In 2008, two events happened within a span of seven weeks that hurled the globe into upheaval and forever shaped nations, said George Friedman, Ph.D., geopolitical expert, author and international affairs strategist, and founder of Stratfor and founder and chairman of Geopolitical Futures. Friedman took to the stage at NAIOP’s CRE.Converge 2017 to share his shrewd insights into global events.
The first was in August, when Russia invaded the country of Georgia, upsetting the world’s assumption that war had become obsolete. The second was the collapse of Lehman Brothers and the U.S. subprime crisis.
The latter resulted in a crisis of exporters; in short, exporters depend on customers, and when customers lose the ability to buy, exporters are in trouble. China in particular was thrown for a massive loop, and the European Union was destabilized. The United States did fairly well, because our exports account for around 12 percent of GDP, compared to Germany, whose export business makes up 50 percent.
The decline culminated in 2014 with the downfall of commodities and the collapse of the price of oil, which set into motion a series of events that included the ousting of Ukrainian President Viktor Yanukovych and Russia’s invasion of Syria, followed by a campaign of “agitation propagation,” or so-called election tampering by Russia in the 2016 U.S. election.
There are two great centers of economic power: Europe and the United States. Today, Europe is fragmented, and although it’s moving forward confidently, there is global concern about instability. The U.S. accounts for one-quarter of the world economy, has the only global military force, and is driving power of technology – and that scares the world.
Friedman says that the U.S. is an enormous power but doesn’t always know how to wield that power. There is a tremendous imbalance between the U.S., a reeling Russia, a desperate China that is trying to stabilize, and a fragmented Europe. Much of this strife is because current U.S. leadership has declared that it is putting “America First” – and that puts export countries again in a dangerous position.
Shifting to the topic of North Korea, Friedman explained why the county wants to assemble global weapons. In short, they know that the U.S. is afraid of them and what a nuclear war would do to the world. Therefore North Korea’s assumption is that if the country has the weapons, it can control the U.S. and limit what the superpower can do. North Korea is trying to persuade South Korea and Japan to break their treaties with the U.S., forever changing the balance of power in East Asia. The only ones who want that to happen more than North Korea? The Russians and Chinese.
The intention of North Korea doesn’t matter, said Friedman, but their capability does. The U.S. will be faced with the touch choice of either going to war, or accept living with an unstable county with immense nuclear power. Either choice has significant impact on the financial markets, and therefore impacts CRE. The unknowns are huge.