Helping CPAs grasp the fundamentals of global power

At a time of technological disruption and significant political change, Jacob Shapiro predicts that Japan, Turkey, and Eastern Europe are poised to see their power strengthen over the next 10 to 20 years.

Shapiro is a geopolitical analyst and forecaster for Geopolitical Futures who examines economic data, supply chain and resource information, and political and military developments to predict trends in the strength of regions and countries across the globe. He presented his current world forecast during an AICPA spring governing Council session Sunday.

A couple of months ago, Shapiro was in Warsaw, Poland, observing why he believes Eastern Europe is on the rise. He said Warsaw reminded him of a U.S. city, with evidence of American investments everywhere he turned.

He is optimistic about Eastern Europe’s prognosis partly because the United States has ironclad security relationships with countries in that region as a result of its concerns about Russian goals for expansion.

“If you look over time at what a U.S. security relationship means to a country’s economy, it means increased U.S. trade and increased U.S. investment,” Shapiro said during a telephone interview before Council. “… That’s a place where a military and a political reality is leading to an economic consequence.”

Shapiro also predicts rising power in:

• Japan. “Japan is a highly focused, fairly equal society in terms of distribution of wealth. It has a level of cultural and political homogeny that is not normal for most countries,” he said. “So when Japan faces major crises, it is able to make huge policy decisions, turn on a dime, and devote tons of resources to handling these issues.”
• Turkey. Shapiro said recent changes leading to civilian control of the military will benefit the country. “But at the end of the day, this comes down to geography,” he said. “Turkey controls the Bosporus. It sits on some of the most important and wealthy strategic real estate in the entire world. And when Turkey is strong, it expands out in all directions.”

Shapiro also predicts that strength and influence will diminish for Germany, where he sees the rise of the far right as an ominous sign; China, which he sees as burdened by wealth inequality and economic inconsistencies; and Russia, which isn’t benefiting from high global oil production.

The United States, he said, is likely to experience an economic downturn and political upheaval over the next five to 10 years. He said historical trends of economic expansion and recession indicate that the United States is due to experience a recession within the next few years.

He said the economic recovery following the recession that started in 2008 has not addressed the country’s underlying problem of wealth inequality. This is likely to lead to political upheaval, he said.

“The rich are getting richer, and the poor are getting poorer,” he said. “If you look at statistics about who has recouped their wealth since the 2008 financial crisis, those who you would define as upper class have actually made back their money and more. Those who you would define as middle class just simply haven’t.”

Nonetheless, Shapiro predicted that the United States will emerge stronger from turbulent economic and political times, just as it has from other periods of upheaval in its history. He said CPAs need to understand that although the United States, Canada, and Australia may undergo political shifts in the coming years, the underlying fundamentals of geopolitical power in those places haven’t changed.

He also predicts that after weathering the challenges created by the vote to exit the European Union, the United Kingdom will remain a stable power center. His message for CPAs? Understand the fundamentals of power rather than being rattled by the panic created by daily headlines.

“If you want to understand how the world works, you have to get away from the ideology, away from the politics,” he said. “You have to understand what different groups of people’s interests are. And what are CPAs at the end of the day? CPAs are people who help people manage their interests and figure out the best ways to manage what’s going on in their lives. Adding that toolkit and being able to see, these are the things going on in the world … I think that’s a useful perspective to have.”

— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.