Incumbents in trouble, Putin’s bet, Conservative Canada, and more: Your questions, answered

Another heat wave, another mailbag.

Thank you to all who’ve sent questions. The response to last week’s edition was overwhelmingly positive, so please keep ‘em coming. If you want a chance to have your questions answered, shoot me an email here or follow me on Facebook, Twitter, LinkedIn, Instagram, and Threads, and look out for future AMAs. The only questions that are off-limits are boring ones.

Looking at the elections in France, the UK, and the US, would you agree that 2024 might be shaping up to be the year of anti-incumbents?

Funny you should ask – my latest Quick Take tackles that exact question. Long story short: Yes, this is a deeply challenging time to be an incumbent, and the massively underrated reason why is that people all over the world are still reeling from the aftereffects of the pandemic.

There are, of course, plenty of local and idiosyncratic reasons why the French, the Brits, the Indians, the South Africans, and so many others were unhappy with their leadership. But the one thing incumbents everywhere had in common is voters blamed them for all the unprecedented disruption they’ve experienced since COVID-19, from lockdowns and vaccine mandates to supply chain disruptions, inflation, migration, and crime. In this environment, if the Republican candidate in the United States was anyone other than the historically unpopular Donald Trump, we’d be looking at a GOP landslide – and that’s against anyone that the Democrats put up, let alone a debate/age-diminished Joe Biden.

What US election result is Putin hoping for?

Putin clearly prefers Trump – a more transactional president who admires strongmen, shuns traditional US allies, and believes “common values” are irrelevant to international relations. Trump dislikes Ukrainian President Volodymyr Zelensky and has expressed a desire to engage with Putin directly and unilaterally to end the war on terms more favorable to Russia. Putin also benefits from more chaos in the US political system and stands to benefit from a contested US election outcome that turns Americans more inward, against each other, and away from international leadership in diplomatic, economic, and – especially – security matters.

If Trump is elected and turns his back on Ukraine, how likely is it that Western Europe will crank up its own war machine and get the job done?

They’ll certainly try to do more. That’s especially true of NATO’s frontline states: Poland, the Baltics, and the Nordics. But France, one of Europe’s leading proponents of common defense capabilities and support for Ukraine under President Emmanuel Macron, may not be in a position to do more given the result of its recent parliamentary election. Germany, the continent’s largest economy, may be reluctant to lean in given the fiscal troubles facing the government’s weak and fractious coalition. And some other countries like Viktor Orban’s Hungary and Robert Fico’s Slovakia will align themselves more with Trump, dividing what has hitherto been a strongly unified Europe on the issue.

Where do you see breaking points for the Russian and Ukrainian people in this war?

It’s much closer for Ukraine. Kyiv is running low on valuable young men who can be mobilized, trained, and sent to the front to fight. Ukrainian support for the war has eroded accordingly. That matters more than it would if the same were happening in Russia because Ukraine remains a democracy, however imperfect.

A little over a year after Yevgeny Prigozhin’s aborted coup, I don’t see any near-term breaking points for the Russian people. Though large-scale casualties are certainly making the war less popular among the population at large, the Kremlin is able to sustain its “meat grinder” campaign by drawing from a pool of disenfranchised convicts, ethnic minorities, and mercenaries. Not that “ordinary” Russians are substantially more enfranchised …

What will it take for the Chinese to give up on Putin? What can America do to hasten the process?

There’s no reason for them to do so. After all, India – a key strategic partner of the United States and the West more broadly – has also significantly increased its trade with Russia, with no adverse consequences for Delhi. If the US were to start imposing significant secondary sanctions on Chinese companies or banks over expanded dual-use exports to Russia, that’d probably get Beijing to reduce its exposure to the Kremlin’s war machine at the margins. But there’s nothing the US is likely to do in the near future (under Biden or Trump) that could completely break the China-Russia relationship.

How would a Trump presidency strengthen China?

