By Clem Sunter.
Abstract: If you want to get ahead of your competitors, you need the bright eyes of a fox to spot the flags changing the game around you and the agility of a fox to meet the challenges posed by them…
I would like to provide an update on the global flags which I identified in Flagwatching, a book published in November 2015. Clockwork flags are those ticking away with fairly precise consequences, whereas cloudy flags can have a wide array of possible outcomes.
The religious flag
The flag of major religious conflict, which really only went up the flagpole in this century after a lapse of a thousand years, is affecting all sorts of games in a very significant way.
The first is the Middle East and North Africa, parts of which are in a permanent state of civil war as a result of this flag. Thousands have died, millions have been turned into refugees and major cities like Aleppo have been destroyed.
The second is the toughening of immigration policies which has divided America probably more than any other issue since slavery triggered the American Civil War.
The third is intelligence-gathering and the game of war generally where the West has to fight a highly dispersed enemy unified only by ideology, but with the ability to create havoc through lone-wolf attacks on civilian targets.
The fourth is the growing restrictions in the field of international travel around such activities as carrying laptops onto planes and obtaining visas of entry.
This is a cloudy flag in that there are some extreme scenarios flowing out of it such as nuclear or dirty-bomb terrorism and a possible showdown between Saudi Arabia and Iran. There are no signs that this flag is going to come down any time soon, though in its present form it does not represent an existential threat to the West.
The red flag
This cloudy flag first went up with the recent annexation of Crimea by Russia. Russia was thrown out of the G8 and now has heavy economic sanctions imposed on it. Yet Russia supplies one quarter of Europe’s energy. Putin and Trump are uneasy colleagues whose relationship could change overnight if there is any military incident in Syria or elsewhere involving Russian and American military forces.
Meanwhile, China has just overtaken America to become the largest economy in the world in purchasing power parity terms. It is busy building a sophisticated defence system and international trading network to protect its No 1 position, which it has regained after three hundred years in the shadows.
North Korea, the third component of this flag, is a wild card with the potential of creating a second Korean War given the unpredictability of its relationship with America, and the impulsive nature of both leaders. No amount of sanctions will make it drop its missile and nuclear programme. However, in the event of war, South Korea will be the country to suffer most and China will be severely disrupted.
The grey flag
The ageing of the world’s population is accelerating and has already slowed Europe and Japan’s economic growth rate down to virtually zero. America is younger and more resilient and will expand its economy faster. China has revised its one-child to a two-child policy precisely because of this clockwork flag ticking away in the background. Nevertheless, public health care is becoming an overwhelming issue everywhere as the number of old people spiral and only limited resources are available to keep them alive.
In the developing world, the economies of those countries with competent governments will easily outpace those of the developed world. By the end of this century, Asia and Africa will account for 83% of the world’s population of just over 11 billion.
The anti-establishment flag
This flag has already produced Brexit in the UK, Trump in America and an outsider like Macron to lead France. The reason the flag is cloudy is that Macron with his belief in a united Europe is the exact opposite of Theresa May and Boris Johnson. One simply does not know where or how the lack of trust between the public and the political establishment is going to create the next surprise. However, inequality between the super-rich and the rest is still widening so the anger that caused the flag to rise in the first place is bound to increase.
The pressure on companies to be more concerned and transparent about the ratio of the remuneration of top executives to the wages of workers is intensifying. International agreements are also forcing the banks and others to share financial information with governments to stop money laundering and tax avoidance by rich individuals. The game of being a financial adviser will therefore be very different in the future.
The green flag
The latest example of the impact of this clockwork flag is the projection that global warming will open up the Arctic as a major shipping route by 2050 because the ice will have sufficiently disappeared. Extreme weather is producing extreme drought and extreme rainfall in many countries. California has experienced both in the last five years. America’s continued support of the Paris climate change accord is now in doubt just as the scientists are warning that the tipping point regarding the future sustainability of the planet could be earlier in this century than previously thought.
The national debt flag
This clockwork flag is quietly rising as governments everywhere are abandoning austerity and budget surpluses in favour of the Keynesian solution of running budget deficits to reinvigorate their national economies. As long as interest rates remain low, the effect of increasing national debt beyond acceptable levels is being deferred. As soon as inflation rates start to go up, the era of cheap money will have to end and interest rates will be raised by central banks. This could lead to defaults on national debt by countries such as Greece and Italy and set in motion the kind of credit crisis that fuelled the stock market collapse in 2008.
The world of work flag
High youth unemployment rates will continue until the educational establishment understands the nature of this clockwork flag. Automation, robots and artificial intelligence have completely transformed the world of work from what it was like in the last century. The majority of young people have to create jobs for themselves now rather than get jobs based on their academic qualifications. The age of the entrepreneur has begun and the curriculum of schools and universities must reflect this.
In America, many citizens have become personal conglomerates in that they pursue several different careers at the same time. It is called informal employment and may, for example, include making money out of your car through being a member of a smart network like Uber. That is the way that it is and, like the first industrial revolution in the 19th Century, there is no turning back the clock.
The porous border flag
In two days last week, 6 000 refugees were rescued in the Mediterranean from drowning. This cloudy flag, along with the religious flag, has led to the hardening of attitudes in the West towards accepting refugees from conflict zones as well as normal economic migrants. This has meant that, unlike in 2016, migrants are now compelled to survive in makeshift camps without any hope of reaching their ultimate destination of choice. Hence, borders are becoming less porous as a result of popular pushback in the US and Europe.
The new rules of the immigration game are diminishing one of the great forces driving the world since the Second World War: globalisation. It may well extend to educated and talented people having less opportunity to pursue education and work opportunities abroad in other countries. The world is turning into a more closed society and unfriendly place than it was twenty years ago. The question is whether the trend will be reversed by exceptional and more inclusive leadership replacing the power elite we have today.
The internet and cellular flag
This pervasive clockwork flag is radically altering the way every arm of government and every industry in the private sector operates. As I mentioned in the book, our dependency on this technology has elevated cybercrime and cyberterrorism to one of the greatest threats on Earth. This weekend’s attack on 200 000 institutions in 150 countries has demonstrated how vulnerable the world is to dedicated hackers. On the other hand, this flag offers entrepreneurs incredible opportunities to be innovative and to reach their targeted markets.
The latest view on the next major technological wave is that the internal combustion engine will be obsolete by the middle of this century and cars will be electric and driverless. Every house will have its own solar energy system which makes it independent of the grid.
The lifestyle and leisure flag
The millennial generation has a completely different view of time to previous generations. Hence, this clockwork flag is negatively affecting the popularity of sports like golf and test cricket which consume a large amount of time to play or watch. Equally, the role of mother and father is moving completely away from the old model of the former looking after the children while the latter goes out and earns the money. Life and leisure are now a jointly shared affair where the roles of the two partners evolve as circumstances and personal preferences demand.
Watch these flags and please come up with some of your own which will give you the edge in the life you live. And in doing this, may the fox be with you![Originally published on News24.com, 15 May 2017]