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Editor’s blogAugust 28 2018

Banks must live with populism

The American century is over. Plan for more uncertainty amid the birth pangs of the new world, writes Brian Caplen. 
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Banks must live with populism

There is a tendency to think that Trump and Brexit are aberrations, and that soon everything will revert to the nice world liberal order we all enjoyed before. If your bank or company is thinking this way, then your strategic plan is going to be stillborn. 

The right way to understand populist politics is as a symptom of underlying economic changes rather than as the cause of them. 

The world order in which the US supported certain global institutions and pushed rules-based free trade, open economies and democracy, has collapsed. It has been replaced by an array of competing power systems – China, Russia and the EU – whose record of adherence to these values is mixed. 

President Trump may have given the old order a bit of a kick, but he didn’t cause its collapse. Nor could the appearance of even the most ardent liberal US president ever hope to put it back together. 

From now on, trade deals are going to be bilateral rather than multilateral; they will need to deal with services and data as much as goods; and trade may be linked to all kinds of other issues such as defence spending, levels of migration and reciprocity. 

Bank CEOs need to plan for a world in which local variations in business rules may be greater than before. They need to plan for more political upheaval even in advanced economies rather than simply worrying about the business cycle. They need to understand that a combination of technology and geopolitics is taking us through once-in-a-century changes that will lead to societies being completely rebuilt. If your business plan takes account of all this, it may stand a chance. If not, you may as well throw it away.

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