Liam Carter:

Good day, everybody. Welcome to another ICMIF webinar titled A Divided World With Global Challenges: Macroeconomic Developments and Global Trends. Thank you so much for taking some time to be with us today. I’m going to host this webinar for you. My name is Liam Carter. I am the senior vice president for resilience and sustainability here at ICMIF.

I’d like to take a quick moment to introduce our speaker today. Our speaker is Alexandra Stråberg, the chief economist from our Swedish member, Länsförsäkringar . Alexandra is the chief economist. She has broad level of experience at a senior executive level in many industries and businesses. Amongst other things, she has been the head of macroeconomic analysis at the Confederation of Swedish Enterprise. She has an extensive experience with global trend analysis, strategic business planning across different industries. Her current role, she is responsible for the economic secretariat at Länsförsäkringar . She’s a sought-after speaker and commentator on global macroeconomic developments.

Without further ado, I’d like to hand over to Alexandra.

Alexandra Stråberg:

Thank you very much, Liam. Thank you everyone whose watching this webinar.

Okay. I have titled today’s presentation A Divided World. That is because there are many things happening right now and it is a very complex world. But unfortunately, many of the things that are dividing countries rather than united. We see polarisation, nationalism, and populism with all of its consequences. At the same time, our biggest problems are actually global.

Last year was the year of elections when more than half of the world’s population went to an election. This year, it is about all those rhetorics turning into action. The European Intelligence Unit measures a democracy index every year. They look at about 60 indicators grouped into four categories to try to see how democratic is the world. They’ve divided all these countries into the categories of full democracy, flawed democracy, hybrid, or authoritarian rule. In their latest report, they see that less than 8% of the world’s population live in a democracy. If you add the category of flawed democracy, then it’s about 45%. But it is as much as 40% that live under authoritarian rule.

Even though, maybe of you the listeners or watchers of this webinar, maybe you didn’t vote last year. But we have to remember that all these elections decide in which way the countries intend to be going on so many global issues, such as climate or defence investment, security, and trade. They also decide if the country is going to be more or less protectionistic, more or less globalise, and more or less open. That means that these elections have a great impact on actually all of us.

But speaking about trade, one trend that we can see is that protectionism is increasing. What is then protectionism? Well, protectionism is often used as a way to support national producers from imported competing goods. But it might sound better than it is, because what happens is then an import tax on cheaper goods leads to higher prices for the consumers. Another fact is that if one country imposes protectionism and tariffs, it often spreads like a virus.

Protectionism is gaining in popularity. The question is why? Well, it can have many causes and I’d like to talk about two of them. One reason might be what happened around 2001 because George W. Bush, the former US President, was in on the idea of welcoming China to join the World Trade Organisation. He believed that a China that was integrated deeply with a global economy would become more open and more democratic. This actually started the golden era of globalism. But it wasn’t all that good, because it had some consequences.

One consequence is that many countries lost of a lot of national jobs. For instance, the US lost somewhere between two and four million jobs mainly because of production increased so much in China and the extremely higher level of imports. It seemed like, when you look back on the golden years of globalism, that the group that gained the most was the middle-income Chinese and the one that lost the most is the low-income workers in the West. Some US policymakers now look back to the decision to admit China into the World Trade Organisation as a mistake. But for China, this led to a huge boost in Chinese exports.

Some say that this has contributed significantly to the de-industrialization of America. Rising inequality in the US also helped to fuel the rise of more populistic and protectionistic leaders like Donald Trump. You can understand this. If you lose your job due to increased globalism, then of course if someone comes to you, a politician comes to you and says, “Guess what? I’m going to give your job back. We’re going to start up, we’re going to get the jobs in the steel industry. We’re going to get the mines open again,” and et cetera, and et cetera. Then of course, there’s an opening for that kind of politics.

