Rising interest rates aren’t the only nor the key fundamental issue that the world markets, financial or otherwise, need to be worried about. Interest rate hikes are a response to rising inflation which in turn is partly explained by excessive demand caused by the massive stimulus to handle Covid related weakness but also supply issues. Whilst some of these supply issues seem temporary, some are worryingly structural given the likely unwind of globalisation (which had a deflationary effect for decades) thanks to emerging geo-political issues. George Soros, the outspoken investor and philanthropist, who perhaps knows a thing or two about global geo-politics, having born through it and had an influential role in it, shared his take on this at the World Economic Forum in Davos recently. Project Syndicate which featured this piece summarises it as: “Russian President Vladimir Putin and Chinese President Xi Jinping have much in common: They rule by intimidation, which leads them to make mind-boggling mistakes – Putin in Ukraine, and Xi with an unsustainable zero-COVID policy. But the deep flaws of their closed societies do not imply that open societies are destined to prevail.”
He starts off on a somewhat alarmist note referring to the implications of the Ukraine war: “Even when the fighting stops, as it eventually must, the situation will never revert to the status quo ante. Indeed, the Russian invasion may turn out to be the beginning of World War III, and our civilization may not survive it.
The invasion of Ukraine did not come out of the blue. The world has been increasingly engaged over the past half-decade, or longer, in a struggle between two diametrically opposed systems of governance: open society and closed society. Let me define the differences as simply as I can.
In an open society, the role of the state is to protect the freedom of the individual; in a closed society, the role of the individual is to serve the rulers of the state. Other issues that concern all humanity – fighting pandemics and climate change, avoiding nuclear war, maintaining global institutions – have had to take a back seat to this systemic struggle. That’s why I say our civilization may not survive.”
Having contributed his bit to the end of communism, he wonders what led to the revival of repressive regimes in the past decade and reckons technology in particular AI had a key role to play:
“In theory, AI ought to be politically neutral: it can be used for good or bad. In practice, the effect is asymmetric. AI is particularly good at producing instruments of control that help repressive regimes and endanger open societies. COVID-19 also helped legitimize such instruments of control, because they really are useful in dealing with the pandemic.
…These developments have had far-reaching consequences. They have sharpened the conflict between China and the United States. China has turned its tech platforms into national champions.
President Xi Jinping’s China, which collects personal data to surveil and control its citizens more aggressively than any other country in history, ought to benefit from these developments.”
He then says how this may not happen has Xi has made multiple blunders this year – letting Putin go ahead with the invasion, conducting the winter Olympics amidst Omicron and then the inexplicably strict lockdown to contain it (he reckons Xi has realised the Chinese vaccine is ineffective). Thanks to this, the Chinese economy is likely in recession already. All of this in a crucial year when Xi is set to seek reappointment: “Xi has many enemies. Nobody dares to attack him directly because he controls all the instruments of surveillance and repression. But it is well known that within the Communist Party, dissension has become so sharp that it has found expression in articles that ordinary people can read.
Contrary to expectations, Xi may not get his coveted third term because of the mistakes he has made. But even if he does, the Politburo may not give him a free hand to select the members of the next Politburo. That would greatly reduce his power and influence and make it less likely that he will become ruler for life.”
On Russia, he reckons like all autocrats, Putin has made his share of mistakes as well: “Putin expected to be welcomed in Ukraine as a liberator…Putin seems to have recognized that he made a terrible mistake when he invaded Ukraine and is now preparing the ground for negotiating a cease fire. But a cease fire is unattainable, because he cannot be trusted. Putin would have to start peace negotiations, which he will never do because it would be equivalent to resigning.
The situation is confusing. A military expert who had been opposed to the invasion was allowed to go on Russian television to inform the public how bad the situation is. Later, he swore allegiance to Putin.
…For the West, the dilemma in dealing with Russia is that the weaker Putin gets, the more unpredictable he becomes. The member states of the EU feel the pressure. They realize that Putin may not wait until they develop alternative sources of energy before turning off the gas taps himself, while it really hurts, as he has done to Bulgaria, Poland, and Finland.
…Meanwhile, as the war in Ukraine rages on, the fight against climate change has had to take second place. Yet the experts tell us that we have already fallen far behind, and climate change is on the verge of becoming irreversible. That could be the end of our civilization.
I find this prospect particularly frightening. Most of us accept the idea that we must eventually die, but we take it for granted that our civilization will survive.
Therefore, we must mobilize all our resources to bring the war to an early end. The best and perhaps only way”
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