Episode 8: COVID Continued: What the world will look like in 2022

Transcript: Season 2, Episode 8: COVID Continued: What the world will look like in 2022

Disclosure: The opinions expressed by Eurasia Group analysts in this podcast episode are their own, and may differ from those of Citigroup Inc and its affiliates.Welcome to Living Beyond Borders, the podcast from Citi Private Bank and GZERO Media that examines the risks and opportunities in our rapidly changing world—from global politics to economics—and what it all means for you.

I’m Caitlin Dean:, Head of the Geostrategy Practice at Eurasia Group.

It was a year of highs and lows – and for many, a year of recovery.

Aside from the ongoing pandemic and new variants that emerged – major moments of the year included everything from the Biden Harris inauguration, to the withdrawal in Afghanistan, to the Suez Canal blockage.

[NEWS TAPE MONTAGE]:

CLIP: Breaking news tonight the deadly surge on Congress as an angry pro trump mob storms the U.S. Capitol…

CLIP: More than 95 thousand Americans are now hospitalized with Covid 19

CLIP: A Giant containership ran aground in the Suez Canal after losing power

CLIP: With nations re-enacting travel bans left right and center and medical authorities working around the clock to learn more about the dnagers of a new covid variant

CLIP: Today President Biden formally announced the United States would withdraw all its troops from Afghanistan by Sept 11

CLIP: And just 90 minutes from now Jeff Bezos and his brother Mark Bezos, aviation icon Wally Funk and a first paying customer Oliver Damon will launch to space and back]

Caitlin Dean: As we wrap up 2021 - just about two years after the covid-19 virus first was discovered in humans, we wanted to look at where the geopolitical landscape stands today - especially in light of the omicron variant of the virus - and what is on the horizon for 2022. Joining me now are David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth. Hi David.And Ian Bremmer, President at Eurasia Group and GZero Media. Welcome back, Ian.

Ian Bremmer: Great to with you.

Caitlin Dean: Before we dive into look at the recovery and predictions for the new year, let's address that we are again in a state of uncertainty with the Omicron variant now spreading. David, what are the most likely scenarios you're seeing in terms of COVID's health impact and economic impact and how worried should we be about those?

David Bailin: Well, the first thing I would say is that the idea that there would be a new variant is actually not surprising. I think it's to somewhat of our good fortune, that we actually have a variant that looks like it's going to be highly contagious, but only moderately impactful in terms of its overall health impact. That said we are dealing with a variant that looks like it will overtake Delta based upon all the information we have.

What we're looking here at is another wave of COVID globally. That probably extends the pandemic as we know it for at least another six months. And clearly the number one thing that people are going to be looking at are hospitalizations to determine its impact. And therefore, if we can think about hospitalizations, we're also going to be talking about the economic impacts that will ensue, whether it's increases in some of the labor shortages that we currently have or supply chain shortages and things I know we'll be talking about today. It's a very significant impact.

On the other hand, I just want to point out that what we've noticed in the data for almost the last two years is that each successive wave of COVID has less and less economic impact on the markets and has had less and less real economic impact, frankly, on the economy because of the adaptations that have taken place. And so I think we have a high degree of human suffering and a relatively less degree of economic impact.

Finally, and I'd love to hear Ian's views on this, we're very concerned about China, which has taken a zero COVID policy and because of the poor quality of relative vaccinations there, the exposure or the risk associated with China now is significant because all of these variants could theoretically cause a significant spread there.

Ian Bremmer: I think that this has been largely, not exclusively, but largely a pandemic of the unvaccinated. That was obviously 100% the case when it first showed up, because we didn't have any vaccines. But with Delta variant, it became very obvious inside the United States because of things like vaccine hesitancy and internationally because of inequality in vaccine distribution. This is going to be even more the case it appears from Omicron.

And so, I mean the impact this is going to have, will be overwhelmingly on people inside advanced industrial democracies that aren't vaccinated. The good news is that won't have as much of an economic impact because the people that are vaccinated are increasingly and overwhelmingly the people that are most vulnerable to this disease that people that are particularly old, the people that have preexisting conditions in the advanced industrial economies, those people are almost all vaccinated. So as a consequence, hospitalizations and deaths should be significantly lower.

