Last year we correctly described 2011 in one word: debt.
Mindthis is not in the game of predicting the future with lengthy articles that will inevitably be proven wrong in a matter of weeks. Instead, we chose one phrase that will dominate the entire world through dinner table discussions to global news stations and think tanks. No, Karl Marx is not right, we will not see a massive uprising against the “world order of capitalism”, rather we will see the foundations of our world economy tested. The combination of elections and income inequality leads to the word “Anarchy” (which I define as extreme political and economic disorder).
Elections: Quantity and Quality
According to CNN, 59 countries will be voting in the next 12 months which makes up about a third of the world’s nations. In aggregate terms, 53% of the world’s population which represents half of the world’s GDP could be facing massive leadership changes.
This possible electoral change is focused in the world’s most powerful countries. China, France, Russia, and the United States of America, all will see some form of leadership change/election. That’s four out of the five U.N. Security Council members which represent 40% of the world’s GDP. Even more shockingly, 70% of China’s leadership will be new in the next 12 months. These are not some low level paper pushers, Hu Jintao and Wen Jiabao will be replaced by Xi Jinping and Li Keqiang. This amount of elections/selections within 12 months during economic turmoil should always cause concern.
The only positive outcome from the Occupy Movement was that it forced think tanks to take a look at income inequality. People often complain about how the developing world is an uneven success story. It should be pointed out that the gap between rich and poor has grown ever wider in wealthy countries over the past three decades. I urge you to read the entire report by the OECD which has a plethora of data on the phenomenon rather than reading substance-free Forbes articles.
The Economist highlights how the Gini coefficient, a measure of inequality in which zero corresponds to everyone having the same income and one means the richest person has all the income, increased by almost 10% from 0.29 in 1985 to 0.32 in 2008 for working-age people in OECD countries. The trend is caused by earnings: the pay of the richest 10% of employees has increased at a far greater rate than that of the poorest 10% of employees. Whether happiness can be bought is irrelevant, household stability is based on income.
In the next 12 months our world is about to go through massive changes with fundamental players receiving major political and economic makeovers. Although anarchy is not certain, it’s now an option among many on the table.
P.S. Those uncontrollable global youth unemployment rates don’t help.