But another thing that I also think helped to spur this nationalism that we’re watching right now is COVID. When it hit, it became something that suited more populistic and protectionistic leaders because it became the norm to close borders, to stop migration, and to decrease globalism. But then, we have to remember, remember what cured COVID? What made the vaccine get developed? It was about science. It was about science networks around the world. Global ones collaborating, not individual, national ones.

Here we are. We have the biggest global economy started trade wars, and also withdrawing themselves from the international scene. That is leaving the Paris Climate Agreement, threatening to leave NATO, does not want to pay or be a part of the UN organisations, and it keeps going. Things are getting more national than international, and of course the US is not alone. This is a trend where more and more countries turn inward. Less interested in global organisations and less interested in global leadership.

This is an era where no one power nor a group of powers are willing or able to drive the global agenda and maintain international order. The job as a global sheriff is unfilled. This global leadership deficit, it’s growing and it could be a recipe for geopolitical instability. Another problem facing the global order is that core international institutions, like the United Nations Security Council, the International Monetary Fund, the World Bank, and so on, no longer reflect the underlying balance of global power. It could be that they need to be reformed, or replaced, or reinvented in some other way.

The fact that no one wants to sit in this global sheriff chair could, according to the Eurasia Group, be traced back to three causes. They have to deal with Russia, China, and voters. First. The West failed to integrate Russia into the US-led global order after the Cold War. That of course has provoked a deep resentment and antagonism towards the US and Europe. Now we have a Russia in severe decline, but also actively building military strategy partnerships with others chaos actors on the global stage, like North Korea and Iran.

But then, China. In contrast, China was brought into the international order as a member of World Trade Organisation. Trade with the West made China far richer, but no more democratic and no more supportive of the rule of law. We have deepening tensions and even confrontation between China and the West as a result.

Then we have tens of millions of citizens in advanced industrial democracies then concluded that the globalist values that our leaders have been promoting is no longer working in my favour, so I will not vote for anyone who is trying to promote this. That, in then case, gave the rise to more populist and more nationalistic leaders not wanting to take on the role of the global sheriff.

But isn’t there any country that could lead? But then, what country could lead? We have a lot of advanced industrialised democracies that are presently weak and unable to fill that leadership gap left by the Americans inward turn. Let’s go through them for a glance and see what’s going on.

Let’s start with Europe. The European Union could possibly do it together, but probably not individually. If we look at Germany, well, their government has collapsed and now we have a federal election coming up with uncertain results. France? Sort of in the beginning of a political crisis. UK is led by a new government still finding its feet. Italy? Relatively stable for once, but that is hardly enough to bolster the global order.

Then, what about Japan? Well, the Liberal Democratic Party has lost its majority. South Korea, then. Ha, that’s in completely disarray. Canada? Well, Justin Trudeau is soon to be out. But what about India then, couldn’t they take on the job? Well, it is the strongest and most plausible global leader among developing states, but it still remains a lower income country and very much focused on national interests. Saudi Arabia, then? It lacks the standing to drive far-reaching global reforms. What about China? Yeah, it is the second-most powerful country, that’s true. Only does it not lack the legitimacy of soft power needed to attract a stable following, but it also is very preoccupied with domestic challenges.

The chair is empty, with no one able and willing to uphold the global peace and prosperity, we have the risk of economic disruptions and dangerous military clashes that could grow. The world would become more divided and more combustible.

Speaking about conflicts, the world has become significantly less peaceful over the past decade. The number of active conflicts are at the highest levels in decades. After Russia’s annexation of Crimea in 2014, the European countries significantly increased their defence investments. The NATO and the EU member states realised the effects of decades of under-investment. Then when the war against Ukraine started, it further accelerated this trend. The United States and Japan both have approved unprecedented defence budgets. However, these countries are overshadowed by China, which saw its defence budget increase by almost 65% between 2019 and 2022.