Caitlin Dean: Ian, if we assume that Omicron is just the latest variant and there will be others coming and COVID is here to stay, assuming there's no real post-COVID world, what will the implications be politically and economically?

Ian Bremmer: Look, I think a lot of people are already living in a world that from their perspective is post COVID. I think, the question is how far and how fast does that kind of behavior distribute out globally. Again, it's going to be the poor economies that don't have the money to deal with a response to six months of additional pandemic, can't engage in lockdowns, don't have the same number of vaccines rolled out in their population and have populations that are increasingly angry about all of this.

I mean, we know in the United States right now, the economy's actually quite robust. We also know the average American doesn't feel that way. Part of it is because the average American is living through two years of just profound, psychological trauma that comes from not seeing your friends and your family and seeing far too much of some of your other family and your kids and the schools being out and then they're on and then they're out again and you can't go to a restaurant and, oh my god, I might die. I mean, that weighs on people. It certainly weighs on the way they think about the economy and their wellbeing going forward. I think that we're going to see a lot of that going forward in other parts of the world.

Caitlin Dean: Let's take a minute to reflect on 2021 and where the world currently stands. It was a bit of a rebound year, even if, as Ian said, people aren't necessarily feeling that yet, but Ian, what does that rebound mean to you? How did you see that play out?

Ian Bremmer: When we look at 2021, I see a world that's geopolitically incredibly dysfunctional. The largest economy in the world, my own, with a booming economy, but with more inequality than any other G-7 economy with more political dysfunction than any other G-7 economy and with less vaccines distributed than any other G-7 economy. That's all self-imposed.

Then you have the second largest economy in the world, China, which has this problematic zero COVID policy. That's not going to get much easier next year, as David mentioned, because they can engage in complete surveillance and lockdown and their vaccines don't work very well. They'll have their own mRNA vaccines in mid-2022, and then they can roll them out. But until then, we've got all these problems. The Chinese are not in any way aligning with the United States and it's allies. They're becoming more consolidated as authoritarian regime and more state capitalists in the way that they approach their economy.

If you take those two factors as your backdrop, your ability to respond to crisis is deeply and fundamentally challenged. Now, the funny thing is that we happen to have these two great test cases of crises out there. One being the pandemic. The other being climate. It turns out that despite the fact that the US and China, both internally and together are vastly more dysfunctional than you would hope, the responses to both of these two crises are very, very different. In the case of pandemic, it's every nation for itself. It's no coordination. It's no cooperation. It makes it much, much harder to deal with this crisis.

In the case of climate, we're actually seeing significant acceleration in everyone responding to climate change, including the Americans, including the Chinese and everybody else.

Caitlin Dean: David, how do you think the rebound went, both in the US and globally?

David Bailin: I do think that there's a tale of two cities. On the one hand, you see this incredibly robust economic recovery with the inequality that Ian points out at its heart, and which has been partly sponsored by governments. I think they've done a good job in bridging this in what could have been an incredible chasm across the world when the global economy shut down. And so that I think they've done a B-level work, but with a strong economic recovery.

David Bailin: The politics have gone the exact opposite way. I think at the end of the day, what we've seen that saved us is a technology revolution long in the making that became apparent to everyone that allowed us to do that, right, to basically be resilient by using technology to bridge a lot of these gaps and fiscal spending and monetary policy to assist us in that way.

So where we are at the end of '21 is what I would describe as a healthy-ish economy with a sick government situation that Ian's adequately described, and some hope in the form of corporate action on not only the climate issues, but also on social issues that are moving away fast away from government and more toward the corporate sector.

Caitlin Dean: David, let's focus a bit more on that economic recovery, specifically, the healthy-ish recovery that you mentioned. It was buoyed by a massive stimulus in the US. Can that recovery continue with less stimulus funding?

