Risky Business

The Spectator/KPMG conference explored investment opportunities in today’s uncertain geopolitical climate

We live in an age of uncertainty. The predictable threats of the Cold War have been replaced with more nebulous dangers: great power politics might be stable but across large parts of the world instability rules. The Spectator’s ‘Global Risk and Opportunity’ conference in association with KPMG explored the consequences of this uncertain global environment for business.

Andrew Neil opened the event by observing how the all-party desire in America to withdraw from costly foreign entanglements threatened the Pax Americana that has kept the peace since the end of the Cold War. The Conservative MP Malcolm Rifkind, who served as foreign secretary and defence secretary in John Major’s government, offered an overview of the global landscape. He warned that Russia is ‘an authoritarian state’ and that India is a better long-term investment than China because India’s democratic system provides a safety valve for popular discontent. By contrast, in China the only way to get rid of a bad government is through a revolution.

The investment expert Jonathan Ruffer presented an assessment of the prospects for the global economy in the next few years. He began with some peppery assertions, declaring that the credit crunch had been ‘entirely predictable’, that all the speculation about double-dip recessions is ‘largely irrelevant’, and that the eventual result of the policies being pursued by the major economies would be a surge in inflation.

Next, the conference turned its attention to the challenges posed by terrorism and political turmoil. Lord Guthrie, former chief of the defence staff, warned that in the current economic climate ‘no nation, not even the United States, can afford exactly what they’d like’. Lord Guthrie, who has worked as a government envoy trying to ease tensions on the subcontinent, said that he regards Pakistan as the most dangerous place in the world. He fears that if there were another attack on India launched from Pakistan, akin to the assault on the Indian Parliament in 2001 or the Bombay bombing of 2008, it would be very difficult for the Indian Prime Minister to withstand public pressure for retaliation. The consequences could be catastrophic.

Frank Gardner, the BBC’s security correspondent, reported that when he interviewed senior members of the Taleban recently, they refused to say whether they would bring al-Qa’eda back with them if they returned to power in Afghanistan. Gardner believes that they would be unlikely to do so, and that they understand that offering a safe haven to al-Qa’eda would again bring the wrath of the United States. Gardener also noted how ‘core al-Qa’eda is under enormous pressure … the drones are keeping them on the run’.

Later, debate turned to whether China was the biggest bubble of all. James Kynge of the FT’s China Confidential said there was evidence to justify either great optimism or great pessimism. The level of corruption at the centre of power in China meant that the country was in danger of rotting from the core outwards. But, overall, he came down on the side of optimism. The main reason for this — echoed by Philip Ehrmann of Jupiter Asset Management — was that China is now becoming a truly continental economy. Growth is no longer confined to the coastal trading towns; domestic demand as well as foreign investment is driving the economy forward. Indeed, for the first time since the Maoist revolution, land usage rights in the countryside are now being transferred for money.

No conference on the threats to global security would be complete without a discussion on the Middle East. Dominic Asquith, the British ambassador to Egypt, caught the mood by remarking that ‘if you’re a perfectionist, don’t work in the Middle East’. He emphasised the importance of the present moment, which he views as ‘probably the last opportunity to resolve the Israeli–Palestinian problem with a two-state solution.’ Any peace deal would need to involve the Arab states, as the Palestinians cannot offer enough on their own to make a deal attractive for Israel.

Rory Stewart, the diplomat turned Tory MP, closed the conference with a plea for Britain to be more realistic about what Western intervention can achieve. He ended with the counter-intuitive thought that failing states are more dangerous than failed states. Why? Because their sovereignty has to be respected.