Global Trends by Martin Khor
Monday 2 January 2017
2017 – expect a roller coaster ride ahead
This will be a year like no other, as there will be a thunderous clash of policies, economies and politics worldwide. We should prepare for the challenges ahead and not be only spectators.
The new year has dawned. Everyone agrees 2017 will be very interesting.
It will also be most problematic. From politics to economics and finance we’ll be on a roller coaster ride.
With his extreme views and bulldozing style, Donald Trump is set to create an upheaval if not revolution in the US and the world.
He is installing an oil company chief as the Secretary of State, investment bankers in key finance positions, climate sceptics and anti-environmentalists in environmental and energy agencies and an extreme rightwing internet media mogul as his chief strategist.
US-China relations, the most important for global stability, could change from big-power co-existence with a careful combination of competition and cooperation, to outright crisis.
Trump, through his phone call with the Taiwanese President and after, signalled he could withdraw the longstanding US adherence to the One China policy and instead use Taiwan as a negotiating card in overall relations with China. The Chinese perceive this as an extreme provocation.
He has appointed as head of the new National Trade Council an economist known for his many books demonising China, including “Death by China: Confronting the Dragon”.
Trump seems intent on doing an about-turn on US trade policies. Measures being considered include a 45% duty on Chinese products, extra duties and taxes on American companies located abroad, and even a 10% tariff on all imports.
Thus 2017 will see protectionism rise in the US, the extent still unknown. That is bad news for many developing countries whose economies have grown on the back of exports and international investments.
Europe in 2017 will also be preoccupied with its own regional problems. The Brexit shock of 2016 will continue to reverberate and other countries facing elections will be less open to the world and become more inward looking.
As protectionism, xenophobia and narrow nationalism grow in Western societies, Asian countries should devise development strategies based more on domestic and regional demand and investments.
2017 may be the year when resource-rich China, with its development banks and its Belt and Road Initiative, fills in the economic void created by western trade and investment protectionism.
But this may not be sufficient to prevent a finance shock in many developing countries now beginning to suffer a reversal of capital flowing back to the US, attracted by the prospect of higher interest rates and economic growth.
In 2017 Malaysia will be among the countries most vulnerable to this, due to the large foreign ownership of local bonds and shares.
As capital flows out and the currency depreciates further, the affected countries’ companies will have to pay more for servicing loans contracted in foreign currencies and imported machinery and parts, while consumers grumble about the rising cost of living.
On the positive side, exporters will earn more in local currency terms and tourism will increase, but this may not be enough to offset the negative effects.
Thus 2017 will not be kind to the economy, business and the pockets of the common man and woman. It might even spark a new financial crisis.
The old year ended with mixed blessings for Palestinians. On one hand they won a significant victory when the outgoing President Obama allowed the adoption of a UN Security Council resolution condemning Israeli settlements in occupied Palestinian territories by not exercising a veto.
The resolution will spur international actions against the expansion of settlements which have become a big obstacle to peace talks.
On the other hand the Israeli leadership, which responded defiantly with plans for more settlements, will find in Trump a much more sympathetic President. He is appointing a pro-Israel hawk as the US ambassador to Israel.
With Trump also indicating he will tear up the nuclear power deal with Iran, the Middle East will have an even more tumultuous time in 2017.
The commencement of floods in some parts of Malaysia during the holiday season, ironically following days of the taps going dry for millions in the Klang Valley, is a prelude to the environment continuing to be a critical issue in 2017.
Unfortunately low priority is given to the environment. Hundreds of billions of dollars are allocated for highways, railways and urban buildings but only a trickle for conservation and rehabilitation of hills, watersheds, forests, mangroves, coastal areas, biodiversity or for serious climate change actions.
2017 should be the year when priorities change, that when people talk about infrastructure or development, they put actions to protect and promote the environment as the first items for allocation of funds.
This new year will also be make or break for climate change. The momentum for action painfully built up in recent years will find a roadblock in the US as the new President dismantles Obama-initiated policies and measures.
But Trump and his team will face resistance domestically including from state governments and municipalities which have their own climate plans, and from other countries determined to carry on without the US on board.
Indeed if 2017 will bring big changes initiated by the new US administration, it will also generate many counter actions to fill in the void left in the world by a withdrawing US or to counter its new unsettling actions.
There are opportunities to think through and chart alternatives and reforms that are anyway needed on the global and national economies, on the environment, and on geo-politics.
Most of the main levers of power and decision-making are still in the hands of a few countries and a few people, but there has also been the emergence of many new centres of economic, environmental and intellectual capabilities and community-based organising.
2017 will be a year in which ideas, policies, economies and politics will all clash, thunderously, and we should be prepared for the challenges ahead and not only be spectators.