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Ian Bremmer on the forces behind the geopolitical recession
Ian Bremmer's Quick Take: A Quick Take for you today. I want to talk to you about the geopolitical recession that we, the world, are now in. What is a geopolitical recession you ask?
Well, economic recessions you kind of understand. We have boom cycles and bust cycles. They happen frequently. So frequently that we even have solid measurements for when an advanced industrial economy is in a technical recession. That's two quarters in a row of negative growth. Or when the world is experiencing a recessionary year. They happen frequently in the United States since World War II, every seven to 10 years on average. And that means that we have been through many of those cycles, and we can recognize them and we know that we don't like them. We want to respond to them.
And whether you are an advanced industrial economy, a free market economy, or whether you are an authoritarian state and a state capitalist system, either way, you've got central bankers and finance ministers or treasury secretaries that are using monetary and fiscal tools to try to minimize the impact of a recession and get back towards effective more sustainable growth.
Okay, so that's the economic side. But I'm not an economist. I'm a political scientist. Are there cycles in geopolitics? And the answer is yes. But they're a lot longer. And because the cycles are longer, playing out over several generations, we don't live through a lot of them individually. And so, we don't recognize them as a pattern. But we are right now in a geopolitical recession.
What causes a geopolitical recession? Well, basically it's when the balance of power becomes misaligned, out of whack, with the rules of the road geopolitically. With how the world order is structured, the institutions, the architecture. So, for example, the global order that we have been living through both after World War II through the Cold War, and then through Soviet collapse, was all about a number of global institutions and architecture that the United States created with its allies, its friends, after World War II was over.
So, the world has just gone through this horrible cataclysm, a geopolitical depression, and now we've got a boom cycle. And the United States is creating the United Nations and the WTO and the IMF and all of these other global institutions with the idea being support for collective security, support for a multilateral free trade architecture, support for rule of law, promotion of human rights, promotion of democracy all over the world. Generally speaking, the United States created a whole bunch of global institutions that reflected what the United States thought about how the world should be run.
Then over time, the balance of power changes, but the institutions don't. At least not as much because they're sticky, because it takes a lot of political capital to change them. People kick the can down the road. Let somebody else do it. And when that gap grows too wide, then the geopolitical order starts to shake. It becomes much more unstable.
So, what happened here? Three big reasons why we are now in a geopolitical recession. Number one, when the Soviet Union collapsed, Russia was not integrated into the West, not into the EU, not into NATO. They're angry about it. They blame the United States. They are now a chaos actor on the global stage, at least insofar as the advanced industrial economies. The G7 are concerned, and their top allies are fellow chaos actors: North Korea and Iran. That's reason number one.
Reason number two, China was integrated into the global order, particularly the global economy on the notion that as they got wealthier, as they benefited from that, they would become responsible stakeholders. And what that means for Americans is that they're going to align with these US led global institutions and values and norms. They'll support rule of law. They'll become more politically liberalized. They'll become more economically free market in orientation. The Chinese have gotten much wealthier. They're now a technological peer to the United States, no one else is close, ahead in some areas, behind in others. But they absolutely have not aligned with the United States. And that is making a lot of Americans and a lot of American allies very concerned, and it's leading to confrontation between the two most powerful countries.
Number three, while those first two things were going on, lots of people in the West, and especially the United States, increasingly felt like their own leaders, their political leaders, their business leaders, their corporate leaders, their media leaders, their elites, were promoting globalism, were promoting a bunch of things for a global order that didn't help them. So, all of those ideas about collective security and promotion of democracy and promoting free trade, not interested, because the average American doesn't feel like they're benefiting from it.
And certainly that is a big reason why Trump won, not just once, but twice, and more decisively the second time around. And so now, not only do you have the Russians acting like rogues with allies, and the Chinese much more powerful, but not aligned with the US-led global system. But you have the Americans saying, "We're not very interested in promoting that global system anymore. In fact, we're more interested in the law of the jungle."
It's a worldview that's closer to the Chinese. Not multilateralism but just one-on-one relations where you are stronger and you tell the other country what you want to have done. It's very transactional, it's very pragmatic. Doesn't really matter what kind of values that country holds. If you're Trump, you'll do a deal with Russia or China or an ally, and you'll criticize and pressure anybody if they're not behaving the way you want to. The fact that there are common values doesn't really matter. The fact that you're part of the same infrastructure and architecture doesn't really matter. It's, "What are you doing for me now?"