Now Trump is putting pressure on the other NATO countries to invest much more than recently done. Fair enough. Many countries have relied on the US to save them. They have, instead of putting money in defence investments, used the money for other things like education investments, health investments, research, and investments in the green transition. But now, they have to spend a large amount on defence. But is the money there? That is the question that a lot of countries are asking themselves, especially in Europe.

What about the economic development, then? Because that’s where the money comes from. Well, we come from a period when many countries have struggled to beat inflation. Now many countries are trying to balance inflation, together with policy rates and the economic cycles. Now this is a real balancing act and it is not the easiest thing. The inflation, it’s on its way down for many countries, but has shown to be a little bit more sticky that is hard to get down to the target of 2%. The centre banks are also trying to keep their balance.

If you have a low inflation at the target, then you do nothing to the policy rate. If it’s too low, inflation, then you have to lower the policy rate. If you have high inflation, policy rate, you need it to go up. But then, the real dilemma which many countries are facing right now, you have a high inflation but also problems in the economy. Then what do you do with the policy rate? If that wasn’t hard enough for the centre banks’ bosses, you also have the effects on the currency, and also populistic politics. That’s not an easy line to be balancing on.

When speaking about the economy, I have decided to focus a little bit more on the US today, as much of the politics presented by them and possibly coming will affect the world. This is for two main reasons. One reason is that the US is the biggest and the strongest economy. The second reason is everybody else is actually watching what they do.

Now in general, when looking at US economy, growth is expected to be a little bit weaker this year but still above trend. The risks of Trump’s policies, such as an overheated economy, an elevated inflation, and rises interest rates remain. However, it may take some time by they materialise. Employment continues to develop strongly. Now when you talk about employment developing strongly, that’s often good news. But it’s not good news if you, at the same time, are trying to keep inflation down because the labour market is actually the one thing that drives inflation the most. Because if you have a strong labour market, it’s hard to get labour. You then have to pay them more to start working for you. To be able to pay them, then you have to increase prices. That then increases the price pressure, and then you get inflation. This is a hassle when you have a strong labour market and you have an inflation that you want to keep down.

Underlying inflation is still about 3%, but it is expected to remain elevated for some time. Along with the potential impact of Trump’s policies, this could actually jeopardise future rate cuts. The market’s expectations for future rate cuts have been turned down significantly. Currently, the futures point to the Federal Reserve, the American central bank, lowering the policy rate is maybe one or twice this year. That has come down from maybe the expectations of them lowering the interest rate six times.

In general, this is a game of four areas that Trump has in his economic programme. In general, we can divide them up into four themes. One is tax cuts. One is deregulation. Third one is deportations. The fourth one is tariffs. The question is then will the lower taxes and the deregulations be more positive than the negative effects that comes from the deportations and the tariffs?

As for now, we are all following the news and we know that there is a trade war going on. I do think that we have to ask ourselves then why is Trump focusing on tariffs? Why is this so important to him? I think, first of all, tariffs is a good tool when you want to negotiate. But it’s only a good tool if you are as strong and important as the US is on the global market.

The second reason I think he’s focusing on this is because of the economy and the economic effects of a trade deficit. Trade deficit, what is that, easily explained? That is the US is upset that they are importing many things from countries but they’re not exporting as much. That means that they buy more from other countries, but they do not buy as much from the US. That Trump thinks is very unfair.

What are then the effects of the US economy? Because the main idea here is also to protect national companies, and also to attract other companies to settle down in the US. But that is not all the consequences and it’s not all the effects that the tariffs might have. Because the higher prices on goods, if you import goods and there’s a tariff, then you will then buy national goods. But the national goods has a higher price than what the imported goods used to have, which then translates into higher prices for consumers, and also translates into higher inflation, and a not lower policy rate.

Also, we have to remember that many of the American companies import a lot of input goods for their production. If those get much, much higher in price, then of course, then you have to put a higher price on the market on the finished goods. That means higher cost for companies and households. Also, this leads to, because it’s very unpredictable, this leads to messy and very volatile markets where many of us have our savings.

