APCIA members have been then handled to a session from Hal Brands, Henry A. Kissinger distinguished professor of Global Affairs at Johns Hopkins University School of Advanced International Studies, on ‘What history tells us about great-power rivalry: America, Russia, and China’.
“The United States has been used to dealing with an international system that’s never been free of threat since the Cold War ended, but the fact that we’re back in an era where we worry a lot about high tensions with other great powers, and the prospect of conflict with other great powers, that’s a relatively new development for most of us who don’t remember the Cold War,” Brands informed Insurance Business.
An professional on the Cold War, Brands makes use of learnings from historical past to assist conceptualize the geopolitical and geo-economic dangers that the US faces as we speak. He believes that by historical past, and the Cold War particularly, international locations and companies – together with insurers – can acquire a extra textured understanding of how extra intense worldwide rivalries would possibly current challenges for the US.
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“What we’re facing today is not new; it only seems unusual because we’ve had the benefit of living in an era where the great powers were mostly at peace with each other,” he mentioned. “But that’s really the exception quite than the norm. If you take a look at most of recorded historical past, it’s characterised by competitors, and generally battle, between probably the most highly effective international locations on the earth.
“Even though every competition is different, and every rivalry is different, there are challenges that recur from time to time. A lot of the things that the US had to do during the Cold War – like rallying a diverse coalition of countries to contain a dangerous enemy; managing the balancing act between competition and cooperation or negotiation; and thinking about how to forge long-term strategy… over a period of decades while also dealing with surprises and shocks that happen along the way – all of these things are just as relevant to US competitions with Russia and China today.”
One of the massive variations between the Cold War and as we speak is that there’s a far larger stage of financial interdependence between the United States and its major competitor. During the Cold War (1947-1991), there have been comparatively low ranges of commerce and cross-border funding flows between the US and the Soviet Union, however the reverse is true for the US and China as we speak.
“That creates some pretty interesting challenges, because you’re dealing with a country that challenges US interests militarily, diplomatically, and technologically, but it’s also a destination for lots of American investment,” Brands defined. “China is also a major American trading partner, and it is important to the health of the global economy, so there’s a degree of complexity there, which was not necessarily the case during the Cold War.”
Brands believes the extent of geopolitical danger “has been higher in recent months than it has been anytime in the last 30 years,” a development which additionally creates plenty of geo-economic danger. This has created a really difficult atmosphere for insurance coverage corporations, particularly these with worldwide profiles.
“We’ve seen how the war in Ukraine is creating lots of disruption for the global economy, whether that’s with respect to energy, or food supplies, or a variety of other things,” mentioned Brands. “There has additionally been extra disruption brought on by the breakdown of US-China relations, and so we’re beginning to see partial decoupling of the US and Chinese economies in sure areas pertaining to know-how, as an example.
“I think that’s going to continue, in part because I don’t see the Ukraine war ending anytime soon, and in part because I think the trend toward greater tensions in the US-China relationship is going to continue. And so, I think we’re going to have to get used to operating in an environment where the international economy is regularly disrupted by geopolitical tensions.”
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One fascinating facet of all this for insurance coverage corporations is the timing. While US-China relations have been unwinding for a number of years, Russia’s invasion of Ukraine got here after two years of COVID-19 pandemic disruption, which prompted financial strife worldwide. Following heavy stimulus packages to kickstart economies, many developed international locations are actually experiencing inflation, which is dangerous for insurers as a result of they battle to keep up sturdy funding yields and their backside traces endure.
“You had an international economy that was already primed for an inflationary shock, and then you add the Ukraine war, and spikes in energy prices, and disruptions in food supplies, and it creates kind of a perfect inflationary storm,” Brands informed Insurance Business. “What we’re seeing is the intersection of transnational problems like pandemics, with more traditional geopolitical problems, like rivalry and war.”
There have been main geopolitical shocks to the worldwide financial system earlier than, however Brands mentioned it’s arduous to say precisely what restoration from this present scenario would possibly appear to be.
“Even if we get a recovery from the shocks that have been created by the Ukraine crisis, or the lingering shocks from the pandemic, I don’t think it’s realistic to expect that we’re going to get a major upturn in US-China relations that would ameliorate some of the economic frictions that have resulted from that anytime soon. I just don’t see that happening anytime in the next decade, or perhaps beyond,” he mentioned. “I think we’re going to be living in a period of greater economic turbulence in the coming years than we’ve experienced for the past few decades.”