A few months ago the political and economic climate seemed rather precarious if not downright scary. But normality, moderation and stability are returning sooner than would have been thought possible at the start of this year.
Neither France nor the Netherlands has extreme right wing leaders. Germany seems certain to return Merkel to power later this year and the UK will elect its second woman Prime Minister with the added benefit that her current opponent will be replaced by a stronger and more credible one. The North Korean situation is now helped by greatly improved leadership in South Korea and the looming presence of China over the Northern rogue state and the incompetence and structural weakness therein. Russia continues to be mischievous and irritating, simply not playing by global rules but it is no more than the ‘chippy kid in the playground’ who needs attention and respect on the home front. More will emerge of Russia’s misdeeds later this year.
Trump’s influence and threat are fast waning. Even in the US, those that were horrified at his election are now content to wait for his implosion. It may be an inditement for a business deal or the FBI’s findings on connections to Russia. He has so far been unable to implement much of his bigger electoral promises. The checks and balances and the rule of law are proving to be thankfully too much for Trump. He is starting to look like an ineffective lame duck, half-baked republican whom few can or will trust. The prevailing mood in the US now is that Trump cannot make any changes of economic note so ‘carry on as if he is not there’. There is a caveat, as you will see below.
On the minus side of the political balance sheet is the fact that Trump has unwound the US commitment to climate change and his support for international human rights is hardly convincing. Elsewhere, the increasingly authoritarian regime in Turkey is unwelcome news and the Middle East is far from resolved thanks to the interminable Syrian crisis though this has little effect on the global economy. The refugee crisis from that conflict will continue to haunt politicians in the EU this year. Terrorism shows no sign of abating but like the Irish ‘troubles’ of the 70s-90s I suspect they will become in the end part of the fabric of the norm.
Finally there is Brexit. It will continue to be in the public eye as an ugly issue thanks to the rhetoric of the likes of Jean-Claude Junker and to a lesser degree Donald Tusk. But behind public utterings and the media feeding frenzy there are two negotiating teams of huge experience, talent and sanity. Whilst the deal may yet take more than the two years anticipated there is no doubt in my mind that a sensible deal will be reached for both parties. The UK and EU have a lot to lose from the split and minimal damage will be done. A bad deal could harm the EU and create further internal instability. Even a very good deal for the UK does not have to look like one that encourages others to leave. If they want to leave (and some do e.g. the French electorate) then they will do so no matter what deal is arrived at for the UK.
On the wider front, global growth is looking quite healthy and even the tepid EU economy is showing more signs of life.
So at this date, events may still sound alarming but a correction towards global stability and growth is in process. For now at least.
Stephen Archer is a business analyst and founding partner of Spring Partnerships.