Showing posts with label united states economy. Show all posts
Showing posts with label united states economy. Show all posts

Tuesday, July 7, 2015

What will the world look like in a decade?


Stratfor has 11 chilling predictions for what the world will look like a decade from now” by Armin Rosen, Business Insider, June 16, 2015

The private intelligence firm Strategic Forecasting, or Stratfor, recently published its Decade Forecast in which it projects the next 10 years of global political and economic developments.

In many ways, Stratfor thinks the world of 10 years from now will be more dangerous place, with US power waning and other prominent countries experiencing a period of chaos and decline.

Russia will collapse...

"There will not be an uprising against Moscow, but Moscow's withering ability to support and control the Russian Federation will leave a vacuum," Stratfor warns. "What will exist in this vacuum will be the individual fragments of the Russian Federation."

Sanctions, declining oil prices, a plunging ruble, rising military expenses, and increasing internal discord will weaken the hold of Russia's central government over the world's largest country. Russia will not officially split into multiple countries, but Moscow's power may loosen to the point that Russia will effectively become a string of semi-autonomous regions that might not even get along with one another.

"We expect Moscow's authority to weaken substantially, leading to the formal and informal fragmentation of Russia" the report states, adding, "It is unlikely that the Russian Federation will survive in its current form."

...and the US will have to use its military to secure the country's nukes.

A deactivated Soviet-era SS-4 medium-range nuclear-capable ballistic missile.
Russia's nuclear-weapons infrastructure is spread across a vast geographic area. If the political disintegration Stratfor predicts ever happens, it means that weapons, uranium stocks, and delivery systems could end up exposed in what will suddenly become the world's most dangerous power vacuum.

The breakout of Russia's nuclear weapons stockpile will be "the greatest crisis of the next decade," according to Stratfor.

And the US will have to figure out what to do about it, even if it means dispatching ground troops to secure loose weapons, materials, and delivery systems.

"Washington is the only power able to address the issue, but it will not be able to seize control of the vast numbers of sites militarily and guarantee that no missile is fired in the process," the Decade Forecast states. "The United States will either have to invent a military solution that is difficult to conceive of now, accept the threat of rogue launches, or try to create a stable and economically viable government in the regions involved to neutralize the missiles over time."

Germany is going to have problems...

Germany has an export-dependent economy that has richly benefitted from the continent-wide trade liberalization ushered in by the European Union and the euro, but that just means the country has the most to lose from a worsening euro crisis and a resulting wave of euroskepticism.

The country's domestic consumption can't make up for this dip in Germany's export economy or for a projected decline in population. The result is Japan-style stagnation.  
"We expect Germany to suffer severe economic reversals in the next decade," the Decade Forecast says.

...and Poland will be one of Europe's leaders.

Look a little to Germany's east, and things won't be quite so bad. "At the center of economic growth and increasing political influence will be Poland," the report says.
Poland's population won't decline as much as those of the other major European economies. The fact that it's the largest and most prosperous European state on Russia's western border will also thrust it into a position of regional leadership that the country could leverage into greater political and economic prestige.

And it only helps to have the kind of close, longstanding strategic partnership with the US that Poland enjoys.

There will be four Europes.

It wasn't long ago that European unity seemed like an unstoppable historical force, with political and economic barriers between countries dissolving and regionalism and nationalism disappearing from the continent's politics.

In 10 years, that may all seem like a distant memory. The Decade Forecast talks about four Europes that will becoming increasingly estranged from one another: Western Europe, Eastern Europe, Scandinavia, and the British islands. They will still have to share the same neighborhood, but they won't be as closely connected as they were before.

"The European Union might survive in some sense, but European economic, political, and military relations will be governed primarily by bilateral or limited multilateral relationships that will be small in scope and not binding," the report says. "Some states might maintain a residual membership in a highly modified European Union, but this will not define Europe."

Turkey and the US will have to be close allies but for an unexpected reason.

Several Arab countries are in a state of free fall, and the Decade Forecast doesn't see the chaos ending anytime soon. The major beneficiary from all of this will be Turkey, a strong, relatively stable country whose borders stretch from the Black Sea all the way down to Syria and Iraq.

Turkey will be reluctant to intervene in conflicts on its borders but will inevitably have to, according to the forecast. As Ankara's strength and assertiveness increases relative to its neighbors, the country will become an indispensable US partner.

But Turkey will want something in return: a line of defense against a certain powerful and aggression-minded country on the other side of the Black Sea that has military bases in neighboring Armenia. Turkey will want the help of the US in keeping Moscow out of its backyard.

"Turkey will continue to need US involvement for political and military reasons," the report says. "The United States will oblige, but there will be a price: participation in the containment of Russia. The United States does not expect Turkey to assume a war-fighting role and does not intend one for itself. It does, however, want a degree of cooperation in managing the Black Sea."

China will face one huge problem.

