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Meredith Sumpter: The "G-Zero" World Hits Asia

July 11, 2017

Shanghai skyline. CREDIT: Mstyslav Chernov (CC)

Podcast music: Blindhead and Mick Lexington.

DEVIN STEWART: Hi, I'm Devin Stewart here in New York City, and today I'm speaking with Meredith Sumpter. She is Asia director at the Eurasia Group in Washington, DC. She's based in Washington.

Meredith, great to talk with you over the phone today.

MEREDITH SUMPTER: Absolutely, Devin. Thanks for having me.

DEVIN STEWART: Tell us about the Eurasia Group. It's based in New York, you're in Washington. What does the Eurasia Group do?

MEREDITH SUMPTER: The Eurasia Group is a political risk advisory firm. It's headquartered in New York, but we have offices all around the world. We work with clients and international institutions to help them understand how politics is impacting them, either a country's trajectory or how a country is likely to perform in terms of political stability and economic growth. This is important because whether you're a company, an international investor, a government, or international institution, we all want and need to better manage the risks and opportunities that flow from political and geopolitical events.

DEVIN STEWART: How does your firm define political risk?

MEREDITH SUMPTER: Political risk is essentially the impact that politics or political decisions and events have either on a country's performance or on an operating environment. So, the political risk of a country or countries can impact the operating space of businesses, investors, and the international institutions that are presently there.

DEVIN STEWART: Is the demand for understanding political risk growing, do you think?

MEREDITH SUMPTER: Absolutely. When the firm was started about 19 years ago we found that we were having to evangelize about what political risk was and why it mattered. As we are bearing witness to changing geopolitical structures we no longer have to evangelize, but we are certainly helping those that we work with, and even the broader public, understand how geopolitical risk and how politics is impacting their daily lives.

DEVIN STEWART: Why would you say there is more of a demand for it now?

MEREDITH SUMPTER: I think there's just more of a broader awareness that what happens in a region far from where you might be geographically located does have an impact on your bearing, whether that's from a security standpoint or an economic standpoint as well.

DEVIN STEWART: Would you say that politics is having a greater impact on global economies?

MEREDITH SUMPTER: Absolutely. I think we are actually seeing that happen right now with the election in the United States of an administration that is taking more of a unilateralist stance as to how it pursues its interests in the world and retreating from what has been the multilateral system of governance that has kept the stability and prosperity for the United States but also for the broader global community for the past seven decades.

DEVIN STEWART: Are you measuring political risk quantitatively, and if so, how do you do that?

MEREDITH SUMPTER: We take both a quantitative and a qualitative approach to measuring political risk. Eurasia Group has a team of dedicated country experts and political scientists who cover well over 100 countries, comprising about 95 percent of gross domestic product (GDP). We take a structured approach that accounts for qualitative factors. Sometimes political risk is not easily measured by data, but it can be qualitatively assessed through knowing what to watch for, for political drivers for the country that you cover, or through more analytic tools such as narrow analysis, signposts, and probabilities that help us provide a greater understanding of what is happening and what is likely to happen moving forward.

DEVIN STEWART: I know that the Eurasia Group's founder, Ian Bremmer, has talked about the emergence of a G-zero world. Is that how the firm sees the global picture right now? What is the big picture in the world today about political risk, and what is a G-zero? [Editor's note: Check out Bremmer's 2012 Carnegie Council talk on a G-zero world.]

MEREDITH SUMPTER: First and foremost, a G-zero is a world in which no one country has dominant power or can influence the international system of governance. What we think about with regard to the G-zero is where we are at this point in time. We are amidst a transition to a multipolar world, a world that is marked by the relative rise and power of other countries, even while the United States continues to be the most powerful country. The steady economic and geopolitical rise of China and other major powers at a time when the United States appears less inclined toward global leadership—and by that I mean not isolationist, but certainly that the current U.S. administration is much more unilateralist in how it pursues U.S. interests—suggests that the American-led system of global multilateral trade, security alliances, and international financial institutions will come under stress and weaken.

This is an important topic that is perhaps overlooked by many of our fellow citizens here in the United States who believe that U.S. power will never be fundamentally challenged or that geopolitics perhaps is a subject that concerns urban elites only rather than the broader population living in communities across the country that are really the lifeblood of the United States.

DEVIN STEWART: So, lack of leadership. It sounds like it's a riskier world today. Is that how you see it?

MEREDITH SUMPTER: Absolutely. And one marked by greater uncertainty. If you don't have a hegemon that is helping to shape multilateral governance, or at least shape a global agenda and to get everybody onboard, it does create greater uncertainty and less coordination across the multilateral system.

DEVIN STEWART: Let's shift over to Asia. What do you see as the big picture regarding the geopolitics and how it affects our economies in U.S.-Asia relations?

MEREDITH SUMPTER: To be clear, Asia will be the future global engine of growth. What happens there, as those economies continue to rise and you have the world's largest collective middle class that we've ever seen, is that it's critically important for the U.S. economy, if it itself is going to enjoy robust onward growth, to find some way to engage in, if not leverage off of, the growth that is to come in Asia.

DEVIN STEWART: What do you see as some of the biggest risks in terms of the geopolitics itself?

