We could easily make 2016 an annus horibilis if we want. Many developments did not pan out as intended, the two most dominating street-side discussions being the Brexit referendum and US presidential election. Because the results of both defied all odds, they left the relevant societies in some sort of a possible mire: worse is predicted for Great Britain once it invokes Article 50 of the Treaty of the European Union (for exiting), while, for US citizens, now that a well-documented rabid misogynist, racist, nationalist, and protectionist is set to pull Oval Office policy levers, everything could be up for grabs. Immediately after the British referendum tally was finalized, the Financial Times Stock Exchange (FTSE) plunged steeply, eventually recording a 16 per cent decline for a wicked year, while sterling hit a 30-year low, exchanging for only 1.22 US dollar. Across the Atlantic, though, a similar collapse with the Dow Jones Industrial Average (DJIA) did not happen, in fact, hopes of infrastructure-building projects almost drove the stock market to the 20,000 brink.
Behind this paradox lie silver linings that continue to be overshadowed by the glum or grim news. Non-electoral forces must also be at play. If one recalls how, in January and February 2016, the DJIA index plunged below 15,000, then one must also know how this mark doubled the 7,949 mark when Barrack Obama first took oath in January 2009: it was the lowest inaugural-day posting in recent memory. George W. Bush, on whose watch that nadir was reached, came into office with the DJIA index on a roll, at 10,587 in January 2001. Indeed, the DJIA index doubled during Bill Clinton's presidency, from 5,000 in 1995, one of the only other times in recent memory when it doubled during the tenure of the same president (the other was during General Dwight David Eisenhower's, to 600 in 1959 from 300 in 1954).
Clinton's years also saw the longest US growth period in the entire 20th Century, while Obama inherited the worst US economic crisis since the 1930s. He also watched how an exogenous factor, like petroleum prices, collapsed from over $100 per barrel to $25 in February 2016, a development capable of revitalizing many industries overburdened by high energy costs, not to mention the price of the spiralling amounts spent on oil imports. Silver-linings, such as this, should not be obscured by 2016 traumas.
Continuing with Obama's tenure, unemployment fell from 7.8 per cent when he entered office to below 5.0 per cent today, while inflation levels fluctuated between the lows not seen since the Eisenhower era of the 1950s and the highs that hardly approached George W. Bush's levels. Clearly something else was rocking the US economy than the infrastructure euphoria of the post-November 08, 2016 stock market binge. Crossing the 20,000 DJIA barrier would have iced the post-Great Recession recovery that bogged Obama down for almost his entire presidency. Yet, by the same token, that the DJIA index did not cross the 20,000 threshold may also signal second thoughts among stock buyers about Trump's promises. This remains to be seen during 2017 before drawing any conclusions, but not at the expense of other market developments.
Indeed, 2016 had other silver linings: DJIA growth reached 13.4 per cent, the S&P 500 index spiralled 10 per cent (even though it dropped to 1,810 in February, as opposed to the 2,238 it scaled at the end of December); and the dollar strengthened by 4.0 per cent (Vito Racanelli, Barron's, January 2, 2017, p. M3). Across the Atlantic, taking Britain briefly out of the comparative and analytical discussions, Germany's stock market, DAX, climbed 6.7 per cent and France's CAC-40 by 4.5 per cent. Following its own referendum result of disapproving a Europe-friendly constitution, Italy's FTSE MIB slipped by a sizable 10 per cent. Returning to Britain, predictions of greater slippage dominate the news: until it invokes Article 50, its stock market is unlikely to make long-term shifts (though when it does, we should fasten our seat-belt further, since going alone in a highly networked global economy has generally meant more losses than gains). Whether British developments can shake the global economy as it did a century ago remains to be seen, but alarm bells ring with diminishing shrill the farther one moves from that corner of Europe.
Developments on the other side of the Atlantic might be slightly more positive, though unlike the roaring 1990s. Should Trump's promised policies see the light of day, the United States will also face growing costs over benefits: the huge infrastructural investments he proposed boosted the metal market performances: base metals, such as zinc, nickel, and copper, whose demand increases with infrastructure-building (zinc, for instance, serving as the rust antidote of construction materials), spiralled in prices after Trump's victory, but precious metals, like gold and silver, fluctuated more during the year, before notching a 9.0 per cent and 17 per cent climb, respectively, for the year.
Even the energy sector gives hope of growth more than continued stagnation: petroleum prices might have collapsed 30 per cent in 2015, reaching the February 2016 low of $25 per barrel, only to end the year slightly above $50 per barrel, meaning a rough doubling of prices of various types of oil, while natural gas prices also climbed by half that amount. These indicate demand is beginning to climb, prices continue to be low, and both of the above stimulating both production and consumption.
More than that, in the interim, alternate energy sources were given more than a booster: electric cars and solar panels, for example, took strides towards the mass market, opening new industries, forcing oil exporters to restructure their increasingly inefficient economies (for example, Saudi Arabia's Vision 2030 is finally biting the bullet in a country too tightly regulated to even envision competitiveness). Glitches remain, such as the Trump-inspired shale oil growth inside the United States, encouraging the Keystone Pipeline (though this will hurt the environment appreciably), the United States will also become a weaker global petroleum player while oil exporting countries would get one last chance to diversify their economies, thus lessening trade dependence on the United States.
What could be 2017 ripples in the global political economy may become gushes/spurts subsequently: no country can escape them since energy is vital for growth in any country besides being a springboard industry, that is, the fountainhead of other industries.
Bangladesh, too, has more reasons to be optimistic than not. Capitalizing on low oil prices, it can fill up its refineries, while also expanding its solar energy capabilities (one area where it speaks louder than many other countries). These should lower the estimated expenses of the numerous infrastructural projects (on what the government calls the "mega project" list), if handled properly. Though remittances have dipped, especially from oil-exporting countries, we lucked out in the sense that the expected drop in exported migrants did not happen: new agreements with Saudi Arabia and the United Arab Emirates give our migrants a fresh leash of life.
In a nutshell, then, the clarion 2017 call seems to be to push renewals. Playing with the old model may yield short-term benefits without reducing inevitable long-term costs. This is a popular pathway, since immediate positive results resonate well with elections in democracies and buys popular support for dictatorships. Yet, there could never be a better time in this century to bring in the new model; but since the new demands costly infrastructural upgrading here and now, this may be the last chance to take the plunge before other unpredictable events rock the boat. Â
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
imtiaz.hussain@iub.edu.bd
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