China may have a rough decade ahead as economic growth slows, leading to widespread discontent toward the ruling Communist Party. But the party will not liberalize, which means its only viable option for controlling the gathering chaos while remaining in power will be to increase internal oppression.

Beijing also faces another, perhaps even bigger problem: China's growth hasn't been geographically distributed very evenly. Coastal cities are thriving, but China's interior has less access to international markets and is comparatively much poorer. That problem will only get worse as China continues to urbanize.

"The expectation that the interior — beyond parts of the more urbanized Yangtze River Delta — will grow as rapidly as the coast is being dashed," the report says. And the growing rift between China's coast and its interior could presage even deeper, more ominous splits.

As the report notes, regional fissures have been a persistent driver of political chaos throughout China's history, and there is an unlikely but "still conceivable outcome in which political interests along the coast rebel against Beijing's policy of transferring wealth to the interior to contain political unrest."

Japan will be Asia's rising naval power.

Japan has a maritime tradition going back centuries, and as an island nation it is pretty dependent on imports. China is building a state-of-the-art navy of its own, and it may become even more aggressive in controlling shipping routes in the East China Sea, South China Sea, and Indian Ocean that Japan depends upon.

Japan will have no option but to project power into the region to counter China and protect its supply routes. With US power waning, it will have to do this on its own.
"Right now [Japan] depends on the United States to guarantee access," the forecast states. "But given that we are forecasting more cautious US involvement in foreign ventures and that the United States is not dependent on imports, the reliability of the United States is in question. Therefore, the Japanese will increase their naval power in the coming years."
The South China Sea islands won't start a war — but there's a catch.

Asia Maritime Transparency Initiative

The regional powers will decide that South China Sea island disputes aren't worth a major military escalation, but they will still be a symptom of a hazardous power dynamic. 

"Fighting over the minor islands producing low-cost and unprofitable energy will not be the primary issue in the region," the report predicts. "Rather, an old three-player game will emerge. Russia, the declining power, will increasingly lose the ability to protect its maritime interests. The Chinese and the Japanese will both be interested in acquiring these and in preventing each other from having them."

Dangerous great-power dynamics are returning to East Asia, even if it may not result in armed conflict in the South China and East China seas.

There will be 16 mini-Chinas.

China's economy will slow down, and growth in its production capacity will flatline. That's actually good news for a handful of countries. The entry-level manufacturing jobs that China used to gobble up will migrate to 16 emerging economies with a combined population of 1.15 billion.

So while China's growth will stall, leading to unforeseeable political and economic consequences, Mexico, Nicaragua, the Dominican Republic, Peru, Ethiopia, Uganda, Kenya, Tanzania, Bangladesh, Myanmar, Sri Lanka, Laos, Vietnam, Cambodia, the Philippines, and Indonesia could see improving economic fortunes over the next decade as more manufacturing jobs arrive.

US power will decline.

With the world becoming an even more disorderly and unpredictable place over the next 10 years, the US will respond by being increasingly judicious about how it picks its challenges rather than taking an active leadership role in solving the world's problems. 
A growing economy, surging domestic energy production, declining exports, and the safety of being in the most stable corner of the world will give the US the luxury of being able to insulate itself against the world's crises. While this more restrained US role in global affairs will make the world an even less predictable place, it's a reality that other countries will just have to deal with. 

"The United States will continue to be the major economic, political, and military power in the world but will be less engaged than in the past," the forecast says. "It will be a disorderly world, with a changing of the guard in many regions. The one constant will be the continued and maturing power of the United States — a power that will be much less visible and that will be utilized far less in the next decade." 

Monday, September 6, 2010

Can Manufacturing Return to the USA?

The need to move USA manufacturing operations to competitive economic climates, has been essential for a Company's survival.  This exodus to a number of foreign countries, mainly to China and Mexico, has had a negative impact on the USA – its economy, median incomes, standards of living.

Today, New Balance Inc. is a rather unique exception to the migration trend.  For more than twenty years, this successful Boston manufacturer of athletic shoes, annually produces 7 million pairs of its shoes in the USA.
New Balance CEO, Rob Demartini, admits it's a challenge to stay competitive in the world market but says the company's commitment to domestic manufacturing is firm. It's really part of the fabric of the company. we've been manufacturing athletic shoes since 1938," said DeMartini. "We think in an industry where there a lot of shared manufacturing, knowing how to make the product, helps us. It also gets us a lot closer to the consumer."
This piece, titled “New Balance: U.S. Manufacturing Commitment” lists many of the principal reasons for the impressive ability.  New Balance credits a productive employee base and the use of lean manufacturing protocols.  The New Balance story is admirable, especially in relation to the many challenges faced with US Manufacturing.

There were many understandable reasons for the shift to foreign environments, but in my opinion, a great deal of the losses in US Manufacturing could have been avoided with superior, A-level Management - particularly at the Chief Executive Officer level.