Trump’s spotlight has hit a number of countries already. It’s about different goods and different strategies, depending on the country. Now we have, in general, tariffs on steel. Trump is talking about tariffs on semiconductors, cars, and pharmaceuticals. But he said that he would give some more information in the beginning of April.

Let’s see then. Let’s look at a number of countries where he has put his spotlight on, and start with China. With China, it is a global power struggle also, and competition of course. But you can also understand these tariffs towards China because is it really fair competition when a company then tried to compete with a state or a national company that is also subsidising the products to increase competition. That one you can understand. It’s not really fair. But I do think that there’s an undertone here of a global power struggle.

If we then turn our eyes to Mexico, then I think this is about border control. It’s about controlling both the drug traffic and immigration. But also, Trump knows that the US is the absolute biggest factor for Mexican trade so it’s hugely important for their economy.

Then looking at Canada. This is also about border control, but I also think it’s a little bit about a big brother syndrome. But Canada is as much as Mexico is highly depending on the US.

Then finally, we have the European Union. Now, we have not had any tariffs placed on the European Union, but I am sure that they will come. I think that the European Union will have to be ready to do some compromises, to play tough, but also to embrace some drama. I think that the US, what could help these negotiations, is probably that the US wants the EU to buy more from the US. LNG gas, it could be weapons. It could also be about the EU being much more tough on China, and also to increase their defence investments. All of these things might tell the US that we are on your side, and we listened. If you put tariffs on us, then we won’t be able to do this.

Now as we have seen in the media, there’s a lot of talk about the European involvement in the negotiations for the war in Ukraine. But I will not dig deeper into that, because I do believe that that’s more politics and that’s why I focused on the tariffs.

I think that the Europeans are ready. They’ve seen what happened with negotiations with Columbia, and Canada, and Mexico, and China. I think that everyone is expecting tariffs to be placed on the European Union, too.

These are the things that we see in the headlines. We have talked about conflicts. We’ve talked about the economy, interest rates. We’ve talked about inflation, and of course the trade war that’s going on. The question then is, which I think is important, and that is what are we not looking at? Because there are other things that are also impacting our society, but maybe not making it all the way to the headlines. Let’s spin this wheel, where we have a number of different themes and areas, and see where it stops.

Oh, surprise! What a surprise. It stopped on all the blues. That means that we should talk and focus on climate, technology, urbanisation, and demography. Perfect. Let’s start with technology, I think. This is how it sounds when my husband gets a new phone and update to the computer that doesn’t work, or anything technological that he has to adopt to. But we all know that there’s so many advantages with a technological development and to AI. From a customer, but also from a business perspective.

If we use this, there are great scales of advantages. We will have the ability to collect and systemically manage and analyse data, and use the insights in our operations. More and more people’s lives and more problem in our lives can be solved digitally, virtually, and remotely. Digital services, values, and experience developed then become increasingly better and smoother. People’s lives are becoming what they say phygital, a mix between physical and digital. AI can also help us approaching various global problems. We have also probably only seen the beginning.

I sometimes can understand my husband because there are also some risks, and problems, and challenges with this. We know that as social media and streaming platforms accelerate the spread of information, it becomes increasingly difficult for people to navigate the flow of information, and distinguish fact from fiction and misleading information. The challenge then is further enhanced by what I’ve been talking about, a polarised political and social environment where actually, disinformation is often used strategically to influence both opinions, but also behaviour. That disinformation can manipulate election results, which then undermine the trust of democratic institutions.

This will probably affect the labour market. Existing roles will change significantly and some will disappear. Some will appear. Then we have cyber threat, one of our biggest business risk of course. As internet is integrated with people, and objects, and society’s infrastructure, then of course the availability of that information is right there, for then cyber crimes. More and more data is generated and stored about individuals online, making personal information available to those with the ability to access it illegally. Then of course, this wealth of data can be used to identify for identity theft, financial fraud, and other malicious purposes.

