My Thoughts on Their Next-Decade, ‘Outside-the-Box’ Predictions

In 15 days, Americans will vote on a wide range of issues. Not the least of which is where they want to see the U.S. economy head, and how we’ll get there. But can the candidates fully prepare for what may be in store for the global economy … and the impact it could have here at home over the next two presidential terms? To see what surprises may await our president-elect, I dived into the latest issue of The International Economy (TIE). From time to time, TIE asks a host of somewhat-obscure global economists and thinkers for their big-picture predictions. What I find interesting is that the economists gravitate toward the same few ideas … and that those are inevitably driven by current global market, political and social trends. In its latest issue, TIE asked more than 50 top thinkers to look ahead 10 years at what outside-the-box developments could shock the world. So what do these top thinkers expect is coming our way during the next decade? Two things seem to dominate the list …

Prediction 1: The EU will disintegrate

Whether it will be good or bad is debatable. But many top thinkers believe the European Union will come apart. That’s probably because the taste of Brexit still lingers. On top of that, the public is becoming more-averse to supranational bureaucracy. One thinker predicts an economic revival. One that will be (counterintuitively) brought on by forming a political union among nation-states that has heretofore been a huge problem and obstacle. In that same vein, another thinker sees a new and effective political generation. One that’s able to generate national and cross-border reforms that are welcomed by the public. On the other hand, one thinker sees the next 10 years bringing “The death of the European idea.” That’s because a political union is highly unlikely, and Brexit has established a nationalist precedent.
Capital Economics shows the country-by-country breakdown of political party presence that is considered skeptical of the European idea.
I tend to agree with the latter thought that the European idea is toast. As Capital Economics points out, “Most countries’ constitutions allow for referendums” like the UK’s. Hungarian voters, who have the highest level of Euroscepticism (on the far-right side of the chart above), recently rejected a referendum on mandatory EU migrant quotas. While the turnout was too low to make the vote count, it begs the question … Could a movement for Hungary to leave the EU soon follow? Considering Greece’s, France’s and Italy’s elevated levels of Euroscepticism, it could very well turn into a parade to the exits. What remains to be seen is whether European officials resist the natural forces of rebalancing and decentralizing … or whether they fight to maintain a status quo that rewards the elites at the expense of common Europeans. To wit, another dominant theme among the thinkers is that …

Prediction 2: The social-political mood will deteriorate, and global institutions will disintegrate.

One “top thinker” honed in on a possible President Trump coupled with the impending Brexit. And how together, these could cause disintegration characterized by “aggressive, nativist populism” and contempt for the “common good.” Those comments were echoed throughout the list of thinkers who very much worry about a breakup of the status quo. They seem to fear anything that could potentially change the nature of how the global economy functions. Currently, these thinkers seem to think we have a global nucleus of some sort that powers economies around the world. To the extent we do, I disagree that we shouldn’t welcome a disintegration of such a model — be it political, economic or otherwise. The best way to respect the common good is to let the common sow the good … and reap it, too. I don’t put my ultimate hope in anything of this world. But if I did put any hope into the concerns of Brexit and a Donald Trump presidency, it would be that they help put the responsibility of the “common good” back into the hands of the commoners. The same thinker concerned about the common good was also so bold as to predict an end to the belief in “progress.” We can only hope. Progress has come to be measured by economic growth. And that’s a sad story. With the status quo in place, we’ll never be able to escape such artificial “progress” and actually attain real progress that international overlords could never deliver.

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Now, those things — specifically the all-too-common approach to them — don’t excite me. I mean, we’ll get enough predictions on those fronts for the next 10 weeks until 2017 arrives. I prefer some of the more-peculiar predictions. For instance, Brexit …
“Brexit will cause Britain to radically modify its policies on trade, regulation and taxation.”
One thinker says Britain will emerge as the winner in developed-market economies because of the changes Brexit will encourage. I tend to agree about it affecting positive economic developments in the UK over the next decade. But the jury is still out on whether Britain will be the leader among its peers.
But even that is still more 2016 and less 2026. Here is the big idea I read that I am most-intrigued by …
“Taxing climate pollution instead of productivity will be a societal breakthrough.”
At first blush, that seems to be a very loaded prediction. Climate change and global warming have become such a polarizing issue, especially in the United States. But the thinker does not say climate change. Rather, climate pollution. There is a difference. Most people will agree that climate pollution does actually exist. The breakthrough would happen despite the validity (or lack thereof) of the climate change argument. My thoughts now … For the sake of how you perceive my thoughts, I should admit that I tend toward the climate change deniers camp — I simply do not believe that what we call climate change and global warming is a distinctly nor meaningfully man-made condition. Back to the tax idea … What critics are likely to assume is that taxing climate pollution will be some derivative of the perverse carbon credit system concocted to regulate business’ emissions. Instead, it would be a much-more-targeted (and broad) tax. And it would be aimed at internalizing the ecological costs that are currently externalized by companies. That way, they can drive down the cost of selling their products to consumers. Currently, taxes on businesses are brought down on measures of productivity. So, somewhat similar to how a fair tax removes the tax on personal income and applies it to personal consumption expenditures, a climate pollution tax would remove the productivity tax (e.g., corporate income) and apply it to the consumption and use of oil, gas and other fuels. Now, I’m not smart enough to know exactly how such a climate pollution tax should look. But I agree that it’s a better way of leveling the playing field … promoting ecological consciousness … and encouraging competition among small and large, local and multinational, companies … And better than the existing system that puts the cost of climate pollution on individual health and the environment. I’d love to hear what you think of these thoughts as well as what you think is coming in the next decade. Just drop me a line in the Reader Mailbag! Do right, JR Crooks
“JR” specializes in trading commodities, currencies and options. He has spent nearly 10 years analyzing financial markets and writing about global economics. JR honed his trading techniques and global-macro worldview alongside his father, Jack Crooks, at Black Swan Capital. JR also…