite the animosity that is shared between a majority of developing nations and their developed compatriots, in a globalised world, the two spheres are very much linked. The world has seen the broad effects a declining Chinese economy has had on individual nations, and as a result of the economic importance of Europe, their regression might indicate a similar trend.
Europe (EU, UK included) not only represents the amassment of some of the richest nations in the world, but also a collection of nations that are very much involved in the development of the global economy. As a provider of foreign direct investment, and important trade partners, the trade bloc provides the much needed financing for may developing states. Considerably more could be said for the groups involvement in aid to poorer countries, and how much it contributes to humanitarian efforts.
This is why the events of Brexit have caused such worry in business circles. With the winding down of the Chinese economy, investors sought out the comfort of “safe haven” economies in the west to curb risk. However, with the UK approaching a recession and the lengthy process that will be the EU tensely renegotiating its trade agreements,investors are unsure whether their investments are safe in the blocs financial center.
And the key word here is “unsure”.
When asking any investor or economist what will be the progression of events in the market in the coming months, the level of speculation becomes almost akin to your friends sports predictions. Most experts couldn’t tell you what shape the global market will be in, beyond a couple of months, and this has caused the wholesale erraticism we observe today.
Unlike previous years, where predictable changes allowed investors to be more comfortably risk-prone, the current environment cautions any who would venture on the wilder side of life without solid info.
How will this come to affect attitudes towards globalisation and international connectivity in years to come? Well, we’ve already seen the rise of right wing nationalism in Western Europe, a development that sees most of the blame for economic stagnancy being placed on the outside world through events like Brexit in the UK, or the rise of Marine Le Penn in France. The continued instability in the Middle East is a lingering thought for those that see the potential risk groups like ISIS pose internationally. And surely even the antics of Donald Trump in the US can’t go without a second glance at global context.
On a whole, whilst others seek to grow closer to the global market, its main role players in Europe keep piping up about distancing. Opportunity remains marginally high for the more innovative countries amongst us, but even that prospect has driven a decline in business confidence in several countries that don’t feel especially innovative.
So in a world that is both enthralled with the ability to be connected as a single community and market, and terrified of losing their ability to act as an independent economy, you have to ask: What on earth is going on?