Yes. It might not be all cursing and angry, but it’s a little bit of both, the positives and the negatives. One thing is for sure, as Justin Trudeau said. “The pace of change has never been this fast, yet it will never be this slow again.”

Now, let’s talk about climate then. Because the return of Donald Trump has raised anxieties in sustainability circuits that the global energy transition will be thrown in reverse this year. Fed by campaigning promises and quotes like, “Drill, baby, drill.” But you know what? I remain positive because I think the global energy transition survived the first Trump Administration and I think they will survive the second, too. The difference is that in 2017, the global energy transition was just leaving the station. But heading into 2025, it has reached serious speed. Politics will no longer hold back the American energy transition.

I think that this momentum is driven by economic self-interest. We have technological information, steep learning curves, and rapid cost declines in renewable technologies. That have dramatically reduced the price tag of the energy transition. This has made renewables cost-effective in most markets, actually regardless of politics.

Politics will have an impact on the energy transition, and I think especially in the US. Trump will focus on oil and gas output. But the question is that oil and gas output is already at record levels and will struggle to go much higher. Is it even possible? I think that the next generation clean energy technologies, such as geothermal, direct air capture, and advanced nuclears are actually supported by parts of Trump’s voting base because they benefited a lot from Biden’s Inflation Reduction Act. I think that all these realities will bolster the long term political resilience of the US energy transition.

Then look at some other countries. China, the world’s largest emitter, is already nearing an emission peak five years ahead of time. If you look at Chinese manufacturers in technologies like solar panels, electric vehicles, and batteries, they already dominate the global supply chains. But they will not abandon those expansion ambitions because changes in demand or access to the US market. If anything, I think that they will see it as an opportunity to increase their market shares in the rest of the world, speeding up the global adaptation of these technologies. Even though I see this a bump on the road, I think that the environmental transition can handle this bump. I already think that we’re on our way and we can’t be stopped. I remain positive on this note.

The next two themes I’d like to put together, and they’re about urbanisation and demography. Demography is how the population is divided up in different age groups. I could actually summarise these two trends in a very short sentence. We move to the cities and we get older. But let’s make it a little bit more interesting.

Be with me now, and let’s pretend that the world is a village of 100 people. Let’s look at how the world then looked like in 1950, and then compare it to what we think it will look like in 2050. Let’s see. How many lived in the rural areas and how many lived in an urban area in 1950? 30 people out of the 100 lived in an urban area, and most people, 70 in this village, lived in a rural area. Okay. But what about the people then? How many were actually adults living in this village? Well, there were 42 adults living in this village. How many elderly did we have? Only five. Five elderly retired people. Then, what about the rest? Well, the rest are kids. There were a lot of bikes, small bikes and toys in this village in 1950.

Let’s look what happened in 2050 then. How many is expecting to live in an urban or rural area? Well, 70% are expected to live in a rural area, and only 30% in a rural area. That’s a big difference. What about the people then? Let’s see how many adults that we will have in 2050. Wow. We will have half of the village is an adult. By adult I mean working age population. How many older people we would have in this village? Well, almost three-times more. Or, more than three-times more. 16 people are older. Only 34 are young ones, children.

Why is this important? Because this is actually a massive change on society. Because this will affect welfare systems, labour markets, pensions, social security system, and taxes. Foremost, the health system because we live longer and we have fewer children. Whose going to support the one who is not working? Who is going to work with health and help the one who gets older? Because that is a fact that when we get older, we use more healthcare. This is a massive change and will be a massive change for most Western economies. We will have almost the same problem. A little bit different in emerging markets, but they will soon also reach this level. That’s going to take a lot of innovation and a lot of ingenuity to make this society work.

