Next year is not going to be better, and one might just stop there. Whatever temporary economic fixes are applied to the eurozone, American deficits and unemployment, the overheated Chinese real estate market, petering Indian reforms or stalling Brazilian growth, the downward slide will continue. This is because all are symptoms of a structural global economic dislocation that is becoming increasingly disorderly. Yet the second half of this prediction is that politics may be deceptively calm in 2012 – calm before the storm.
To start with the economics. Two trends are underway that have drawn much comment. One is between the old western economies and the formerly emerging economies, notably those in Asia. The second, which heightens the pain of the first, is that the globalisation of markets that enabled the first trend (by giving Asia access to western markets) has also created two new classes of winners. The first is a global super-rich, made up of the innovators, traders and bankers. The second is made up of the Asian and other emerging market manufacturing and service sector workers, who have undercut western labour costs.
The big losers are western middle class and blue collar workers, who (with notable exceptions such as Germans) have lost out dramatically. The real source of this crisis is a decades-long loss of competitiveness and income for these groups that politicians have tried to cover up with unserviceable levels of sovereign and household debt. Now the bill is due and, as the global economy is so interlinked, nobody will be left unscathed. Chinese developers will struggle as much as western business leaders with turbulence and recession.