With Fred Bakker, van Agtmael is the author of The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation. Earlier in his career, van Agtmael authored The Emerging Markets Century: How a New Breed of World-Class Companies Is Overtaking the World. Few understand the big trends shaping the world better than van Agtmael. Given his track record, his views on the future of our planet are immensely important.

What’s Next for Emerging Markets?

For decades, globalization has raised the fortunes of developing nations. Now, international tensions between the US-led West and Russia-China are upending not only globalization but also the global postwar order. The Russia-Ukraine War has led to Western sanctions. The West has cut off Russia from international markets. For the first time since World War II, a major war has come to Europe.

Even as tensions with Russia have risen, the US and China seem to be in a headlong collision. They seem to be in the Thucydides Trap, a term that Harvard’s Graham Allison used to describe a clash between a ruling and a rising power. China has poured money into massive projects and initiatives such as the Belt and Road Initiative. In such a scenario, the world is deglobalizing. This puts into question the future of emerging markets. In this new scenario, can they keep growing?

Van Agtmael believes things will become tricky for emerging economies. Cheap labor is being replaced by robotics, additive manufacturing, and artificial intelligence. Those countries that can supply relevant raw materials and new forms of manufacturing will thrive. Issues of security will increasingly play a role in configuring supply chains and the destiny of the global economy.

What’s Next for India?

India’s economy continues to grow, a “bright spot” for the world, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. Under Prime Minister Narendra Modi, the Indian government has become more business-friendly. The economy has grown impressively. Sectors like manufacturing, information technology, and pharmaceuticals are doing very well.

Social mobility is now improving. More Indians are becoming entrepreneurs and professionals. In summary, economic growth has created a rapidly growing middle class. Van Agtmael thinks that India would have to navigate tricky geopolitics. As its economy grows, India will become a major power in the emerging multipolar world.

Global Inequality

Both income and wealth inequality has risen worldwide. This threatens social cohesion and progress. Many feel that governments serve elites, not the people. Van Atgmael believes that addressing inequality is essential for preserving democracy but politicians have failed to address this issue. As a result, right-wing governments and far-right movements have emerged. They oppose trade, propose self-sufficiency, and are moving away from globalization.

As someone with a rich experience in both business and public policy, van Agtmael proposes higher taxation as well as institutional reform. He argues that increasing social mobility through improved opportunities is essential to preserve liberal democracy.

[Matthew Knudson wrote the first draft of this podcast description.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Listen to the Part 1

Antoine van Agtmael: Stagflation and Race for Clean High Tech

Listen to the Part 2

Antoine van Agtmael: New Perspective on Europe, China and Demography

The post Antoine van Agtmael: The Future of Emerging Markets, India and Inequality appeared first on Fair Observer.

With Fred Bakker, van Agtmael is the author of The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation. Earlier in his career, van Agtmael authored The Emerging Markets Century: How a New Breed of World-Class Companies Is Overtaking the World. Few understand the big trends shaping the world better than van Agtmael. Given his track record, his views on the future of our planet are immensely important.

European Inflation

The EU is bracing for another year of high inflation and slow growth. The ongoing Russian-Ukraine War has no end in sight. As a result, gas prices remain high because of this massive supply shock. European economies are struggling to find alternative sources of energy and, as yet, have been unable to tame inflation.

Interest rates have risen and so has debt. This makes Europe vulnerable because servicing debt is becoming more expensive and it is hard to foresee new drivers of growth in an aging continent. Despite such problems, van Agtmael is optimistic about Europe. He thinks Europe will become more self-reliant in energy. Losing cheap Russian gas will hurt Europe in the short term. However, Europe will make meaningful structural reforms to remain competitive with China and the US long-term.

More Immigration?

Europe has a demographic crisis. The continent’s labor force is aging. Europe’s dependent population is growing as it struggles to find young workers to replace them. Van Agtmael believes that more immigration will eventually supply the labor, including the skilled workforce, Europe needs. However, many voters resist the idea and have voted in populist leaders who ran on an anti-immigration platform.

Many argue that more immigration may not be the solution. If low-skill workers immigrate, they are unlikely to contribute to growth. They may also come from more traditional and conservative societies. Such workers may face cultural barriers and struggle to integrate. Host societies are also wary of losing their homogeneity and identity. Van Agtmael believes that Europe must emulate the US and accept more immigrants to replace aging workers. Eventually, they will gain the requisite education and skills. Not everyone can be let in of course. A sensible immigration policy is the way forward. If Europe can find the right balance, it will have a sustainable workforce in the future.

