The year 2022, with its two major events, the Russia-Ukraine War, the awakening of a cold war between the USA and China, as well as the 20th Congress of the Chinese Communist Party, marking the end of collegial management in favor of an autocratic Neo-Lenino-Marxist management, marks the end of a thirty-year cycle, which began in 1989 with the fall of the Berlin Wall. The period that is beginning sees the War Economy succeeding the Peace Economy, fueled by an explosive cocktail of four concomitant crises: an energy crisis, a democratic and societal crisis, a debt crisis and an environmental crisis.
The author already perceives the new characteristics of this War Economy: a shift in value from demand to production – the one who controls their productive apparatus is the master; the replacement of trust by mistrust; an arbitrariness that replaces the law; a re-establishment of borders replacing free trade.
A new way of shaping trade relations; the transactional approach is strangling respect for fundamental values – the triumph of the “deal by deal” approach, of opportunism and negotiations are no longer based solely on power relations, but on dependency relations. Therefore, we are going to live in a planet of chaos. We must prepare for it because we are witnessing the forced marriage of geopolitics and the economy if these two worlds want to continue to prosper.
After having thus defined his observation of the world, the author endeavors to illustrate this evolution by recalling recent developments in the industrial fields, that of components or even AI, but also by analyzing the long-term strategic decisions of the main global players, for whom success is assessed today by the relationship of interdependence measured by the trade balance and the balance of current payments and no longer by the evolution of GNP.
A new ESG: “Energy, Security, War” is therefore opening up and only those who know how to adapt to its requirements will resist or even prosper. The author concludes his work by analyzing the probable impacts of this “new neo-governance” on the major economic flows such as inflation, debt, and monetary stability and, consequently, on the evolution of a new geopolitics of monetary flows and their allocations, in China, the United States of America, and Europe. Those who succeed in merging geopolitics and economics will be the big winners in the entry into war economics.
The author, former portfolio manager at Fidelity Investments in London and Boston, then founding partner of KDA Capital, a European equity fund long only until 2010, David Baverez is based in Hong Kong, and is currently an investor and essayist. He is also a columnist for L’Opinion and the author of several books.
Column written by K WANTZ O’ROURKE