A look at geopolitical issues affecting fluid power and industry in general

At the recent National Fluid Power Association’s InternationalEconomic Outlook Conference — this one held virtually, dueto the Covid-19 pandemic, Sam Potolicchio of Preparing GlobalLeaders Forum, spoke about some of the key geopolitical trendslikely to impact business in the coming months and years.

Potolicchio explained that the upcoming U.S. presidential election will clearly constitute the top geopolitical event this year and will affect trade issues and business in general. And no matter what either political party wants you to believe, he said that the question often comes down to the “beer question” — who would you rather have a drink with? The issue of personality and charisma is important to voters.

Potolicchio also said that so much of our elections will be determined by a head nod or an off-key comment, because we’re so on the knife edge of being split 50/50 in this country. As an example, he said that he thinks the small-at-the-time moment of Hillary Clinton slipping when getting into an SUV was a moment magnified in some voters’ heads and likely contributed to her loss more than many people would think. He also said that “anyone who tells you they know who is going to win President is full of bunk.”

Advantages that Biden has include: He is not Hillary Clinton, Elizabeth Warren, or Bernie Sanders. Biden is dominating among voters who disliked both Trump and Clinton. He also has the Obama advantage, and will try to make this an extension of the Obama years. What’s more, Trump has not found a way to encapsulate Biden; the Sleepy Joe nickname is not hitting with voters in the way that Crooked Hillary did. What’s more, the pandemic has completely transformed things. Reagan asked: Are you better off now than you were 4 years ago? That will be a tough thing for Trump to battle.

Trump’s advantage are: Never Trumpers are now firmly into his camp. It’s going to be difficult to see people switching sides. Biden is an establishment candidate, and they rarely win for the Democrats. Additionally, “Washington” candidates usually lose. Trump is actually not that historically unpopular as a president. He stays in a 42-43% popularity range, which means it will likely be a tossup. Voters who are more likely to vote for him are not as likely to vote for a third-party candidate.

The big question remains — Will a second wave of the pandemic hit in October? We don’t know what voter turnout will be, and Potolicchio noted that higher turnouts generally mean a Democratic victory. But if it’s reduced to all mail-in voting, that could push down Democratic voting. Republican votes are generally more successful by about 5%, which could be a huge X factor.

Potolicchio said that the #1 risk for business is that we may see an electoral banana republic come November. At the state level, a lot of the swing states are controlled by Republicans although some have Democratic governors. The Speaker of the House will become President if battles over ballots go to the courts. This could affect faith in the U.S. globally.

He thinks that Biden will likely win by about 100 electoral votes. A razor thin win by Biden may cause Trump to fight it.

Four other issues to consider

1. Potolicchio said that China is definitely a serious competitor to American hard power, even if they don’t match us with soft power. The main areas of dispute between the U.S. and China are: trade war, Huawei spying claims, claims of blame for the Coronavirus, new Hong Kong laws, Uighurs human rights issues, contested territories in the South China Sea, closure of consulates such as Houston, and Tiktok ownership arguments.

Toughness against China will likely be a commonality between Democrats and Republicans. Relations will continue to deteriorate between the two countries, no matter who wins in November. However, from a general population standpoint, the pandemic has accentuated our poor feelings toward China.

Potolicchio is optimistic though; he thinks it’s going to be difficult for the two countries to decouple from each other. “We are too closely entangled with each other. … ultimately, it is going to be more brinksmanship than a head-on collision with fatalities both militarily and economically,” he said.

2. The pandemic has put a magnifying glass on some serious structural issues that we have not just in the U.S., but globally. Before everything hit, even with an uninterrupted bull market with steady incremental global growth and steady U.S. growth, 53% of Americans lacked emergency savings. 28% of Americans did not have adequate health insurance. 21.3 million Americans lacked broadband WiFi access. 33.6 million Americans did not have paid sick leave.

There is an economic cataclysm that is occurring on Main Street, Potolicchio told the audience — but it hasn’t affected Wall Street and our stock portfolios in the same way. This Achilles heel is the inequity … he noted that breakups of countries generally happen when the richest state is 5-6 times wealthier than the poorest state. It’s been that way with the Soviet Union, Yugoslavia, or the EU before Brexit.

3. There’s a mental health experiment going on and no one’s talking about it, Potolicchio said. Toxic stress is increasing by about 100%, according to some studies. This impacts people’s ability to function at high levels in the professional workspace. He thinks the pandemic is with us for 2-3 years and we are not going to have a vaccine that is going to wipe it out; rather it will be a guessing game, similar to the different influenza strains each year. If there’s a vaccine in November or December 2020, there will be a low level of confidence in it, and we will see less than 50% of people willing to get it.

4. Who’s actually in charge? Potolicchio said that the U.S. isn’t engaging in the world order, and we’re seeing other nations flexing muscle, as well as a decline in the general trust of U.S. leadership. At the university level, we may not get the level of talent that we historically have. This may lead to fewer inventions and new products.

And concerning the climate crisis: it will be a miracle if we don’t have at least five enormous environmental events in the next three years that will have continued economic destruction and will cause new refugee flows into already pandemic-weakened systems. This is a permanent crisis that we are going to have to address.

But bullish on the future?

Still, Potolicchio is bullish about the future. He described a “youthquake” … we are going to see a new generation get into politics. With the new generation will come a new approach to solving problems, and we’ll increasingly see people who are willing to engage with others outside their political party. Potolicchio said that we need to talk to our political counterparts like they are co-pilots and not enemies. The younger generation is more willing to simply look at problems and not worry about party labels.

Paul J. Heney • VP, Editorial Director