So given all of that, we are now in a serious geopolitical recession. What I call a G-Zero world. Not a G7, not a G20, where there's an absence of global leadership. Now, what's very interesting about that G-Zero world, what's very interesting about this geopolitical recession that I believe that we're in is that the United States is in a particularly strong position right now. Particularly strong compared to its adversaries like China facing the worst economic conditions since the 90s, maybe even the 70s. Like Russia in a period of severe economic decline, and other decline, national security, political. And Iran, which has basically just lost their empire, their empire by proxy, the Axis of Resistance in the Middle East. The US is also much stronger relationally to its allies. America's technology capabilities becoming so dominant compared to what the Europeans, the Japanese, the South Koreans, the Canadians don't have. America's military capabilities. The strength of the US economy coming out of the pandemic compared to every other G7 democracy shows that the United States can get a lot more done in a geopolitical recession. Can ensure that its will is followed.
Also, the fact that Trump is consolidated so much more power this time around compared to 2017 when he was first president. Last time, he had all of these establishment Republicans that didn't really support him, all the way from Mike Pence, his vice president, to Mad Dog Mattis, to Mike Pompeo, to Nikki Haley, to Gary Cohn, and on and on and on. This time around, not at all. Everyone is aligned with Trump.
Also last time, the GOP, the Republican Party, didn't feel like they had to ride Trump's coattails. He wasn't as popular as a lot of they were in their own individual campaigns. This time around not at all. Trump's much more popular than them, they need him much more. And that's happening at a time when so many allied governments are very, very weak. And that's a problem, right? For them. If you're Canada and your government's imploding, or you're South Korea and your government's imploding, or you're Germany, your government's imploding, or France and your government's imploding. Or even countries like the United Kingdom and Japan where the establishment is very, very vulnerable, and very unpopular, Trump's ability to tell you, "This is what we want. And by the way, we are a lot more effective at playing the law of the jungle than either our allies or our adversaries."
It's going to be very hard for them not to kiss the ring, not to provide big wins for the Americans. So, lots of wins for Trump, and that's what we're going to see over the course of the coming year, and a lot of defense being played by a lot of those other countries around the world. But is that sustainable?
Because to get out of a geopolitical recession, you ultimately need to create new rules of the road. You need new global architecture, especially because our challenges, whether it's climate change or an arms race, nuclear weapons, whether it's AI and new disruptive technologies, for good and for bad, they all are global challenges and global opportunities. But we are increasingly fragmenting our responses to national and even local levels.
So, this is not a sustainable trajectory, and that is what we're going to spend an awful lot of time looking at over the coming year, over the coming administration, and going beyond. Because, of course, this is the first time that any of us have experienced a country, the United States, essentially unwinding, undoing its own order. These global institutions that Trump and others are saying are globalist and not useful for the Americans to align with are institutions the United States initially created to help run the world in America's own image, but the US no longer believes that that works for it. And that is a fantastically interesting, but also unnerving, unsettling, and unstable time for us all geopolitically.
So, that's what a geopolitical recession is. I hope you found this worthwhile, and I'll talk to you all real soon.
Have the US and Canada managed a soft landing?
While that’s a lot of “ifs,” it’s better news than expected last year when many were predicting a rougher go of things and a decent chance of recession.
Stateside, economists are tilting more and more toward the US avoiding a recession of its own, which is also good news for Canada. Inflation is increasingly under control and the labor market is holding up. Plus the Fed is expected to cut interest rates this year, maybe even three times.
Annualized GDP growth estimates for the first quarter in the US are now up to 2.8% while estimates in Canada for growth are hovering around an unexpectedly robust 3.5%. Canadian inflation was 2.8% in February and 3.2% in the US.
Consumers and businesses are hoping for a cut in Canada, too, perhaps as soon as April 10, when the Bank releases its next rate decision. But if it doesn’t lower rates next week, it’s expected to get around to it before too long, perhaps by summer.
Could this be good news for President Joe Biden and Prime Minister Justin Trudeau? As Evan Solomon explained, reality and perception are often far apart when it comes to such matters, so it depends on whether the politicians can convince voters to give them credit for the turnarounds.Specialists tend to the body of a victim outside a damaged shopping center hit by a missile strike in Belgorod, Russia, on Feb. 15, 2024.
