When elephants fight, what should we do?
There is an African saying that when elephants fight, the grass is trampled. The weak are hurt whenever the powerful struggle. They never asked for the conflict in the first place.
Coming back from the Emerging Markets Forum in Paris last month and watching the annual business party in Davos (World Economic Forum), it became clear that the rift between the superpowers is widening by the minute with the war in Ukraine. .
Talking face to face with old and new friends after more than two years of confinement behind masks reminded me that there is no substitute for personal contact to understand what people really think about issues. Virtual Zoom meetings can never replace relaxed conversations over dinner, coffee and a glass of wine.
Much of the ‘dialogue of the deaf’ between warring elephants is due to the fact that during the pandemic, leaders and their top advisers have wandered off into their own bubbles, not getting good feedback on what is really going on. in the field. This is why big errors of judgment are made and will be made again.
The pre-pandemic “return channels” have all but disappeared. These are low-key meetings between the top advisers of key rivals who can talk to each other freely and get good reads on areas of compromise and possible avenues for negotiation. Away from TV cameras and paparazzi, one could have serious discussions without being trapped by the need to repeat simplistic “you’re bad-me good” soundbites for the home market.
The big picture seems messy, but it’s clear to anyone who takes a long-term historical view, paying close attention to how individual decisions or accidental events can change the course of history.
While Europe and Russia are totally preoccupied with the war in Ukraine, and the United States is driven by domestic politics, high inflation and random shootings, as well as China struggling with Omicron, the president of JPMorgan, Jamie Dimon, has warned that we must prepare for an economic “hurricane”.
Given that the big elephants (big countries and big corporations) will somehow survive this hurricane, what are we, the little fry, going to do to avoid being someone’s lunch?
The maxim that all politics is local holds true even in a global world. The global calendar is still set by local electoral calendars, whether the votes are free or not. Without a clear victory over Ukraine (making Biden a war-winning president), the Democratic Party risks losing its slim majority in the US Senate and likely House by November’s midterm elections. Consequently, the Biden administration could become a lame duck for the next two years to 2024, hurt by high inflation and continued domestic infighting. Given that the leading Republican presidential candidates are even more hawkish on China than the Democrats, no serious reset in US-China policies is likely for the next six years.
During the same period, the European economy (the third most powerful economic grouping) will still be plagued by Ukraine’s war or post-war reconstruction, the cost of which is estimated to be at least 600 billions of dollars and growing every day. At the Davos meeting, German Chancellor Olaf Scholz made it clear that Germany would end its dependence on Russian energy and switch to alternative sources. This means that Germany, as Europe’s largest surplus economy, will have to write huge checks, not only for its own restructuring, but also to bail out deficit members of the EU struggling with over-indebtedness and economic recovery. .
In short, with elephants still preoccupied with war or pre-war over the next six years, priorities to address pressing global issues, such as global warming, global over-indebtedness, international monetary reforms, etc. will be weak. The rest of us, namely the corporate sector and billions in emerging markets, will all have to make our own contingency plans.
Business leaders use the Davos forum to shape their mid- to long-term strategies, which is why there has been a big debate about whether to de-globalize and decouple. My view is that the global reset is actually moving towards glocalization – a simultaneous reconfiguration of global supply chains and more local resilience efforts on food, energy, water and critical infrastructure such as Internet and payment flows. The militarization of finance and the media has profoundly shaken all political decision-makers. Internet and cash payments can be disabled at will. No small country wants to be so vulnerable to the whims of the big powers.
Scholz was one of the few European leaders who remembered and appreciated that in the global conversation, emerging countries like India, Indonesia, Brazil, Mexico, Argentina, South Africa and the Senegal matter. ASEAN leaders are still mumbling about being summoned to Washington DC to be lectured by President Biden, with peanuts ($150 million) in development aid to be split among ten ASEAN members. ASEAN has always preferred peace and development to take sides in the battles of the great powers.
In such complex circumstances, corporate captains will really want to hedge their bets, keeping their supply chains in countries where national markets matter, but ensuring that they are fully diversified in terms of supply and sources of income. Such collective self-preservation must mean that costs and inflation will rise, adding to global woes. Ultimately, consumers pay.
What should the little people (local communities) do in such circumstances? Surprisingly, during the pandemic, the localization of food production and distribution has proven to be much more resilient than expected. Local food producers and markets create more jobs, more food and more domestic value addition than relying on global supply chains. Local communities are rediscovering that they can help themselves and not be too dependent on dysfunctional governments.
In sum, global fragility has arisen because there has been a seismic shift towards interconnectedness and concentration in big bottlenecks that could fail due to great power conflict. But global resilience happens when the masses (the small) are strong and resilient, rather than overly dependent on fragile supply chains or greedy aid from big powers. The whole system cannot be strong when the lower masses are weak. Trade is always better than help, but if the strong won’t protect the weak, they must protect themselves.
You have to think that grass survived long after the warring dinosaurs died out. Food for thought, especially in times of scarcity and war.
(The author is Distinguished Fellow, Asia Global Institute, University of Hong Kong and former financial regulator.)