If it feels like your business is facing an unusual amount of geopolitical uncertainty, you are not just experiencing a case of recency bias, according to noted political scientist Ian Bremmer, president and founder of the Eurasia Group.
Speaking during the keynote presentation at the Gartner Supply Chain Symposium, Bremmer explained that much like the global economy, geopolitics also goes through cycles of boom and bust. Bremmer maintains that we are currently in a period of geopolitical recession rife with uncertainty and conflict.
“There are rules of the road that people agree on internationally that are created by the countries that hold the balance of power,” said Bremmer. “The balance of power changes, but the rules are ‘sticky.’ … When countries that are powerful no longer align with the rules, it starts to break. And that’s what gets you a geopolitical recession.”
These geopolitical inputs are going to challenge supply chains and will effectively act as a tax on businesses, said Bremmer.
Bremmer pointed to three key destabilizing factors that underlie the current geopolitical recession:
- Tensions between Russia and the West. When the Soviet Union collapsed, Russia was never fully integrated into the West. This failure, said Bremmer, has angered the Russian government. “They are increasingly aligned with other rogue states that want chaos on the global stage like Iran and North Korea,” said Bremmer.
- Tensions between the United States and China. Unlike Russia, China has been fully integrated into the Western economy. But while the country plays an essential role in the global economy, it has not become more Westernized like many expected. The Chinese refusal to meet this unspoken presumption has led to mistrust and misalignment between the country and the United States.
- Growing antiestablishment sentiment. Tens of millions of people in the United States and other democracies increasingly believe that their political institutions are illegitimate and beholden to monied special interests.
Don’t expect these issues to resolve during the next election cycle, warned Bremmer. Instead, businesses should anticipate that geopolitical risks to their supply chain will continue for a while. In particular, the current crisis in the Middle East could have severe repercussions for the global economy, especially if Israel and Iran get into a direct conflict and the Straits of Hormuz—a chokepoint for the flow of oil—is disrupted.
“Look, when you have a pollical scientist giving you a keynote, it’s generally not a good thing for the supply chain,” he quipped.
