Current world headlines and the economy
CROSSROADS (Toward Philippine Economic and Social Progress) - Gerardo P. Sicat (The Philippine Star) - December 12, 2018 - 12:00am

The Philippine economy is an open economy, meaning that production and flow of foreign trade and resources to the country are exposed to the political and economic conditions in the world at large.

Thus, developments that are significant enough to disturb current trends and events in other regions of the world eventually could affect us.

World politics and their potential risks on our economic future. I pick a handful of political headlines and developments blazing across our TV screens and in newspapers around the world: (1) Saudi Arabia – who killed the Arab journalist, Adnan Kashoggi? – and the Middle East; (2) Europe – the political trauma of Brexit in the United Kingdom and the recent destructive riots in France; and (3) United States – the Mueller probe of the Russian interference in the US presidential elections of 2016.

Though remotely associated with our economic future, these events could trigger actions that eventually have some connection with events that we experience, including economic.

Who killed Kashoggi? Political succession in Saudi Arabia. This is about Saudi Arabia’s long-term future.

The young crown prince of Saudi Arabia (Mohammed bin Salman) has been given the blessings of the current King to succeed him in the future. The crown prince is given tasks at the center of future social and political reforms in that country.

The brutal murder and disappearance of Kashoggi (a Saudi journalist who worked in Washington DC and who is known to be critical of the political methods of the crown prince) happened in Turkey inside the Saudi consulate. He went there to apply for a civil document.

Later investigations, including those of the American CIA, had pointed to the crown prince as the one who ordered the killing. The politics of the Middle East, the various capitals of the world, and especially the reactions in Washington DC have been convulsive and divisive ever since. The Trump administration has supported the crown prince. But others, including those in Trump’s party, have directly condemned him.

Thus, the future of the crown prince as leader is threatened. This unsettles Saudi Arabia’s politics. Saudi Arabia is the leader and lynchpin of OPEC’s oil policy. As the largest supplier of oil that enter the world market on a daily basis, its role in determining supply has a profound impact on the price of oil.

Saudi Arabia has the largest concentration of Filipino overseas workers sending remittances to the Philippines. Any convulsions in this region affects the price of oil which affects the whole economy. If OFWs are threatened in their work in this country, the result on the Philippine economy could be catastrophic.

Political drama of Brexit in the UK and the yellow vest riots in Paris. Europe’s future is very vulnerable to both the political uncertainty in the UK concerning its plan to leave the European Union, and to the sudden opposition to French President Emmanuel Macron who, just recently was a very popularly elected leader.

Brexit has convulsed British politics and its economy for three years now. The Brexit deal with Europe that Prime Minister Teresa May negotiated could not muster support in the parliament, thereby throwing the country into great indecision.

Macron’s reformist program in France has been looked to as Europe’s future at a time when Germany’s Angela Merkel’s political fortune has weakened and flickered. The very violent public protests in France were unexpectedly sudden, fueled by a gas tax designed in part to fight climate change.

Brexit – British departure from the European Union – could profoundly diminish Europe’s size and clout. Yet Brexit in Britain brings that country cataclysmic internal politics.

Add to these the troubles in France – which opens the questions of What next? – leaving a lot of questions for the future direction of Europe, too!

France is seen as the inheritor of the mantel of leadership on issues concerning global climate change. Given American absence in that field, France has taken the difficult task of pushing the global challenge of climate change after the Paris Accord on that subject.

Mueller investigation of Russian interference: the Trump presidency. The US government probe, known as the Mueller investigation, of Russia’s interference in the 2016 presidential election has been ongoing since May, 2017.

So far, the probe has led to the indictment of five former Trump advisers and 26 Russians, and three Russian companies. Seven of these persons have pleaded guilty, including five members of Trump’s close circles during the election.

The revelations associated with these events have recently become more directly connected with the close circles involving the presidency. The findings, so far,  are coming dangerously close to the Trump campaign, especially as a result of testimonies provided by three very close associates in this circle.

It is, therefore, apparent that much more drama would be revealed as the Mueller probe comes toward closure. The status of the probe has been a very political issue because the president has been fighting each step of the way to negate findings through opinions he expresses via tweets.

Trump’s reactions to each development in the investigation have substantially affected his performance as president. Swings of his policy directions and volatile personnel changes are certainly fueled by his reactions to developments in this investigation.

Presidential duties that are performed under the strain of these challenges could stain judgments on substantial political and economic policy decisions, including those that deal with world affairs.

All these have reverberations on the world’s economic future. They certainly are negative factors to worry about for world economic growth for they widen the uncertainties faced by all nations.

In terms of economics, they impact on world trade and the flows of economic resources, including those of investments and, certainly, of migration of peoples and jobs.

My email is: gpsicat@gmail.com. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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