David Bailin: When you juice the economy this way, at this time, you end up with this set of pervasive impacts. What I mean by that is that the first thing that happens when people are forced to be at home is that they stop traveling. They stop buying leisure goods. They stop buying sneakers. They do a lot of things. They stop buying all sorts of travel related services. They start buying more things. To give you an idea of how many more things they bought, this was the equivalent of what happened after the Second World War. It was the six percentile of purchases, right, going on for a year. Inventories were depleted. Literally shelves were emptied of a variety of things. You wanted a dishwasher, you have to wait six months. Right now, I'm trying to order furniture. It's out four to six months right now. That's because of the shift in spending.

Then you stimulated the economy. They did such a good job of it that they gave everyone "too much money." They gave too much money to some people who had whatever, and then they also gave rent checks and stimulus checks to a lot of people. There's excess savings in the economy now.

Between COVID physically changing the supply chain dynamics, physically moving people to new locations, giving people enough money so that they could choose not to be a truck driver or a longshoreman, you completely distorted the economy. All of those distortions will abate over time.

The second thing you did is you created incredible amounts of inflation in very small parts of the economy, example used car prices, 40% or 50% higher than they would otherwise be because you can't get a new car, and because people don't want to take public transportation. So this distortion that's going on now will not last. It will just take time to resolve. It's now going to take more time with Omicron than it would've taken before.

When we come out of this, we're going to go back to a new normal economy. What do I mean by new normal? One is it's going to be technologically enabled. None of those tech changes are going to change. They're still going to be used. They're going to still drive efficiency. You're going to still expect your food to arrive 20 minutes after you place the order to your door, as with everything else. You are going to expect more flexibility in where you work tomorrow than you did yesterday. You're going to expect that the companies that you work for are going to acknowledge these in the way that they go about behaving. These are changes that are permanent in the economy, some of which are efficiency generating. You're going to have some people who have more spending dollars still in the bank to go.

Once those excess dollars are gone, you're going back to this new normal economy that I just described that has been forever transformed by what the pandemic has left behind. Then the question is, is that a sustainable and growing economy? It turns out that all of the data suggests that it is, that we're going rapidly into this mid cycle. What happens at the mid cycle is fascinating because companies that benefit from a flatter yield curve, in other words, that benefit from stable pricing, will do incredibly well, leading companies, those that can drive earnings, those that can drive dividends. This is going to be a very good time for a large swath of the larger and more successful, more successful firms, because we're going to go back to the pre-pandemic buying patterns with a health healthier set of companies and a healthier set of customers.

We don't see any recession ahead. We see this long transition period, but it is good to think that we will be in a better place in '22 and '23 than we could have ever thought.

Caitlin Dean: Ian, how big of an issue do you foresee inflation being?

Ian Bremmer: I'm not the economist here, so I'm not going to give a long answer about it, but I will say from a political perspective, it's pretty clear to me that both inflation and economic security are going to be central issues in the upcoming midterm elections. I mean, Republicans will make sure of bit, and so as a consequence for Biden being seen as doing more to bring inflation down is critical. Even though presidents can't do very much about it, they absolutely get the blame for what happens under their watch.

And so far, he's losing that battle. And I have to say, I was a little struck at Powell's renomination event, chairing the fed, that President Biden cast inflation as a problem hurting the poor, because normally presidents bash Fed chairs to ease and not tighten policy. I thought that that framing and the nomination being in the rearview mirror does give the fed more scope to act. The Powell-Yellen testimony on the Hill was impressively bipartisan, frankly, on the need to deal with the inflation problem. So, yeah, I absolutely, it is a big political issue and is being treated as such by President Biden and the administration.

David Bailin: It's a huge deal for the election, like you said, Ian, because people feel wildly confident about the economy and very angry about inflation. The reason is that they experience inflation every day. It's a bad thing.

Ian Bremmer: Even though they've gotten higher wages.