Trump and Biden have similar China policies. The biggest difference is the extent of tariffs Trump is prepared to impose, which would have a more significant negative impact on both the Chinese and the US economy (unless Beijing was prepared to cut a significant and unexpected deal). China’s biggest strategic opportunity in that environment would be to divide and conquer: Exploit concerns from US allies that find themselves constrained or undermined by a more unilateralist Trump administration to improve its relations with them and potentially drive a wedge between them and the Americans.

What’s the biggest geopolitical risk in the world today?

The biggest risk is still “the United States vs. itself”: A presidential election in the world’s most divided and dysfunctional advanced industrial democracy that will do untold damage to America’s social fabric, political institutions, and international standing no matter who wins. Have a look at the full list of Top 10 Risks we put out in January. I really wish they weren’t standing up as well as they are …

How do the leaders of other countries feel about a potential Conservative government coming to power in Canada?

At the risk of sounding harsh, most world leaders aren’t thinking about Canada at all – and for good reason. The stakes of the country’s upcoming election may feel existential to my liberal friends up north who are about to lose power after nine years in office, but the reality is that Canada’s democracy isn’t in crisis like America’s is.

Despite his right-wing populist rhetoric, when it comes to policy substance, Conservative leader and likely next prime minister Pierre Poilievre is closer to Mitch McConnell’s brand of Koch-friendly conservatism than to the nativist, authoritarian, protectionist Trumpism that ruffles feathers in foreign capitals. Sure, a Conservative government will lead to closer alignment with the US in a Trump administration, but either way it would remain a very friendly and stable relationship. It will also lower taxes, lean more strongly into energy and related infrastructure development, and promote other pro-business policies. Critically, agree or disagree with his rather conventional platform, Poilievre has done nothing to suggest he’d undermine the legitimacy of Canada’s democracy. Must be nice, eh?

Do you think the AfD will win the next German election?

No. Despite the party’s meteoric decade-long rise, Germany’s coalition politics are designed to deliver centrist outcomes at the national level, and the Alternative for Germany is still seen as way too radical, Nazi-coded, and incompetent. But it’s certainly plausible that they’ll eventually be part of a government. After all, most of the structural elements that made the AfD a force are still in place: unchecked migration, a weak economy, deep discontent in Germany’s east, and plenty of space to the right of the decidedly moderate and pro-European Christian Democratic Union, aka CDU, for them to exploit.

Can RFK Jr. win?

Win … back his reputation? It’s hard to say. He’s better known now and seems to have a fair number of committed online fans (I say “seems to” because I can’t be sure how many are real vs. bots). I could see him selling merchandise, writing a book, and going on the public speaking circuit. If you’re earnestly asking about the 2024 election, I’d say he has a better chance of winning the lottery than he does of carrying a single state.

Does either of the major US parties have a realistic plan to bring down the deficit?

No. Both presidential candidates’ platforms and track records show little concern for fiscal deficits or pro-cyclical government spending (though Trump added more to the national debt in his first term than Biden has). This is not ideal at a time when interest rates are high and debt servicing costs are rising as a share of the federal budget.

I'm not saying that all deficit spending is bad or equally bad. When we look at companies, we always consider both sides of the balance sheet: liabilities and assets. The same should be true for sovereigns. That’s why I generally support deficit spending that can reasonably be expected to lead to asymmetric increases in the nation’s long-term asset base (e.g., any positive-return investment in education, health care, infrastructure, decarbonization, etc.). Trillions of dollars on failed wars … not so much.

The circumstances and timing matter greatly, too. Fiscal stimulus – even of the not-so-productive variety – is the right thing to do during recessions, when aggregate demand needs a kick in the ass, interest rates are low, and the spending pays for itself many times over with growth. Conversely, the right time for the government to tighten its belt is during the boom … now.

How big a business is Eurasia Group? Is it relatively large, medium, or small/boutique compared to its peers?

We’re almost 250 employees – pretty small for an organization that helps people understand the world. Our principal competitive challenge is employing enough senior leadership to take on all the new opportunities we’re lucky to have. We have a lot of talent, but it’s a big world out there, and it’s not getting any less challenging.