The year 2020 will be dominated by the American election and a global slowdown, says The Economist, adding that the most visible effects of the slowdown so far have been declining business confidence, global manufacturing slump and tepid inflation.
“Two of the world’s great cultures are butting heads. On one side is USA, Britain, Canada, Australia and new Zealand. On the other side is China. This battle is about two different types of societies trying to get along,” said “The World in 2020” report.
Trump’s tariff war with China is the biggest risk to the American economy over the next 12 months.
“China and America, the two largest economies will account for 40 per cent of the global GDP of $90 trillion,” it added.
According to the report, the global slowdown is a supply side slowdown since it has been primarily caused by the tariff war between USA and China.
“There is further global uncertainty in 2020 because of new global officials taking over the world – Christian Lagarde at the ECB, Kritalina at IMF and Andrew Bailey at the bank of England,” the report noted.
In a recession, employee costs get cut first.
In the last two recessions in America, wage bill was cut by 6 per cent.
“If this had not happened, profits would have been 24 per cent lower today. This flexibility is the hallmark of American capitalism,” said the report.
The report also touched upon other relevant issues that currently affect humanity.
“Across the world, two types of identity driven movements are increasingly clashing and feeding off each other. On the one hand you have separatist groups who want to break away and then there is the assertive and outraged nationalism,” it added.
Thanks to digital medium and yearly notes, many CEOS are signaling their position on politics and key issues.
“Business CEOs are motivated by idealism, vanity and calculated self interest. CEO activism has so far been cost free,” said the report.