David Bailin: Totally. It happens at the gas pump all the time. That feeling, right, is actually really been because of the successful policy of the last 30 years of driving down inflation. I mean, we haven't had, in the last 11 years, anything that even approached 2%. Many of the countries in the world, like Japan, had to try to flight deflation, so they've benefited. All consumers have benefited by lower prices and higher quality goods for a decade, and now they're starting to pay higher prices for their bicycles and other things they're buying. They're still buying them. They're very happy but about the purchase, but they're not happy about the price. And so it is a very big deal. That will continue because of Omicron for a longer period of time. There's no doubt about it. And so it does have political ramifications.

When people begin to change their behavior and start to anticipate prices going up in the future, buying things ahead, hoarding, storing more goods, that would be a sign of real, real difficulty. We've not seen that in the economy to this point, so right now it looks to be temporary.

Caitlin Dean: Well, one of the issues that has contributed to inflation is the supply chain backups. That's an issue that's still very much with us. Ian, are we seeing any signs that that will be fixed anytime soon?

Ian Bremmer: You know, I'd have a hard time imagining that we're going to have the same level of supply chain challenges in the coming months. I mean, some of that is just because companies were taking advantage of the massive backup to not pay for additional warehousing and instead just leave a whole bunch of goods on ships. We found out that after they imposed fines for those that were leaving, say for example, Long Beach and outside of LA, which is the largest port in the US, suddenly that problem got resolved fairly quickly because the companies didn't want to pay it. There was some inefficiency just by companies taking advantage of the situation we were in.

But beyond that, why do we have these extraordinary supply chain challenges? Well, it's because you had this massive whipsaw to the global economy. Virtually no consumer demand for a period of time, and then going back well beyond what you would've expected ex-ante. And so you've got goods that are absolutely not in place. You've got ships that are not in place. You've got containers that are not in place. And you also have worker challenges. I mean, some companies have gone out of business, but a lot of folks just having problems getting everybody back in place to work, because of course, there was such a massive relief packages offering around the world to ensure that absolute levels of extreme poverty did not go up.

All of those things are exceptional, short-term consequences, and so even with Omicron, even if it were the worst case, and let's say that it is absolutely as lethal as Delta, you still are going to have less significance from an economic knock on effect globally, for all the reasons David and I have spoken about. So you shouldn't expect that these supply chain disruptions are going to continue for much longer. When that happens, when it changes, companies are very quickly going to remember, just in case supply chains, because they're expensive and they'll go back to, "Well, that was an exceptional period. Let me run the way I know I can to maximize profit." That's just in time.

David Bailin: That's right. You've seen, the second after used cars, the second largest spike in inflation was due to the substitution of foreign goods, shipped very expensively to the country to basically satisfy that demand. That's another source of it. I do think that at the nature of this supply chain shortage is also about commodity inputs and certain scarcer things like semiconductors. I think that when you have excess demand and you've depleted your inventories to zero, you then try to build as many things you can, but you don't have the ability to access the sheet metal and the semiconductors to do that, and so that contributed to this maximum cap on production as well. A little less optimistic than Ian, that the supply chain issues won't continue to exist for another six to nine months because you have to refill the warehouses in order to, to do what Ian said and to get to this just in time policy.

All of this is a one time event. Once we get a normalized situation, vis-a-vis the pandemic, and no one's going to be happy about it, happier about it than corporations and consumers when it does end, people do not like going to stores and not getting what they want. They don't like paying full price. They certainly don't like the absence of selection. You want a bicycle? There's one. It's black. It's yours.

Caitlin Dean: David, I also want to talk about economic expansion. Many experts think that the straw longest expansion is behind us now. What type of growth do you expect in 2022? What risks do you see there?

David Bailin: Well, at Citi Global Wealth, we're actually a little bit less optimistic than some of our competitors on this score. For example, in China, we expect a 4.5% growth rate, which would be the lowest that we've seen probably in at least a decade for the Chinese economy. In the US, we're looking at something like 3.5%. For the globe as a whole, about 3.8%. Now none of these numbers, by the way, are bad in the sense that they're going to, they're not recessionary. You're going to see earnings per share go up between 7% and 10% globally across US corporations and global corporations, so this is a very healthy, normal economy.