Hard Numbers: Missiles hit Russian border city, ex-FBI informant in Biden bribe case faces charges, Gaza needs new ‘Marshall Plan,’ UK slips into recession, Bangkok’s air becomes unbreathable
7: At least seven people, including a one-year-old girl, were reportedly killed on Thursday by an apparent Ukrainian missile strike in Belgorod, the closest major Russian city to Ukraine. This is not the first time Belgorod has been targeted amid the Russia-Ukraine war – dozens were killed in a strike there last December, as Ukraine seeks to show that it can still strike Russia, even as Moscow’s forces slowly push forward the front lines in the Donbas. Meanwhile, the US warned that the eastern Ukrainian town of Avdiivka, which has seen some of the worst fighting recently, is at risk of falling into Russian control.
25: Alexander Smirnov, a former FBI informant, has been charged with lying about President Joe Biden and his son Hunter Biden accepting payments from Ukrainian energy firm Burisma Holdings. The US Justice Department said Smirnov gave the false statements because he disliked Biden. If convicted, Smirnov faces up to 25 years in jail.
20 billion: The damage from the war in Gaza so far is estimated to be roughly $20 billion, according to a UN trade body official. The estimate is based on satellite images, but for an exact number, there will need to be an on-the-ground investigation. The official said that the Las Vegas-sized Gaza strip will need a “Marshall Plan” of its own after the Israel-Hamas war, in reference to the US-led effort to rebuild Europe after World War II.
0.3: The UK economy fell into a recession at the end of 2023, dealing yet another blow to Prime Minister Rishi Sunak as he hopes for reelection in a vote widely expected later this year. Data released Thursday showed GDP fell 0.3% in the final three months of last year, after shrinking 0.1% in the previous quarter.
156: The air in Bangkok was so polluted on Thursday that city employees were ordered to work from home for two days, and private sector workers were strongly encouraged to do the same. How bad was it? The Thai capital’s Air Quality Index hit 156. When levels go above 100, it’s considered to be unhealthy for sensitive groups, while levels above 150 are dangerous for everyone.
Security forces keeping watch after mosque explosion
Hard Numbers: ISIS-K strikes, ripple effects of Canadian wildfires, eurozone recession, Aussies rescue humpback in distress
11: At least 11 people, including two Taliban officials, were killed and dozens more injured in an explosion in a mosque in northeastern Afghanistan. The Islamic State offshoot has since taken responsibility for the blast. For more on ISIS-K and its ongoing beef with the Taliban, see our explainer here.
5,804: Smoke plumes from wildfires in Canada caused at least 5,804 delays on flights in and out of the US on Wednesday, as the Northeast in particular struggles with off-the-charts smoke pollution levels that have closed schools and public events. Meanwhile, experts say smoke plumes are expected to reach as far away as Norway after having recently passed over Greenland and Iceland.
0.1: The eurozone is technically in recession territory after recording two consecutive quarter contractions of 0.1% – in the last quarter of 2022 and the first quarter of this year. Still, the bloc’s economy is doing better than many initially anticipated at the outset of Russia’s war in Ukraine, and should grow by 0.9% this year.
40,000: Mesmerizing footage captured Australian marine workers rescuing a humpback whale that got tangled in a shark net off the coast of New South Wales. As more humpbacks — around 40,000 — head towards that coastline amid the northern migration season (May-November), Aussies have a special disentanglement crew ready to aid mammals that get stuck.Episode 3: Inflation Nations: What to know about inflation and interest rates
Listen: "During the course of this year, the Fed will not be concerned only with inflation as the months go by; increasingly the pendulum will shift, and they'll be concerned about the employment part of their mandate as well," says Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Reinhard joins Eurasia Group’s Rob Kahn for a check-in on the lasting, sticky rates of inflation, how the Fed will continue to adjust interest rates, and what kind of recession - if any - investors should prepare themselves for.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
Charlie Reinhard
Head of Investment Strategy, North America, Citi Global Wealth Investments
Robert Kahn
Director of Geoeconomics at Eurasia Group
- Episode 1: Should I STILL be worried? ›
- S3 Episode 8: How closing the gender gap drives economic growth - GZERO Media ›
- S3 Episode 9: US/China power struggle, the global political balance, and your finances - GZERO Media ›
- Episode 6: Can the US and China find common ground? - GZERO Media ›
- Episode 7: How AI is changing our economy - GZERO Media ›
Podcast: China's economic head start & a world accelerating into recession
Listen: What's in store for the global economy in 2023? Well, it's not going to be pretty. A raging war in Europe, sky-high inflation, and an unstable China will create strong economic headwinds in the year to come. But it’s not all doom and gloom. Globalization has brought prosperity to billions worldwide. And in the United States, the economy has made it out of the pandemic remarkably well.