Slowing Chinese Growth

China’s economy has grown phenomenally over the last four decades. However, recent crises have been slowing it down. Under President Xi Jinping, the Chinese Communist Party (CCP) has turned increasingly authoritarian and ultranationalist. Xi enforced a disastrous zero-COVID policy on China and has been extremely aggressive against Taiwan.

Xi’s zero-COVID decimated the economy and angered citizens. He has quietly and suddenly withdrawn this failed policy. Xi’s ultranationalism has caused greater tensions with his neighbors and with the US. President Joe Biden has choked off supply of advanced semiconductor chips, technology and machinery to China. 

Van Agtmael thinks China will overcome the challenges caused by American actions. Like Europe, China will have to adapt to painful short-term changes. However, its economy will adapt to the loss of advanced chips and evolve. A Chinese invasion of Taiwan could change things though van Agtmael thinks that is unlikely. He envisages three scenarios unfolding and thinks the most optimistic one is the most probable.

[ Matthew Knudson wrote the first draft of this podcast description.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Listen to the Part 1

Antoine van Agtmael: Stagflation and Race for Clean High Tech

Listen to the Part 3

Antoine van Agtmael: The Future of Emerging Markets, India and Inequality

The post Antoine van Agtmael: New Perspective on Europe, China and Demography appeared first on Fair Observer.

With Fred Bakker, van Agtmael is the author of The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation. Earlier in his career, van Agtmael authored The Emerging Markets Century: How a New Breed of World-Class Companies Is Overtaking the World. Few understand the big trends shaping the world better than van Agtmael. Given his track record, his views on the future of our planet are immensely important.

Stagnation Returns

The financial world waits with bated breath to see how 2023 will transpire. Technology companies have been firing thousands and investment banks are now following suit. Wall Street trouble is reflected on Main Street. Rising costs of living, slowdown in growth, the continuing effects of the COVID pandemic and turbulent global crises have most pundits anticipating a global recession. Van Agtmael thinks we are headed for stagflation. 

While most pundits are praying for a soft landing and a gentle recession, van Agtmael makes a compelling case for stagflation. Rising prices, slowing growth and several national and international crises have left markets reeling. All this, van Agtmael notes, has chilling parallels to stagflation in the 1970s. However, there are key differences that could negate the worst aspects of this stagflation and offer a way out.

Clean Tech

Yet van Agtmael also points out that the clean energy sector will be a bright spot. Trends in energy generation, technological breakthroughs and a growing clean energy market are ripe with potential. In a world that is moving away from carbon, the cost of wind and solar is dropping yearly. This means clean energy is becoming more accessible to regular consumers. Nuclear fusion is also on the cards. Van Agtmael sees an era of incredible growth for clean energy.

Having said that, Uncle Sam needs to catch up. While the US thinks of itself at the cutting edge of technology, China has made more progress in clean energy. Its own nuclear fusion experiments have surpassed America’s. China has poured talent and resources into clean energy technologies. They are leading in many sectors and the US has to pull up its socks to compete.

The US is certainly a leader in wasteful energy consumption. Buildings in the US are designed inefficiently and the American fixation with cars is well-documented. Singh and van Agtmael examine how other countries conserve energy and explore how the US could become more energy efficient.

The Green Top-Bottom Feedback Loop

Some believe in top-down government regulation. Others swear by bottom-up innovation. Van Agtmael thinks differently. This insightful Dutchman argues that there is a “feedback” loop between top-down government regulation and bottom-up innovation. Both are important to bring long-lasting change.

Historically, bottom-up movements raise public awareness and put pressure on larger institutions such the government and large companies to change track. In turn, government policy can mandate big changes such as higher emissions standards for cars or regulations to make buildings more energy efficient. Governments can also allocate large resources for research and development and/or give incentives to private players to do so.

The combination of public enthusiasm and government policy can lead to major changes as Germany, Israel and the US demonstrate. Socially, politically and economically liberal countries have the advantage when it comes to innovation. The change in energy generation, distribution and consumption will be both a bottom-up and top-down affair in these countries, and will transform the world.

[ Matthew Knudson wrote the first draft of this podcast description.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Listen to the part 2

Antoine van Agtmael: New Perspective on Europe, China and Demography

Listen to the part 3

Antoine van Agtmael: The Future of Emerging Markets, India and Inequality

The post Antoine van Agtmael: Stagflation and Race for Clean High Tech appeared first on Fair Observer.