But when you come off the ride, the roller coaster and you're just exhilarated by what you experienced, and now you're going to go to regular speed, it's going to feel slow. We're going back to a high rate of growth than we had in 2019, but it's going to feel slow by comparison. I think that adjustment's going to be pretty difficult for people to fathom. A lot of people when it comes to their portfolio investments are assuming that they're going to make 40% again, which we have had a 40% return or more over a couple of years, certainly from the trials that we saw right after the pandemic. That's not repeatable either. We've got to get people to get their expectations normalized. I think that's going to be difficult, especially when they're forced to have a life that's constrained as the way Ian talked about it much earlier, that's going to be a difficult thing for them to experience.

Caitlin Dean: Ian, given David's view of China as a risk or a slower spot in the economy, what do you see their likely path to be economically and politically?

Ian Bremmer: Yeah, well, politically, I mean, it's enormous focus on a smooth transition for President Xi's historic third term. I see no reason why that's going to be upset. By the way, because it's such a priority, I also don't see the Chinese, trying to rock the boat internationally with the Americans or others over Taiwan, South China Sea, or other places. In a way that I'm much more concerned about say Putin's behavior around Ukraine or other things. By the way, the Biden White House completely agrees with me on this. They think at least until next October, November, which is when the party congress is going to be, they haven't decided the actual date yet. There's a window of opportunity to work more closely with the Chinese, which by the way, is quite useful timing because that's when American midterm elections are.

But more broadly speaking of course, this also means China's going to be focused itself more domestically. This is Xi Jinping's common prosperity concept. It's Xi Jinping's own style of authoritarian populism. It's "We're going to make an example of elites if they're behaving in ways that are fundamentally rapacious and/or anti patriotic."

David Bailin: I have a question for you, Ian, about this, because I'm wondering what you think the impact has been of COVID in literally shutting the Chinese economy and even its politicians from being able to travel and therefore self-isolating. Does that isolationism accelerate or change their view of their own powers or ability to influence how markets should go in a more dynamic way?

Ian Bremmer: I mean, I think it enhances the stereotypes that Chinese leaders have of what's happening outside their country. It doesn't allow them to get ground truth internationally when they're screwing up. I'll give you an example. The Indian Foreign Minister is a good friend of mine, Jaishankar. I knew him from his DC days. We were together a few weeks ago. He's only met the foreign minister like two or three times in the last two years. That's extremely unusual. Now India-China relations are at their worst right now. I would argue, and not just because Jai is my friend, that it's largely been mishandled by the Chinese, so much so that the Indians are no longer leading the non-alignment movement. They're joyfully joining the quad in aligning more with the United States. That's a big mistake for China. I don't think the Chinese understand that.

I think a big part of it is because they're just not out there getting that information/ you and I, maybe we haven't traveled as much the last two years, but we've been around the block a few times. I will tell you that Chinese officials don't do Zoom well or comfortably. There are always more than one on an important meeting. They are taking notes on each other. They're not comfortable with a free and open conversation done digitally, and so I do think this is a problem for them.

Caitlin Dean: I really wanted to get to a number of the unstoppable trends, as we've called them, that we've discussed over the course of 2021 and that we're likely still to be focusing on next year. David, let's start with the idea of Asia being the demographic story of the century. Is that still the case? What are some of the implications?

David Bailin: Well, if it's not the century, it's certainly for the next decade or two. I think that what we're talking about there is the rise of a billion people into the middle class. We're talking about Common Prosperity that goes well beyond China, to the entire region. We're talking about an economic group of countries that collectively are going to become the dominant economy, not only China by itself, but the entire group. That's going to cause a shift, right? A shift in the focus, not only politically, but economically where you're going to see just an entire self-sustaining mechanism take place.

