The three big themes of 2021 so far

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Good morning!

It’s been an eventful week:

  • The final US troops withdrew from Afghanistan, almost 20 years after arriving.

  • The west coast of Canada hit a record temperature of 49.6°C.

  • Former US Secretary of Defense Donald Rumsfeld passed away.

A coincidence? This meme thinks not:

Cheap jokes aside, Rumsfeld was a pretty bad Secretary of Defense from a policy perspective. That's not a partisan political statement, but an observation of his competence:

His fatal judgment was equaled only by his absolute self-assurance. He lacked the courage to doubt himself. He lacked the wisdom to change his mind.

- George Packer, The Atlantic

Though to give Rumsfeld his due, he did write the absolute best memo of all time:

This week we are going to experiment with a shorter edition. We thought it would be interesting to pause and connect the dots for the first six months of 2021. Please tell us what you think of this shorter, one-story format. Your feedback will help us build International Intrigue 2.0 over the summer!

This week:

  1. 🧩 2021 so far: three themes thus far, and what we’re watching for in the second half of the year.

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🧩 The three themes of 2021, so far

By John and Helen

Somehow, it’s July. Time sure does fly when you’ve been constantly inside not having fun 🎻.

Now that we’re closer to 2022 than 2020, and Australia has gone from bragging about being Covid-free to ‘whoops we forgot vaccines were a thing’, we wanted to pause and reflect upon the emerging geopolitical themes of this year.

1. Alliances are back! Kind of.

Recently, John mused with a friend who attended the G7 in Cornwall about what, if anything, came out of the meeting. After a few beers, they settled on two key takeaways (though his memory is as hazy as the IPA):

  • Words: President Biden is keen to push the idea that America is not in decline, and the last four years were ‘nowt but a flesh wound.

  • Actions: G7 and NATO members surprised everyone at their respective summits by releasing joint statements calling out Russian and Chinese aggression.

(In our diplomatic experience, getting member nations to agree what type of paper a joint statement should be printed on would be reason enough for celebration and rapid promotion.)

President Biden’s foreign policy team believes a lack of genuine alliances is one of China’s biggest geopolitical weaknesses. So accordingly, the Biden team is eager to reassure traditional allies that the US is back for good.

The Biden team mainly wants to reassure Europe, South Korea, Japan, and India. Meanwhile, the Labradors of US allies - the UK and Australia - are thrilled to be in the room, any room, and get a t̶r̶e̶a̶t̶ bilateral meeting every so often.

That's all well and good, but alliances do not equal multilateral cooperation. An alliance is cooperation made possible because of shared national interests; multilateral cooperation is when countries work together despite having very different national interests.

So far in 2021, the US has been pretending that the former is the latter.

2. Covid-19, crypto, and weirddd economics

The best investors aren’t always right, but they are the quickest to admit when they don’t know the answer. And a consistent message in 2021 has been that even the best investors simply do not understand what the f*** is going on.

Is inflation coming? Is it already here? What does a post-Covid-19 recovery look like? Is crypto a bubble? Are asset prices about to crash?

When you smash all those forces together in an environment of increasing societal and geopolitical volatility, it becomes patently clear that nobody can know what the f*** is going on. And yet, so many commentators pretend they do.

To quote a certain Defense Secretary:

There are known unknowns… but there are also unknown unknowns… it is the latter category that tends to be the difficult ones.

We think inflation is the biggest known unknown in the short term. Few people in the West remember inflation and its effects, and our system is heavily dependent on keeping inflation low.

Uncertainty aside, we can always look to history for general lessons:

Regardless of where you think we are on that timeline, the lesson for everyone is to focus on not getting ‘wiped out’:

  • It does not matter how frequently something succeeds if failure is too costly to bear.

  • Don’t cross a river if it is four feet deep on average.

- Nassim Nicholas Taleb

Of course, it doesn't mean we should avoid risk entirely because 2021 is particularly chaotic. It just means that policy makers, businesses, and investors must engage with risk sensibly. Placing a high proportion of one's eggs in a single basket is a bad idea, no matter the eventual result.

3. Antitrust and the geopolitics of technology

A majority of people think it's long past time to rein in big tech. But it’s also clear that our elected representatives haven’t a clue where to start that process.

To paraphrase Justice Potter Stewart: society doesn’t quite know how to define our problem with big tech, but we know it when we see it.

And we saw ‘it’ when Twitter booted former President Trump on 8 January. Something must be done, (some of) the people said. But what, and how, (a few) others asked in reply…

Antitrust is the body of law designed to maintain market competition and prevent monopolies. Antitrust law may or may not be affiliated with Antitrust Man.

But was Trump's de-twitter-stration really a question of antitrust? Or was it a freedom of speech issue? Perhaps a data sovereignty issue; an ethical AI problem? Maybe all of the above, or something different altogether?

While we’re not convinced antitrust is the right legal tool to address the myriad issues caused by the tech revolution, it seems to be the default solution ever since it was successfully deployed in United States v. Microsoft Corp.

Whatever you think about antitrust, two things are clear: 

  1. 2021 has been great for grizzled antitrust law professors who haven’t been this relevant since Shrek was first in cinemas.

  2. The world has changed a lot since Microsoft was broken up:

Meanwhile, the problems that tech always had matter much more [now], because they [have] become so much bigger and touch so many more people…. [t]he internet had hate speech in 1990, but it didn’t affect elections, and it didn’t involve foreign intelligence agencies.

- Benedict Evans, Regulating Technology, 2020

(We highly recommended reading that essay)

The Trump-Twitter debacle unsettled a lot of countries who aren’t wild about tech executives making political decisions. Many of those countries - led by the EU and India - have begun to develop explicitly data-centric foreign policies.

The splinternet feels more likely with each passing day.

What we’re watching in the second half of 2021

  1. Cop-26 in November: it’s easy to say international cooperation is back because long-standing allies decided to agree on some topics they mostly agreed about anyway. Climate change poses a much greater challenge to international cooperation than a few chaps (and one lady) from the richest countries saying the enemy is over yonder, while pointing to the East.

  2. The German election: speaking of that one lady, Angela Merkel will step down as German Chancellor in September. She’s been a defining force in European politics since 2005 🤯. ‘Mutti's’ replacement has a huge job on their hands: China and Russia will surely issue an early test of strength (our guess would be another cheeky Russian troop build up, perhaps near Estonia).

  3. Inflation: politicians and central banks will try desperately to tell you that inflation is under control. Whether it is or not will likely be the most consequential economic story in the short term, and will go a long way towards defining which of Ian Bremmer’s three visions for the future we end up in.

  4. Epic v Apple: we’ll be watching the international reaction to this antitrust case when it’s handed down later this year. Experts predict an Apple win, notwithstanding that "the vibe of the thing" feels unfair. An Apple win would likely accelerate antitrust legislation in US Congress, and confirm international suspicions that the world is too reliant on too many, too American, companies.

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