On the GZERO World podcast, Ian Bremmer speaks to renowned global economist, Dambisa Moyo, who says global inflation is not going anywhere, as the likelihood of a worldwide recession looms large. The US and China are moving into creating separate economic worlds, but are still closely linked. Although most of the world understands that they need to transition to cleaner energy, in the short term they still rely on “a hundred million barrels of oil every day.” Europe is creating what Moyo calls an “industrial Band-Aid solution,” rather than long term solutions to rely on energy from other countries. They discuss how these combined threats will affect the world economy this year.
- Podcast: Winter is coming. Global recession, too? ›
- Is the world on the brink of another global recession? ›
- What's the chance of a global recession in 2023? ›
- Podcast: Making sense of global inflation, looming recession, & economists who disagree ›
- China is open for business: Chinese Vice Premier at Davos - GZERO Media ›
- Global economy headed to a recession: Dambisa Moyo - GZERO Media ›
- Podcast: Larry Summers breaks down the banking crisis - GZERO Media ›
Emerging markets most vulnerable to recession and political discontent
Inflation shockwaves is Eurasia Group's top geopolitical risk No. 4 for 2023. But who is most vulnerable to the effects of rising interest rates and a looming global recession?
Emerging markets.
Why? For Rob Kahn, managing director for geo-economics at Eurasia Group, these countries are in deep trouble because they have higher debt and more subject to sudden stops of capital flows that'll make it harder for them to pay for stuff. Not to mention that the pandemic has killed any fiscal monetary policy space they had before COVID, Kahn noted in a GZERO Live conversation about Eurasia Group's Top Risks 2023 report.
Kahn also shares his thoughts on the implications of a global recession and the politics of central banks fighting it.
Read Eurasia Group's Top Risks 2023 report here.
Watch the full live conversation: Top Risks 2023: A rogue Russia and autocrats threatening the world
US House Minority Leader Rep. Kevin McCarthy (R-CA) attends a press conference in Washington, DC.
What We’re Watching: McCarthy in trouble, Lula 2.0, global recession fears
Dramatic US House speaker election
Who will replace Nancy Pelosi (D-CA) as the next speaker of the US House of Representatives? Good question. As members of the 118th Congress are scheduled to be sworn in on Tuesday, Rep. Kevin McCarthy (R-CA) is still short of the votes necessary to lead the chamber. Even after making a major concession to his GOP critics by allowing them to fire him at any time, a handful of far-right Republicans remain publicly opposed to his speakership. If McCarthy doesn't get at least 218 votes on the first ballot, the lawmakers will continue voting until someone gets a majority. Keep in mind that the speaker sets the legislative agenda and decides which bills make it to the floor, so whoever gets the gig will hold a lot of sway at a time when Republicans aim to use their slim House majority to investigate the Biden administration and stymie the White House on anything from funding the government to continuing US aid for Ukraine.
Lula takes over (again) in Brazil
Luiz Inácio "Lula" da Silva was sworn in on Sunday for a third term as Brazil’s president, a post he last held from 2003 to 2010. In his two inauguration speeches, the left-wing Lula vowed to unite Brazilians but also lashed out at his far-right predecessor, Jair Bolsonaro, promising to hold the previous administration to account for botching Brazil's pandemic response and to revoke Bolsonaro's loosening of gun restrictions. (The outgoing president skipped the ceremony to hang out with his buddy Donald Trump at the former US president's Mar-a-Lago estate in Florida.) So, what's next for Brazil under Lula 2.0? Although the new president begins his term in office with his approval rating in the high 50s, his honeymoon period will likely not last long. What's more, Brazilian politics remain deeply polarized, and high inflation + a weak economy means Lula will likely need to raise taxes in order to spend big on social programs for the poor.