University of Chicago Professor Emeritus Marvin Zonis had harsh words for this year’s slate of presidential candidates, including the incumbent, as he touched on the geo-political and economic hot spots for 2012.
“It’s a disgrace that these are the choices we have,” Zonis said, blasting both President Barack Obama as well as the Republicans vying to be the president’s opponent in the general election.
Zonis made that comment in a speech on geo-political risks at this year’s IMCA New York Consultants Conference, which had 850 attendees. “The essence of 2012,” Zonis said, is “lots of political instability one way or another.” He pointed to 11 nations that will be electing new presidents this year—a group of countries that represents 50.2% of the world’s gross domestic product by purchasing power parity per capita.
Meanwhile, two other global strategists who spoke following Zonis, focused more on the United States, saying that another recession in the near term seems unlikely.
Zonis called President Obama’s economic numbers “staggeringly” bad numbers that would normally hurt an incumbent’s election chances—ranging from high unemployment, a rising poverty rate, increased inflation and a bigger deficit and gas prices that have gone up. But the Republican choices don’t appear to offering a better alternative. He mentioned Mitt Romney and called Rick Santorum “the defeated senator from Pennsylvania.” Of former Republican House Speaker Newt Gingrich, Zonis said: “we have Newt who ran in South Carolina against the Washington elites. I’ve never met anyone who was more of a Washington elite.”
Zonis called for Washington politicians to cut entitlement programs.
As for the rest of the world, Zonis said, China will become stuck in a middle-income track. And the Eurozone, he said, is “over as we know it. Greece will drop out.” But the result, he said, will be a stronger euro against the dollar.
But the United States has short-term problems that can only be solved with real leadership, Zonis said, pointing to what he called “the real unemployment rate” of more than 19%. The American public, suffering under economic contraction, is angry, fearful, anxious and mistrustful to the point that there is “a wave of rage in the U.S. that is unprecedented in my lifetime.” All that will lead to political instability, he said, pointing to a contentious election in the fall.
Another area with lots of instability will be the continuing maelstrom in the Middle East. “Civil is rapidly coming to Syria,” Zonis said, calling Syrian President Bashar al-Assad a “son-of-a-bitch.” Meanwhile, Egypt and the rest of the Middle East will become more dominated by Islamists but there may be less terrorism as the populations of those countries become more comfortable expressing their religious orthodoxy
As for Iran, he said, “my own view is that [it] will not develop a nuclear weapon” because there will be too many repercussions from the international community.
Russia “will be fine economically” even if Vladimir Putin is reelected but Zonis noted that $83 billion in capital fled the country last year.
Zonis wasn’t all doom and gloom. He believes the U.S. will see “some fairly robust growth” in three to five years and that technological advancements will drive the economy as well. The U.S. is spending more than $450 billion in research and development, he said. Plus, the lower 48 states will invest in developing shale as a cheaper source of energy and dramatically diminish the amount of oil the U.S. imports.
Zonis also said that several Asian and African nations such as Bangladesh and even Angola are on the rise. And in Latin America, he said that Mexico “will get on top of its drug problem” and that it is seeing its population growth stabilize.
In the session following the remarks by Zonis, Milton Ezrati, a partner at Lord Abbett & Co., and Jonathan Golub, a managing director and U.S. equities strategist at UBS, offered their outlook.
“We are, in many respects, in the same boat as last year," said Ezrati, who sees some opportunities along with the risks. But he doesn’t see a recession in the U.S. “In 2010 and 2011, we had double-dip scares,” he said. “The double-dip guys are 0 for 2.”
More important, Ezrati believes the housing market, while not great, is showing some signs of stability.
Golub believes the big question is about “readjusting expectations.”
Frances A. McMorris writes for On Wall Street.