Okay, my friends. Wow. We have covered a lot of different areas. We have gone through many maybe hard themes, but also some really good opportunities. Both risks and the opportunities. When we try then to conclude this, what can we then say? I think it is important in all these challenges also to find ideas or approaches in how we should navigate through this. If we then look at the global perspective, I think that what we have and what we’re seeing right now is an urgent call for collaboration. What can we all do to support global collaboration? Because it is absolutely necessary to tackle interconnected crisis that we have, such as conflicts, such as climate change, such as misinformation. Foster collaboration rather than to retreat into isolationism. Collaboration is vital for building resilience against the global risks.

If we then look at the national level or regional level, I think it’s important to enhance the global frameworks to manage shared challenges. Facilitate effective dialogue between countries and cooperation between countries, and thereby rebuilding trust and reducing polarisation. We need to have frameworks to manage the risks with artificial intelligence. That is highly important. We need to use these technology responsible and try to mitigate misinformation and other societal effects.

Build a more resilient, sustainable, and inclusive economy. This includes fiscal and monetary policies aimed at addressing economic vulnerabilities, but also promoting sustainable growth. It is also about securing food supply, energy sources, and defence. Nations need to increase and prioritise environmental sustainability in their policies and in their practises.

What about, if we look at businesses and at home? What do we need to think about there? Here, I think one important word is diversify. Diversify in terms of supply change, production markets, consumers markets and segments, investments, and also in savings. Education. Make sure you focus on your continuous education, especially in tech. And maybe an increase in the knowledge in geopolitics could be a good idea. Collaboration. Collaborate with other companies within your sector. Collaborate with companies outside your sector. Build bridges and not gap. And prepare. I’m sorry, but it is a messy world out there. Prepare for an uncertain future. What do you need to prepare and what do you need to be ready for? What do you need to stand up for? Thank you.

Liam Carter:

Wow. Thank you so much for that. I thoroughly enjoyed it. I think there was just so much in there. I’m going to be cheeky and just take an opportunity to ask one question. I think time will allow us to get one question out. Without launching into a whole other webinar, because I’m sure we possibly could have a part two going into so much detail on all those things. The one question that I have is what do you see happening for our industry as mutual and cooperative insurers globally in the short term, given all the points that you’ve just mentioned, and in the long term? Let’s talk maybe 10 to 20 years. I think at a high level obviously, because we’re a little bit short on time. I think your perspective on that would be very appreciated.

Alexandra Stråberg:

I think our industry is at the core of the developments. I think that our role in society has probably never been as important as it is right now. Because we give safety, we give security. We are affected by climate change, and we can also help to prevent the effects of climate change. We have our investments. We can invest them in sustainable investments. I think that in the short term, our role has never been bigger and more important.

In the long term, I would argue the exact same thing. Because what we’re talking now, we’ll be effected by what’s happening in geopolitics in the short term, but what happens in the demographic and the climate perspective a little bit in the longer term also. I just think that we should take on a bigger part in society. I think that is our part right now, to show them that we’re there.

Liam Carter:

Brilliant. I’m so happy to hear that. I really did enjoy your optimism around the climate side, given we are working. I have to thank you. Thank you for taking the time to present to us. That was truly inspiring and really, really brilliant. I think for our members on the line, I’m going to quickly share one final slide here. This webinar will be available as always in the ICMIF Knowledge Hub. I think another call to go back to the Knowledge Hub is Alexandra’s done two presentations for us at our conferences before, the last one being four months ago in Buenos Aires. The change in those four months or four-and-a-half-months has just been absolutely phenomenal. I would love to chat to you again in four months to see exactly what’s developed because it’s just unbelievably right now.

I think to echo your point around the four levels that we can control going forward as businesses, I think we need to collaborate which as the core of what our ICMIF membership is about. We need to be speaking to each other and growing our network to make sure that we are preparing for everything that’s happening.

With that, thank you again very much. We really, really appreciate your time. Look forward to seeing you at the next webinar or the next forum. Thank you very much everybody.

Alexandra Stråberg:

Thank you very much for letting me come and speak.

Liam Carter:

Thank you.