Do you ever feel you’ve awoken to a world you no longer recognise?
In A View from the Bridge, by Arthur Miller, the lawyer Alfieri says he is ‘inclined to notice the ruins in things, perhaps because he was born in Italy.’
An outsider to Al Capone’s New York, he sees that he is powerless but to watch events run their bloody course.
Then, as now, change was afoot in a most brutal and pervasive way. This is what I think of as I look at the 2020s.
A sense of ruin. A bloody course. But, just maybe, recovery.
This decade has opened as the most divisive, chaotic, confusing, and unequal since the 1930s.
Where do I start?
- A powder keg of worsening inequality fuelling rising crime.
- Runaway inflation, escalating interest rates, and a persistent bear market clawing away wealth.
- An entire generation shut out from home ownership, much poorer than their predecessors.
- Extreme concentrations of wealth and a decimated middle class.
- Levels of rivalry amongst major powers not seen since the Cold War.
- Deep divisions even in the most developed and prosperous nations.
- Claims that a coming climate emergency will destroy the world as know it.
Going into 2023, there are two potential courses.
One will see instability and chaos with volatility in financial markets like never before. The other a renewed path to a period of more sustained prosperity.
Possibility #1 — The course of chaos?
Lessons from history show us that unequal and fractured societies fall apart.
Consider Ancient Rome. Instability destroyed the regime from the top down.
There was little to no middle class acting as a buffer in Roman society.
The elite ruling patrician class saw their power shattered when the much more numerous plebeians rose up against them.
Secession of the Plebs. Source: History Daily
Do we have a patrician class today?
They may well be found in the gentrified left and globalised elite.
Power is concentrated amongst tech-company titans, socialist-leaning governments, activist judges, progressive academics, and greying professionals that occupy elite suburbs of big cities.
These patrician elite stand against all climate emissions, seemingly regardless of mitigation. They stand for progressive social values. They’re against the outward expansion of cities. They’re for globalisation, open immigration, and diversity ahead of national identity. And they’ll often be seen virtue-signalling these values to their group.
Unfortunately, for the many more outside these elites, their very livelihoods are under threat.
Their jobs disappear. Their farms are doomed by regulation. Their small businesses are at risk. Costs for transport, energy, and food continue to spiral upwards. Their sense of culture or faith is vilified.
Wealth of the patrician elite has become far more concentrated in the world.
Their sources of wealth in technology and elite professions create far fewer jobs than in the industrial past. As a result, there is no longer a vibrant middle class. Wealth floats directly to the top.
The result? In America in 2021, the top 1% controlled nearly a third of all household wealth, increasing during the pandemic. They also owned 54% of individually held shares.
Here in New Zealand, a similar trend. The top 10% of households hold about 50% of all household net worth.
Of the 120 MPs in this country, declarations show they own 256 properties.
The elite have enjoyed spacious homes with yards to raise their families.
Now they tell the next generation they must live more densely in apartments or jam-packed townhouses. If they do want to own a home, they must borrow at very high rates. They must compete with growing flows of migrants for jobs and scarce homes. They must accept much lower real wages than their parents. And they should reduce driving so they can cut emissions.
The once successful, property-owning democracies of the West are increasingly under threat. And the focus has moved to preserving the interests of the elite. Knowingly or unknowingly, they are shaping society to prevent upward mobility and preserve their position.
There is now a generational war. A culture war. And an economic one.
Outside of the elite and those they may have brainwashed, large numbers of people do not want a path that is without property, genderless, climate-terrorised, or opposed to their values of faith and family.
The early simmering of this was seen in the huge support Donald Trump received. The Leave vote that saw the UK exit the EU. And the rise of right-wing populist parties in central and southern Europe.
Failure to recognise the needs of those outside the elite, or beyond their circles, will see a continued fracturing of society.
As debt and the cost of that borrowing grows, developed countries will begin to look more and more like the developing world. Where the elite live in a handful of beautiful areas. And the rest of the population navigate a world of crime, addiction, gangs, corruption, and declining living standards.
Financial markets will continue to experience volatility. Inflation and debt will continue to misprice assets and lead to crashes. And it will become even more difficult to find upside in markets. Except for the most skilled of investors.
Possibility #2 — The course of recovery?
There is also hope for a different path. It comes from restabilising work for most and wrestling control from the virtuous elite.
On both the left and right, there is now a realisation that, under the current order, low-cost manufacturers like China will capture not only jobs but entire industries from the West. Beginning in America, there is now a process of incentivised re-shoring underway.
This could create a new dawn of emerging industries in the areas of green energy, artificial intelligence, and clean transportation that herald new industry and jobs throughout the world.
The inflationary debt crisis of 2022 is now seeing housing markets crumble. In New Zealand, the right seek to expand urban limits and increase the supply of homes. While the left seek to ramp up tenant protection and tax landlords and speculators.
Pushback and logic are coming to the climate debate so that people are looking beyond immediate emissions. If an electric car is made in a coal-powered station in China and creates vast life-cycle pollution from its mining, is it really that clean? Are there alternative technologies that are less pollutive?
And if you’re driving an efficient gasoline car but have around 20 trees around your property, would it not be fair to consider that you’ll absorb enough carbon for a year of commuting?
From where I’m standing, it also seems that right-leaning governments will take control around the world from 2023 and beyond.
Simply because the left and right of the political spectrum are no longer what they were.
Left political parties once represented workers. The right, the capitalist and professional classes.
This has turned on its head. Today, the left has become gentrified. It is made up of elites and progressives. Much of the working class has moved right.
Whether it is Giorgia Meloni in Italy or Ron DeSantis in America, votes are lining up powerfully for the right, thanks to this move from ordinary working people.
This could offer a freeing up of economic opportunity, a return of jobs, managed immigration, family-friendly policies, and renewed national pride.
While the free market is far from perfect, I cannot help but consider the many entrepreneurs who have created companies that have changed the world. Were the free market contained or derailed as the elite promote, most of those entrepreneurs would not have started those businesses.
And the world would have been materially worse off.
A free market that works for all — that supports employment — will see markets embrace again many new growth areas in business. Not only in technology but in a new greener reindustrialisation of many countries around the world.
We believe in the course of recovery
Do you see the ruins in things?
Everything is broken, but in reality, few are evil.
I am an optimist. And I see the rest of the 2020s ready to roar.
Whatever course we find ourselves on in 2023, there is one certainty. A changing world creates opportunity. And it is set to change like never before.
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Regards,
Simon Angelo
Editor, Wealth Morning
(This article is general in nature and should not be construed as any financial or investment advice.)