strategy page real estate edition

If you want to understand why politics are so divisive, listen to the Freakonomics episode with CNN’s Fareed Zakaria. This post is a recap of his illuminating narrative about the new world order.

The origins of left and right

During the French Revolution, the king needed to raise taxes, and summoned his national assembly to a meeting. During the ensuing debate, those of similar ideology started to gather in small factions around him.

Their next meeting was held in a long rectangular room which was organized in bench seats facing one another. Those who supported the existing monarchy sat on his right, and those who wanted change sat on his left. This adversarial system came to be more commonplace, and became the format of the British parliament. While our legislators don’t wear wigs, they’ve certainly migrated toward extremes of left and right.

Over the course of American history, polarization was defined by opinions on the economy. The left wanted more government involvement and redistribution, and the right wanted less government involvement and redistribution.

But today we’re governed by “identity politics,” which doesn’t serve us. Topics such as trade and technology are abstract, but topics that revolve around our identities such as race, religion or sexual orientation create a visceral reaction. Let’s face it–chaos sells, and the media exploits polarizing topics.

But in Zakaria’s view, we’re missing out because our differences should be in the form of intellectual curiosity that prompts understanding and learning.

Conflict and the Middle East

In a particularly insightful narrative, Zakaria points out that the Gulf States in the Middle East such as Saudi Arabia, Qatar and UAE have advanced socially, moved toward equity for women and adopted socioeconomic systems that align with Western values. As more prosperous nations, they are incented to create peace and stability in the region. Fundamentally, the leaders of these states are not motivated by ideology and do not support terrorism.

Bad actors in the Middle East, Asia and Europe are incented to create chaos, whether that be through terrorism, military incursions, raids in the middle of the night, cyber hacks or currency manipulation. These nation states are revealing weakness, because they can’t match the military and economic capability of more successful economies. Such countries are controlled by autocrats, live under occupation, and use state media for propaganda.

Last year, reformers led by Saudi Arabia sought to recognize and normalize relations with Israel. Don’t be fooled–this was always the trigger for the brutal October 7th attacks. The endgame was always to elicit a violent Israeli response, in an effort to further demonize a common enemy. These same antagonists infiltrated U.S. college campuses in an attempt to manipulate American politics. There is a clear effort to destabilize the U.S. from within.

Capitalism vs. communism

Featuring Marc Emmer for Inc

Over the last 50 years or so, the U.S. has aspired to spread democracy around the world. The fall of the Berlin Wall was a watershed moment, perhaps providing a false narrative that democracy had won. But over time, this ambition led to policy mistakes where the U.S. was too assumptive that capitalism could instantly modernize weak economies in places such as Iraq and Afghanistan.

For democracy to work requires the development of a middle class, such that the masses will not revolt against those who control the capital and wealth. This is why countries that were once communist have struggled over the last 30 years to embrace a successful form of capitalism that serves a broad range of people.

Case in point is Russia, a country with vast natural resources. Russia is a leading exporter of oil, coal, nickel, and aluminum—commodities that tend to spike during regional conflicts. It’s better for the Russian state when commodity prices are high.

Identity politics

According to Zakaria, Russian leadership is using identity politics to create a narrative where Russia can overcome structural decline and return to what they once were. He refers to such nations as “closed” societies which do not celebrate democracy and freedom.

He warns the U.S. is falling into the same trap of politics driven by deep-rooted identity, which corrupts our ability to make sound decisions and form policies that serve the public good.

For America to remain a beacon of democracy and freedom, we need to rise above identity politics and find common ground.

Elsewhere around the world

Featuring Marc Emmer for Inc

Germany’s woes

Pre-pandemic, the German economy was thriving. But last year it was the only G7 nation with a shrinking economy. With heavy reliance on manufacturing, higher interest rates, energy shocks, and a cooling global economy have made for sluggish GDP growth.

India’s resurgence

India’s economy is growing at a 7% clip, eclipsing China and other emerging economies. But the comparisons stop there. India is not a manufacturing hub, and has been unable to create the infrastructure to compete with China. Yet it has become the home of many U.S.-outsourced jobs. The incumbent Prime Minister is expected to win reelection next month. 

China prices

Unlike the U.S. which has experienced rising prices, China is caught in a deflationary cycle. Investors are flocking elsewhere amid U.S. tensions and a real estate slump. China’s capital markets have rebounded after a decline last year. 

World travel

While “revenge travel” appears to be cancelled, there are still hot spots including New York, Los Angeles, Cancun and Vietnam. Travelers are well-advised to avoid France during the July Olympics. Airline prices throughout Europe are already 25% higher, even though travelers are opting for more affordable domestic destinations.

Kiplinger Letter, The Economist, Bloomberg Businessweek

Video: Trend Report – Employee Retention

Podcast Recommendation: Are We Living Through the Most Revolutionary Period in History?

Podcast Recommendation - Freakonomics

Fareed Zakaria says yes. But it’s not just political revolution — it’s economic, technological, even emotional. He doesn’t offer easy solutions but he does offer some hope.

 Listen to the episode

Book Recommendation: Age of Revolutions by Fareed Zakaria

Podcast Recommendation - Freakonomics

The Strategy Experts

Marc Emmer is President and Chief Strategist & Facilitator at Optimize Inc.

He is an author, speaker and consultant recognized as a thought leader throughout North America as an expert in strategic planning.