Remember that today, right, as we speak 63% of the world's market capitalization is the United States, so if you think about what could occur over the next 10 to 20 years in terms of the size of capital markets, the of investment that can move to Asia and the fact that Asia doesn't have some of the infrastructure and therefore will utilize technology more quickly, it could become just much more rapid and sustained growth as an opportunity for investors. Obviously, from their population standpoint, the ability to deliver goods and services more quickly and the fact that they're going to have less technology to displace in order to become advanced, I think as much to their advantage. There's a lot of demographic opportunity that's there and a lot of innovation that's taking place.

If the capital markets develop accordingly and certainly that looks promising, then that would be a great place to invest as well. China's current policy of restricting or trying to contain capital markets there actually could work against them, because though they're going to have robust capital markets, certainly for in the fixed income space and to a lesser degree in the equity space, the rest of Asia will be very much become part of the global fabric in terms of markets themselves. As they do, their cost of capital will come down. So this is a time when we think of Asia as an entire region, as part of an unstoppable trend with China being somewhat of a wild card in terms of how you would invest in it and what industries you'd select.

Caitlin Dean: Great. Ian, I'd like to get your thoughts on that too, for Asia as a whole, for China and within China, what happens before and after the party congress.

Ian Bremmer: I think after the party congress is a really big question mark. I don't think we can say with any level of certainty that China's going to have a less aggressive international engagement style when they are traveling again and emerge as Xi Jinping is the leader for life with a group of policymakers underneath him that he has personally selected are enormously loyal. I mean, this is the other half of what David was just asking me about, is it okay if they're not traveling? It's also not okay if Xi Jinping isn't getting bad news from his own people. There was a bit of a comeuppance internally after they mishandled the initial outbreak of COVID and lied about it domestically and internationally.

But their zero COVID policy, as much as we are looking at it right now and saying, "This is hurting their economy." They think it's a master stroke, because they understand that the rest of the world has had all of this death and all of this disease and China has not. They're the one country that's protected their population - at immense social cost, by the way, in locking everything down. I worry that after two or three years of isolation with Xi Jinping emerging as the most powerful individual leader in the world, that we're not going to like what comes out of that.

More broadly in Asia, this is the part of the world that is least concerned that the Biden administration is inconsistent or unilateral or that the Trump administration was a disaster for four years and maybe they'll come back. You hear that from Canada, you hear that from Europe, you hear it from the Middle East, you hear it from all over the place. You don't hear it from Asia, from America's Asian partners. The reason for that is because they're much more concerned about China and because the United States has actually consistently shown more engagement, diplomatically, militarily, even at the margins economically, though we don't really have a strong trade policy. By the way, that's true for Australia. It's true for Japan. It's true for India. Literally, all for the same reasons.

South Korea is the big question mark for me in the coming year in Asia. That's because they have an election in four months. Depending on which of the two men win that election, it's going to be either dramatically more oriented towards Beijing and a sunshine policy with North Korea or dramatically more oriented towards the US and towards trying to improve relations with Japan. That's a big question mark for Asia in 2022.

Caitlin Dean: How about climate? Ian, especially coming out of the COP26 meeting in November, are we thinking that green recovery is still a real possibility globally?

Ian Bremmer: I don't know that I would call it a green recovery because in an environment where the global economy is challenged, where there are supply chain problems, where there are energy shortages and where you're putting a lot more money into renewables, but you still have mostly an infrastructure that's oriented towards fossil fuels, you can't really call the recovery “green”, right? I mean, China has to spend more on coal to ensure that their people are going to have heat this winter. There are other countries in that situation too. I mean, when Biden is pushing the Saudis and the Russians to produce more oil, that does not imply a green recovery.

But there is absolutely a shift towards renewables globally from a long-term perspective, which is only gaining, gaining dramatically in momentum. I see this in the expectations of electric vehicles in Europe and the United States picking up radically. I see it with the improved net zero commitment targets being made by the Japanese and the Emirates and the Chinese. I see it with the fact that we are now going to be making new net zero commitments every year, as opposed to every five years.