Regrettably, poor Executive Leadership, bad decisions, deficient strategy, etc., impelled much of the manufacturing exodus.  Reducing labor costs became an easy convenience.  Admittedly, a number of  relocations were necessary, even critical for survival.

However, if a larger number of the CEO's within the USA had greater experience, better insight, the reality would be different.  With more "A-level" Executives in charge, plant operations would probably not have required this level of relocation.

Regardless, the USA can regain a portion of its manufacturing capacity in the next several years, if we see a number of positive developments.

Here are some important factors for success:
  • Quality management down through the 3rd organization tier;
  • Disciplined strategic focus – with an honest and periodically updated situation analysis;
  • Superior culture with the absence of hubris and politics;
  • Best cost manufacturer – utilizing lean, kanban and kaizen protocols;
  • Productive, lean salaried employee organization – not just lean for manufacturing;
  • Regular Value Analysis of the product lines;
  • Effective application of capital spending – which is essential.
Certainly, a growth in a number of negatives encountered in other environments, within China and Mexico for example, will contribute to the desire to return some foreign based operations to the USA.  However,  relocating manufacturing back to this country will remain a very difficult challenge.

In relation to overseas manufacturing competition, see: 

4 Gloomy Scenarios

The US Economy continues to be unhealthy.  A review of various forecasts, suggests either a painfully slow recovery or future declines should be expected. One can never trust various predictions to be accurate, but there were four experienced voices who provided sincere concern.

Here is the first:
"The Hindenburg Omen reared its ugly head late last week, signaling more doom and gloom as stocks plod along amid the dog days of summer."
"The Dow Jones Industrial Average will lose about half of its value over the next couple of years as it follows a Nikkei-like pattern of several sharp rallies in an overall decline, according to Charles Nenner, founder and president of Charles Nenner research."
“Dow Faces Bouncy Ride to 5,000: Strategist” - CNBC.com

The third:


Some have predicted this continued deterioration of the economic climate.  Mr. David Farr, the Chief Executive Officer of the Emerson Electric Co., referenced a number of the circumstances contributing to this poor economy in an opinion piece from 2009.

Mr. Farr's Op-Ed is referenced here:
"An Op-Ed on Federal Spending and Legislation"

And finally the fourth:


Neuberger Berman’s MLB Group's 2nd quarter 2010 Economic Outlook is very thorough and well conceived.  It contributes positively with global investment opportunities as well as a potential Achilles' heel to the recovery. 

In these challenging economic times, it is worth a reading and can be accessed here:
"The World Is Still Upside Down"

Tuesday, January 19, 2010

CHINA - Its Past, Present, Future

The following is an op-ed article written by Tony Gleason of Neuberger Berman. In this interesting work, Mr. Gleason studies essential history, reviews present issues, and predicts future trends, regarding business within China. It is very helpful for those of us, who have operational dealings and investments in China. Extremely worthwhile reading:
China Wakes, the World Shakes
by Neuberger Berman’s Tony Gleason - November 17, 2009

As we have all witnessed, the economic system that drove much of world trade buckled in the financial crisis of 2008. It appears that the U.S. will no longer be the insatiable source of demand for the world’s manufacturing countries. Our credit has unfortunately hit its limit with our creditors, namely China and Japan. From an investment point of view, understanding the new financial, economic and political system that is evolving from the 2008 crisis will be a key to making and preserving capital in the decades ahead. China, as I will explain, is re-emerging on the world stage and will likely play the leading role in this evolution. Within this piece I offer my perspective on China today and how I believe it will influence the investment landscape.


I’ve had the extraordinary good fortune of traveling frequently to China. Each time, I’m startled by the progress the country has made since my previous visit. The most recent trips are no exception.

Cities visited in the past few months include:
  • Tier one cities: Beijing, Shanghai, Guangzhou, Hong Kong
  • Second tier cities: Nanjing, Hangzhou and Chongqing
  • Small, but important cities: Li Jiang and Macau
Along the way I met with over 60 companies, various government officials and many interesting people. Since the crisis began almost a year ago it’s become abundantly clear that the Chinese government recognizes they can no longer grow the country’s economy based on exports to the United States and Europe. Recognizing that economic growth is necessary for harmony and its own ability to stay in power, Beijing has shifted gears quite dramatically and so far has managed its way through one of the most significant financial crises in a century. Many will argue with how it got there, but China is on track to leave 2009 growing at a better-than-8% rate. While China has many goals, in our view, the three with the greatest implications for the investment business are to:
  1. Increase domestic consumption;
  2. Accelerate infrastructure; and
  3. Diversify away from the U.S. dollar.
In the investment business, getting the big picture right is key; we believe the ability to appreciate what is going on in China—and act on it— will have a significant impact on investment results. For some perspective on where China is headed, it pays to look back a few years. Therefore I’d like to provide you with some history intertwined with my observations on this most fascinating country...