MEREDITH SUMPTER: We are currently looking at signs of the extent to which the United States will remain actively engaged in Asia. If you look at the current administration, they are signaling staying a power in Asia, they are committed to a robust U.S. presence in Asia, and certainly on the military security side, all signs are that the United States will practically look to work with security partners there.

The challenge, though, is that for Asian leaders, while they are concerned about regional security and certainly very much want to have U.S. partnership there, they are also primarily and fundamentally concerned about how to grow greater prosperity for their people. They are having to contend with a very large and growing emerging middle class that has greater demands for better access to care for improved livelihoods, and so Asian country governments, even though they are the engine of the global economic system, are working very hard to try to leverage the trade and investment ties to enable forward growth for their economies that will give a better life to their people.

So, bottom line: If the United States does not have a compelling economic message in terms of brokering the next generation of trade or investment that will help unlock greater prosperity and growth, both for the U.S. economy and also for those Asian economies, the risk is that those Asian economies will have to look elsewhere for growth, and "elsewhere" could be China; it could be other major commercial investment ventures down the road. But if that answer is not the United States, if the United States is not actively engaged commercially or with trade and investment, the U.S. economy, the domestic economy and Main Street America will miss out.

DEVIN STEWART: You're articulating the impact of the G-zero world in Asia for the United States. Is that what you're talking about? In other words, if the United States doesn't show leadership in Asia, it could come back to haunt the United States in terms of lower international trade, investment opportunities, and other types of opportunities, is that what you're getting at?

MEREDITH SUMPTER: Absolutely. Robust engagement with Asia has to go beyond security engagement. It has to be a very strong focus on economic engagement, and that's trade, that's commercial investment, that's building ties of prosperity that will benefit U.S. families and U.S. workers as well as Asian families and Asian workers.

Let me just talk a little bit more concretely about the trade aspects. The reason why this is important is because, Devin, we're seeing across the political spectrum a backlash against trade in the United States, and even here in Washington. That is actually quite troubling because this is exactly the point in the U.S. economic development where we need to be leaning forward into trade and investment if we're going to expect to see the kinds of economic growth and forward economic developments that will give meaningful employment opportunities to broad swaths of the American public.

Feel free to use that passage I just said. That's critical. That is really the driving force behind why we think this message is important. We need to break through what we see as a growing political consensus in the United States that global trade is actually hurting and not helping U.S. workers.

DEVIN STEWART: In Washington how are you seeing that manifest, the backlash against trade? What does that look like in Washington?

MEREDITH SUMPTER: This really goes back to the result of the last presidential election in the United States and the broader divide in Washington—but also across the country—that portrayed the election as a clash between the globalists and the nationalists. This suggests that a significant number of U.S. voters and the representatives that they elect do not see it as in their interests for America to continue to provide global leadership, including in multilateral trade.

So however one might characterize "America first"—and certainly I think the Trump administration is focused on trying to make the right policy decisions and move to revitalize U.S. industry to boost onward growth for the U.S. economy—the perception is that the United States is now far less willing to lead the multilateral system of governance, and this is particularly important when it comes to economics and trade. So what you will have is a partial vacuum of power in which other major powers will emerge as actors with increasing global reach and influence as they pursue their interests, and these interests will sometimes be diverging with those interests of the United States.

But even while this is happening, it will be difficult for those in the United States to recognize the importance of American global leadership to our own prosperity and stability in communities across the country to rebuild a mass following in favor of a U.S.-led multilateral order or trade order, and this is partly because the economic shifts that resulted from globalization are seen by many U.S. working and middle class voters as having caused their relative decline. They compare what's happening in their communities to the rising middle classes in places like Asia. So we're viewed as turning our backs on the global system rather than leaning in to leverage leadership of it to build the prosperity of the future.

DEVIN STEWART: Would you have any final recommendations for the administration if they would want to extend and sustain American prosperity?

MEREDITH SUMPTER: Well, I'd be honored if members of the U.S. government writ large were listening in and considering these viewpoints.

But I would say the following: We're at an inflection point in which our communities, our workforce, our economy are having to contend with not only globalization, increased trade and investment flows, and the flows of ideas across borders and peoples, but also automation, and that has really shaken up American industry in a way that is causing us to hesitate to lean forward.

What I would say is: Rather than try to find ways to keep jobs of the old industries within the geographic boundaries of the United States, the administration should have a ready dialogue with the U.S.-domiciled global companies. What this will mean is having a conversation with U.S. business leaders and industrial leaders on building the businesses, the services, and the strategic industries of the future. That means building a business case for those companies and investors to invest here in the United States. It means recognizing that we will need to rethink our workforce development in priming our workers to take on the skills necessary to be part of the future forward economy, and be much more open to foreign investment, as well as to welcoming of entrepreneurs and high-skilled immigrants to come here to build and grow companies, and build and grow prosperity. All of this will be critical to building a strong and flexible forward U.S. economy that will again take a leadership role, both in the globe and with respect to Asia.

DEVIN STEWART: Meredith Sumpter of the Eurasia Group in Washington, DC, thank you very much for speaking with us today.

MEREDITH SUMPTER: Thank you.

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