I mean, the Glasgow COP26 meeting was generally a success in spite of the fact that we were in the middle of a pandemic and that the Americans and the Chinese both have real reasons not to want to cooperate with each other as the two largest carbon emitters on the planet. And so on balance, even though I'm saying no to the green recovery, I'm actually getting more optimistic about where we're heading on climate.

David Bailin: I think there's going to be a lot of opportunity that's going to come of the pure economics of it. If you take a look at the correlation when energy prices rise, the alternative energy stock index goes up. That's because the production of alternative energy is incredibly efficient and is only going to get more so. When we think about how buildings are heated, how cars are charged, simply how we're going to look at the grid, which will become itself decentralized over time now, all of that is going to be done in a more carbon neutral way.

The questions can be one of speed because even with the availability of technology and with the availability of capital, governments are going to need to provide encouragement to the industries that need major transitions, so if you take a look at mining or the production of electricity, you've got to have a bridge, an economic bridge to get all industries to act at the same time in order to adapt that new technology, because then otherwise only the richer and more profitable companies could do so. I think that ultimately will lead to an incomplete Green Revolution.

But I have to say that if you look over the last five years, you will see that literally, the stock market reflects the view that the greening of the world is going to become an enormous economic opportunity. If you combine that with the social action on the part of corporations that I talked about early on in the broadcast where the younger shareholders or where institutions now are going to reflect social values for the longer term, you do have a bit of a, what I call a tidal wave that is really going to ultimately change the world. Whether it happens fast enough, whether or not there is coordination in the future, the fact is that we've come to that economic tipping point where it is very clear that this is an extraordinary crisis with an extraordinary response.

Caitlin Dean: There are also a number of technology trends that we foresee continuing. Ian, you recently wrote a detailed analysis of what you call the technopolar moment. Can you explain what that means and how it's impacting geopolitics?

Ian Bremmer: Yeah, the idea is that for our entire lives, when we talk about geopolitics and the global balance of power, we are talking principally and overwhelmingly about states. My argument is that that is changing now because technology companies are increasingly sovereign in the digital space, in the virtual world, which is growing in power so dramatically that it's starting to influence the way we think about geopolitics. Now, I mean national security, but cybersecurity actually tech companies are increasingly dominant. By the way, last year, by far the most in important successful attack against the United States or any of its allies was the Solar Winds attack, which technology companies found out about. Governments didn't even know. They were the ones that had to make people aware and then figure out how to fix it, how to respond effectively.

That's also true increasingly when we talk about the global economy and the role that the collection of data and the digital economy has for us. It also is true when you talk about information that citizens get when they think about how their position in society is changing. I mean, the fact that a sitting president of the United States was de-platformed by Facebook and Twitter at a time when the impeachment process was broken and there was no judicial capacity to respond to any of it. If I told you all of that 10 years ago, you would've said it was inconceivable, that I was writing a science fiction novel. And yet today, it is the reality. It's not that states are suddenly going away, but it's rather that if we think about geopolitical outcomes, increasingly there is a small number of incredibly powerful technology companies that only happen to exist in the United States and China. It really is quickly changing how we think about the way politics and economics interact.

Caitlin Dean: Ian, I also want to ask about inequality. It's shown up a lot in the digital divide, but more broadly, where do we stand in terms of inequality globally going into 2022?

Ian Bremmer: It's just accelerating. I mean, it's the one thing that's really overdetermined in the geopolitical space because there's so many things that are driving more inequality. We have, of course, the reality of technologies displacing workers through automation and through big data and deep learning. That's only speeding up in part because of the need to go digital faster and more broadly with the pandemic. You have the pandemic itself and all these different waves that are displacing to a much greater degree people that have jobs that are not able to easily go online and to work remotely. And of course, you also have a bigger gap between rich countries and poor countries because of the ability of rich countries to respond with massive stimulus and relief, but also because that's where you have the vaccines that can get them back up to normal.

I mean, so many things that are ... Climate change, I mean, we're going to respond to it, but two degrees of global warming is going to be felt much more heavily on the backs of people that don't have insurance and are living in places that are climate stressed, either inside the United States or globally, so they're going to take it more in the chin. All of this is to say that what's happening in the world today is accelerating inequality.

