REUTERS MAGAZINE-The Elephants in the Davos Ski Lodge
(Nader Mousavizdeh is CEO of Oxford Analytica, a global analysis and advisory firm. Previously, he was an investment banker at Goldman Sachs. Any opinions expressed are his own.)
By Nader Mousavizadeh
Jan 17 (Reuters) - The epic global shifts of 2011 transformed the political, economic, and social landscape from Shanghai to Sao Paolo, Washington to Cairo. No leader (not even Vladimir Putin) is safe from the vagaries of social unrest; no economy (not even China's) is unaffected by contagion from an over-leveraged, under-managed euro zone. No country (not even the United States) is immune from the threat of asymmetric attacks - anything from a terrorist bomb to cyber-warfare.
Volatility will be the rule, not the exception in 2012. What I call the emerging Archipelago World of fragmenting power, capital, and ideas is inherently unstable - as vulnerable to old conflicts and new threats as it is open to the dynamic entrepreneurship of rising powers and corporations remaking the map of the world.
A 20-year period of one-world, one-way globalization is being replaced by an era of competitive sovereignty. The walls are going back up. Developed and developing states alike are vertically integrating political and economic interests across public and private sectors in a global race for growth, employment and security. Having previously embraced interdependence as the motivation for horizontal integration across markets and regions, states as diverse as Canada, Finland, Saudi Arabia, Japan, Brazil, Turkey and the United Kingdom are now pursuing more national strategies for economic and political security.
For investors, corporations, and governments doing diligence on their global exposures, acknowledging this new reality is an essential starting point. Forget stability and predictability. Abandon the notion of global solutions to global problems. Instead, develop deep, granular understanding of the distinct political and economic context of new markets. Seek cooperation and alliances of interest, beginning with the discreet interests of these states and their economies. Embrace complexity, and understand that the successful management of political and economic discontinuities will be the essence of stability in the 21st century.
Four themes are likely to dominate the environment in which global investors, companies and institutions will seek to limit the downside to risk and capture the upside to volatility in 2012.
A GLOBAL RESET
A new strategic landscape will take form amid a global reset marked by leadership change in China and national elections in the United States, Russia, and a halfdozen other pivotal powers. The systemic banking crisis in the euro zone will force Berlin and the European Central Bank to pick their poison - and either become a sovereign lender of last resort or see the 27-member ECB's dreams of fiscal union evaporate. For the Middle East, the second year of the Arab Awakening will begin under a cloud of increasing peril and paranoia. The movement for more legitimate and accountable governments in the Arab world will be tested by the still-powerful forces of tyranny, corruption, and fundamentalism - a scenario that will further draw in Israel, Iran and Turkey as strategic arbiters of the region. For the global economy, 2012 will likely see continued disarray, with the gap between the debtor and creditor nations of the world likely widening. Continued...