The economies of the USA, Europe and China are more integrated than ever before. Frictions in geopolitics will lead to more potential conflicts. Think of the US sanctions of Nordstream 2 to Russia, US-sanctions on Iran, public opinion in Europe towards China leading to a boycot in China of Western brands like H&M, Adidas and Nike, the doubts on Huawei and much more.
Covid-19 has made clear how dependent Europe is on China.The tensions are growing between Europe and China on digital security and economic power. Security experts across Europe have great worries of the connection of Chinese multinationals with the State. The Dutch Intelligence Agency AIVD already reported in 2019 on “China’s Offensive Cyberprogram – The perfect business model for nations”, as the biggest threat of economic espionage. Europe already is very dependent on Chinese technology.
The Trump administration has decided that the listings of China Mobile, China Unicom, and China Telecom must stop in January 2021. It’s expected that President Joe Biden will not change this action. Reason is that these Chinese multinationals are connected and controlled by the Chinese Army. The market value of these three telecom companies dropped in December 2020 with US$ 50 billion. A similar decision has been taken on Huawei last Summer, however also in the UK, Sweden and Australia.
The upcoming week European citizens have the opportunity to elect the next ‘bunch of nonos’ in the European Parliament. Around 750 heavely overpaid politicians. Ask yourself what the Europeans got from them in exchange. Are you able to list 10 examples of their achievements? From our strategic intelligence perspectives we foresee crucial economic issues Europe is facing. We call them ‘The Gray Rhinos’. Gray Rhinos are threats already at the horizon, however, we don’t want to see them.
Economic indicators have improved since the summer of 2016, resulting in an accelerating positive level of economic performance in Europe and the other OECD-countries. Entrepreneurs and consumers are getting back into a good mood. The professionals in government, banks and other institutes did not see this coming. In our strategic intelligence best practices, we use the ‘Strategy as Active Waiting’ management tool to identify early indicators of change and create possible courses of action.
We estimate the amount of debt in the financial world to exceed the amount of global debt of US$ 152 trillion (company, consumer and government debt) by far. In business one makes strategic and business plans as result of one’s scenario plans, strategic war-mapping efforts and Grey Swan analyses with the aim of getting to the future first. However, the levels of volatility and uncertainty in 2016-2018 are extremely high, and force us to try and create maximum agility in our companies. Europe will face two large Grey Swans: the first is financial, and the second political; they might, in addition, reinforce one another.
In the fall of 2016, newspapers such as The New York Times and Financial Times published articles on the recovery of the economy. Is this really the case? It seems we cannot rely on these articles in these otherwise highly-regarded newspapers. From 2001 to 2016 the percentage of the upper-middle and middle class in the US fell from 63% to 51%. This means that some 25 million American economic lives crashed.
This statement comes from McKinsey publications in July and August 2016 on ‘income inequality’. This new reality means that a new generation of young people in Europe and the US risks ending up poorer than their parents. From 2005-2014 around 65-70% of the population faced flat or falling incomes. Prior to 2005, this percentage was just 2%. This means that 65-70% of the total population faced a lack of economic progress. The main causes were the aftermath of the 2008 financial crisis and the slow recovery that occurred since then. What are the implications?
This statement demonstrates a potential problem. One example is that of the European Central Bank (ECB), with their new headquarters in Frankfurt, financed with even more debt in a financial world led by overconfidence and exuberance. The eurozone has been in a slow-motion crisis for some 7-8 and no one seems to be in charge: neither Draghi, Merkel, Tusk, Juncker or anyone else. The ECB doesn’t stand for anything but improvisation.
In our daily strategic intelligence practices, we regularly list several Key Predictive Indicators (KPIs) to see what the near future might tell us. This is not forecasting. It is, however, based on delivering perspectives going beyond the brutal facts, by creating crucial foresight and early warning. Our governments, banks, the European Commission, national forecast institutes and our uncritical media tell us that we can expect economic growth. We don’t believe this! Our early warning analyses indicate the opposite.