1968

During a trip in Vietnam over the year-end break, flashbacks from the ‘American War’ as it is called by Hanoi were omnipresent. They sent me back to the late 1960’s, at the peak of the U.S. military involvement in the country, with more than half a million troops on the ground.


It is fashionable to suggest that politics have never been as polarized as today. Those who argue so would do well to look back into 1968. It is often cited as a pivotal year in the story of the United States and for good reasons, as captured in the impressive TV documentary series 'The Vietnam War: It saw the assassination of Robert Kennedy and Martin Luther King, and deadly demonstrations between students and the police across the nation. Violent riots took place in London, Paris, Rome and Berlin too as the establishment in the West was challenged by rising cynicism and anger driven by a widening divide between generations, races and classes. A civil war of values was gripping many democracies as the Beatles released the song Revolution: ‘You say you want a revolution/Well, you know/We all want to change the world’.


A lack of perspective is also affecting the financial markets today. The disconnect between the Fed and investors was laid bare in the FOMC minutes published this week, illustrating the fact that the Fed does not understand why the markets are so worried about the economy. It acknowledged the sources of risk (sentiment, foreign economies including Europe, trade friction, financial markets stress including wider corporate credit spreads, a waning fiscal stimulus) but highlighted the many positives (labor market conditions, industrial production, household spending, broad financial conditions). After careful considerations, the Fed decided to give the markets some breathing space. It is now anticipated that it will pass on the opportunity to hike in March.


Once the negative impact from trade war disruptions is digested, constructive macro data over the early summer months will hopefully contribute to improving the currently pessimistic narrative for 2019. The global economic trends are not as worrying as many suggest it.


The situation on the socio-political front is, however, more concerning. Whilst there are profound differences between 1968 and 2019, a number of similarities should not be ignored, including a heightened sense of social unfairness coupled with a high level of distrust in the political class. In this context, the consequences from an eventual economic slowdown could be dire. In fact, everything I see suggests that the social aftermath of the Great Financial Crisis lies ahead.


Corporates have been encouraged to take on a greater role in society to compensate for the troubling political and social trends. Last year, Blackrock’s Larry Fink stated in its letter to the CEOs that ‘many governments [are] failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater.” An FT article from last week entitled Beyond the bottom line: should business put purpose before profit? elaborates on this theme.


This new form of capitalism relying on the ‘Good Company’ concept tends to be presented as a romantic alternative to be implemented out of liberal motives – and this is where I differ: It is not an option, it is a must when considering the many warning signs from the street. Recent surveys indicate a dramatic loss of faith in capitalism, especially from the younger generation. To save capitalism, a more just version must be crafted as a priority.

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