Caitlin Dean: David, what will it take to stop an ever widening equality gap in the recovery? Is that even a priority for decision makers right now?

David Bailin: Frankly, I don't see that as a priority for decision makers. It is a bit of a depressing outlook. If you think about it from social policy. You can see what governments can do, by the way, if you wanted to think about the pandemic as an MMT experiment, right? The idea of writing checks with the idea of building or supporting different parts of the economy. You can actually see that it could be done. It was an experiment that we've done on a one time basis and politically would be inexplicably to see parties want to continue it, but you actually saw what it can do. I'm very unhelpful for issues of social equality. I am very hopeful that if you're employed in, in a workplace, you're going to be treated better over time, but not about the disparity in income or in quality of life. Pretty much full stop.

I think that one of the things that makes me a teeny bit hopeful is that there are certain companies and whose clients care very, very much about this. For example, you buy one, you give one away. You buy a pair of sock, you get another one given away. But in terms of dealing with a problem of this consequence, I don't see action on it, and I find that very unfortunate.

Caitlin Dean: Looking ahead, more broadly than just equality, what else gives you hope, David, going into the new year?

David Bailin: What has been most hopeful about 2020 and 2021 is the literal resilience that we have seen that technology has brought, but that the character of human beings have brought as well. When you look beyond the politics of what's on the television, we've seen a world that has become oddly more kind, more helpful to one another as a community and more caring, more broadly. I'm not talking about individual groups, but I have to say that there is a sense and I think maybe the climate conference looks at it this way, that we've all been through something terrible together. In that one way, maybe in the climate, we are going to have to take care of one another, ultimately together, that there are going to be issues that us together. As Ian said, ironically, it turned out to be a better climate conference because everyone was sitting around the table and everyone decided that they needed to do something about something. You would not have anticipated that a year ago.

The other thing is that governments have been effective in their policy of dealing with COVID if not from a health perspective, but certainly from an economic perspective. That is, again, we could have been set back five years and instead we've been advanced five years. And so when it comes to healthcare, when it comes to digitization, when it comes to the quality of the delivery, even delivering of vaccines, we've seen that we are able to be much more responsive. And so all of that makes me hopeful that some of the social issues and some of the psychological issues that Ian also talked about earlier, can be overcome during this period of recovery and healing that takes place. Other than, and I think that's a fairly hopeful, it's a fairly hopeful thing.

Caitlin Dean: Ian, same question to you. What gives you hope going into the new year?

Ian Bremmer: Yeah, I mean, it's easy to be pessimistic when the two largest economies in the world are so deeply dysfunctional and when the two wealthiest men in the world are so deeply dysfunctional. You'd like to see more leadership from those places and those people. We're not seeing it, but we are seeing leadership in spite of that. I mean, I think that existential crises can, especially when they reflect challenges that aren't so daunting that you're incapable, bring out the best in a lot of hardworking human beings who would otherwise be a little lazier and wouldn't bother. I think that's what we're seeing with climate.

This was the year that I became convinced that humanity will not allow climate to become an existential crisis. I mean, we've ignored it for a long time, and so a lot more people will be displaced than that was necessary. A lot more people will die than was necessary. But having said that, at some point in the next 15 to 20 years, a majority of the world's energy will no longer come from fossil fuels. It'll come from renewable energy. That will be true forever. That's astonishing. That's a great thing.

Caitlin Dean: Well, thanks so much to both of our guests, David Bailin, Chief Investment Officer and global head of investments at Citi Global Wealth and Ian Bremmer, President at Eurasia group, and GZero Media. Thanks so much to both of you and happy new year to both of you.

Ian Bremmer: See you soon.

David Bailin: To you too, Caitlin. Bye, bye. Thanks Ian.

Caitlin Dean: That’s it for this episode of Living Beyond Borders. Stay tuned in the new year for another look at the biggest issues impacting your world - and your money. I’m Caitlin Dean:. Thanks for listening.