Forward Agenda – September 2018

This is the World Economic Forum’s monthly update – the Forward Agenda. Building on the success of the Agenda Weekly, each month we pull together the most relevant and insightful points on the global agenda.

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Emerging challenges: The collapse of the Turkish lira (by some 40% this year) and run on Turkish assets is affecting other emerging markets, putting currencies and asset prices under pressure. Argentina’s peso plunged, Indonesia's rupiah slid to a two-decade low, spurring intervention from the central bank, India's rupee fell past an unprecedented 71 per U.S. dollar, and South Africa's rand dropped to the lowest in two years. Debt levels in emerging markets are at historic highs, with corporations in emerging markets owing some $3.7 trillion in debt at the end of 2017 – twice the amount in 2008. China’s debt overhang is epic, but the government is boosting lending to stimulate activity, and the Turkish situation could infect China. Some are saying there is some way to go before contagion becomes crisis – Turkey has economic idiosyncrasies, and there is an argument that investors no longer consider "emerging markets" a monolithic asset class.

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Shadow of de-dollarization: While emerging market currencies are battered, growth of over 4% in the US has buoyed the dollar. Short-term strength aside, there are growing signs that the role of the US currency as the foundation for global trade is under threat, accelerated by shifting geopolitics. The ballooning US government deficit, the potential for trade negotiations to leak into currency wars, China’s investment in Belt and Road and African infrastructure, Russia’s burgeoning economic relationship with Turkey and the increasing acceptance of digital currencies are accumulating anti-dollar forces that could reach a tipping point sooner than many anticipate.

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Geo-techonomics: How governments answer the fundamental ideological questions posed by the impact of big tech on society will determine who wins in the Fourth Industrial Revolution. As technology bosses return to Washington for a second round of inquisition, US lawmakers are seeking to answer whether and how to regulate the most potent business force of our time. Questions of political bias and the tension between freedom of speech and misinformation dominate. Meanwhile no such debate rages in China, where the new tools are being used by government for everything from building a new vision for society, creating new trade barriers and making foreign-policy decisions. Questions being asked at Google exemplify the complexity of operating across the two dominant technospheres.

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Chimerica: Technology is not the only battleground between the US and China, with escalating trade tensions reshaping global value chains. Clues as to how it might play out may emerge as NAFTA negotiations progress, if the White House accepts a restructured agreement that contains concessions on major points, and leaves the trading relationship between Mexico, Canada and the US more or less intact. When its attention turns back to talks with China, domestic pressures might encourage the administration to take some talking points and de-escalate, as it did with the EU, alternatively... not. The complexity of the issues between the US and China, and the long-term nature of the geo-economic competition, mean businesses and policymakers should dig in for the long haul.

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Deal or no deal: Business and government are planning for no negotiated agreement between the UK and the EU prior to the March 2019 Brexit date. Once regarded as an outside risk by the UK political establishment, the probability of this scenario is increasing, despite its immense consequences for both parties. Last-minute manoeuvring might result in a framework for ongoing engagement, but the uncertainty is necessitating complex decision-making for businesses with interests in the UK.

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Survivalist mood: While the UN’s non-proliferation negotiations on autonomous weapons try and reach consensus on regulating killer robots, an accelerating mood of technological fatalism is fostering survivalist thinking among some super rich. Decision-makers must understand whether they believe humanity is able to shape its own future or is a passive victim of its own worst impulses. In the meantime, New Zealand has shut the door on the pessimists.