Political scientist Ian Bremmer has a staggering, almost encyclopedic wealth of knowledge around the current geopolitical environment—and lots of opinions to go with it.
Bremmer has authored several books, including the recently published “Us vs. Them: The Failure of Globalism.” His company, Eurasia Group, helps business and government leaders anticipate risk and shape strategies. You may also be familiar with Bremmer from his frequent appearances on news and talk shows or his foreign affairs column at Time Magazine.
Following the Wall Street Journal CFO Network annual meeting, Bremmer was our guest speaker at an intimate dinner Workday hosted for a group of CFOs. Here’s an edited version of a conversation I had with him just before dinner.
By far the biggest risk for any CFO is the rise of China, which will be the largest economy within 10 years. It is already the most important and powerful economic system from a governmental perspective, because unlike the U.S., its economics are driven by the government. And the Chinese government is writing big checks, developing long-term strategies, building an international architecture, and promoting its own standards.
All the CFOs we’re talking to right now are used to living in a world that is basically a global free market, promoted by the U.S. and our allies. Now that system is under strain for many reasons, but the most important is the fact that the Chinese do not support a free market. They’re state capitalists and authoritarians, and they’re increasingly saying we want a global system that is aligned with us.
This means we now live in a hybrid global economy, where sectors are more strategic and where you have to work with governments if you want to have access to some of those marketplaces.
Another area of significant risk right now is the breakdown of the JCPOA, known commonly as the Iran nuclear deal, and the likelihood of a significant spike on oil prices as a consequence.
And cyber is a big risk—specifically cyber emanating from Russia and its willingness to undermine economies around the world. We saw that with Ukraine—the Russians took almost one percent off Ukraine’s GDP with the NotPetya attacks. They are clearly inside critical infrastructure across the United States and Europe, and the U.S. continues to expand sanctions against the Russians to no effect.
“C-level executives are the people that have the ability to make a difference. We can’t just wait around for our political leaders to do it.”
Beyond that, I would say the biggest risk out there is just the general weakness of Western liberal democracies, the rise of populism and protectionism as a consequence, and the anti-establishment sensibilities that manifest themselves not just in the U.S., but also in Brexit in the UK and in the government that you now see in Italy—which is the most anti-establishment since World War II. It goes on and on, and makes it a hell of a lot harder to govern in ways that promote the interests of multinational corporations.
One is growth of wealth driven by technology and innovation. Forty years ago people thought we couldn’t do anything about climate change, and today solar power is cheaper than coal during the daytime. It doesn’t mean climate change is not a big problem, but the ability to suddenly create a new energy source on the back of human ingenuity is pretty extraordinary. And think about biogenetics and nanotechnology—innovations that allow us to be so much more efficient in the way we drive growth and wealth. Those are things to be very optimistic about indeed.
I’m also very optimistic that women are on their way to getting real equitable outcomes in senior positions in multinational corporations. That means capitalism will be less dehumanized. Men running corporations are much more willing to devote their entire lives to the pursuit of profit at the expense of all else. Women generally won’t do that, and organizations with mixed leadership, I think, are going to be much more sustainable. As a consequence, that makes the market more stable.
It was the worst geopolitical summit ever. The American allies are not happy with President Trump. He left the Trans-Pacific Partnership, the Iran deal, and the Paris climate accord. He decided to move the U.S. Embassy in Israel to Jerusalem. He left UNESCO. Every single one of those decisions was opposed by every single U.S. ally at the G7. That’s quite something.
I talk to the American allies; in some cases, the heads of state themselves. It’s the worst relationship they have had with an American president in modern memory, and Trump knows that, and he doesn’t care.
But what’s interesting is that’s why he got elected. His base thinks that the U.S. is doing too much for American allies, and in the case of NATO and defense spending, they’re probably right. In the case of trade, they’re probably wrong.
I think Trump deserves a lot of credit for what happened with the North Koreans. I think that we’ve had a lot of presidents over the last 20, 30 years that have done nothing because they were risk averse.
Well, the North Korea situation has gotten worse. They’ve gotten more nukes, better missiles, and more cyber capabilities, and they use them. Trump decided, “You know what? I’m going to make history,” and it was risky, but he did it. And not only did he threaten the North Koreans directly with military force, but he also told the Chinese, “I’m going to hurt you economically unless you help me on North Korea.” I think the combination of those two things got Kim Jong-un to the table.
Now, that does not mean the Americans are going to declare peace with the North Koreans. It doesn’t mean North Korea is going to denuclearize. It doesn’t even mean that the United States is going to end up the winner here; it might be that the Chinese are able to outmaneuver Trump in North Korea. But six months ago a lot of people thought we were going to have military conflict on the Korean peninsula. Today, nobody does. That’s an overwhelmingly positive development, and I think Trump deserves credit for that.
They have to be honest with themselves about the potential downsides of their business models. They need to recognize that the shareholder is not the exclusive constituent they need to satisfy. They have to care about their workers long term, and care about the people, communities, and environments where they are making all their money. If they don’t do that, people are going to get angry, and at some point, the policy environment is just going to turn against them.
CEOs need to think of themselves much more as stewards—especially because governments are falling down on the job. That means there’s going to be more responsibility and accountability on the people that are doing so well in these marketplaces.
Right now, we’re in the best U.S. economy we’ve had since before the financial crisis, and maybe since the Clinton days. And yet the country feels bad. It’s really divided. If that’s the case now, then C-level executives need to ask themselves: What’s it going to feel like when we have a recession, when interest rates go up, when there aren’t tax giveaways, when suddenly belts get tightened and you start firing people? Executives need to plan for that now.
I’d advise them to find good answers to the following questions: What are you going to do to make a long-term perspective work in your organization? How are you going to get your people, customers, and the communities you’re doing business in aligned with something that works long-term—more than three months or one year out? Given all the uncertainty and volatility, all the danger and divisions, what are you going to do?
Because at the end of the day, C-level executives are the people that have the ability to make a difference. We can’t just wait around for our political leaders to do it. Technology is moving too fast, and our institutions are too big and slow. It’s the C-suite executives that are going to have to take up this challenge, and I hope they will.