John Richards’s Predictions for 2012

Since our previous predictions have proved fairly accurate, I am going to stick my neck out and give some fairly specific best-guesses for the next year. I must give the health warning that these are only extrapolations of present trends, and do not take account of currently unforeseeable events – which, of course, always occur.

First, the good news: the world as a whole should avoid a full recession in 2012 – emphasise the word should. All the bad news should not be allowed to obscure the fact that global business is growing, albeit slowly. Recovery from 2008 should not be expected to be spectacular, but it ought to continue, so long as everyone keeps their heads.

Alas, the bad news is that they are unlikely to keep them in Europe. The latest scheme to save the euro, FU (Fiscal Union), does not address its underlying problems. I predict the euro will survive, but not in its current form. Sooner or later, its weaker members must leave the single currency, for their own good as much as the euro’s. Yet there will be more time and money wasted before the EU’s leaders are forced to accept this obvious truth.

I can also see no end to the economic stagnation of the United States. Political gridlock will continue until the November elections. President Obama will then be re-elected fairly comfortably – not because he offers any solutions, but because he has more money, because he retains the uncritical support of most of the mainstream media, and because his Republican opponents look more and more like a suicide cult.

The second terms of re-elected Presidents are usually disappointing: it seems unlikely that Obama II will come up with a real vision for America’s economic recovery given that there has been no sign of such a vision so far in Obama I. Mr Obama was elected on a platform of Change; his probable re-election will mean No Change.

However, there is now more to the global economy than the old Western Powers. A sign of the times is that Brazil has just overtaken the UK to become the sixth biggest economy on Earth. This is not a negative reflection on the UK – where the outlook is not too bad so long as the British can keep their distance from the euro debacle – but one more indicator of the massive power shift that is taking place in the world. That may be bad news for the moribund economies of the West, but good news for the rest of the planet, and for those American, British, and European businesses who see what is happening and look for new opportunities where the growth is.

“Guerrilla art” can make its point very effectively. After a – now forgotten – stock market crash in 1987, sculptor Arturo di Modica, made a 7,000 lb bronze bull at his own expense and installed it, without permission, in front of the New York Stock Exchange, as a reminder of the “strength and power of the American people”.

In the early hours of Christmas day, street artist Olek covered the bull with a charming all-over sweater as a gesture of her own warmest wishes for the New Year.

Alas, bureaucrats have got worse since di Modica’s original installation. Almost immediately, a park keeper cut Olek’s lovely bull cosy to pieces with scissors and dumped it.

The irony is that the bureaucrat’s nastiness provides the perfect third act to a work of street performance art that symbolises where we are with uncanny accuracy.

Di Modica’s bull has indeed come to symbolise the resilience of the American people in particular and the global markets in general. Just as the statue is still with us, so are the strengths it represents. Yet Olek’s woolly covering reminds us that, however strong it appears, the bull needs to be loved and looked after. The bureaucrat’s destruction of that covering is itself symbolic of the unhelpful attitudes of officialdom – which never wanted the bull in the first place and does not care if it is left out in the cold.

This is exactly where we stand on the threshold of 2011. Free enterprise has proved its resilience yet again, but recovery remains fragile, and government needs to be more sympathetic.

Yet the New Year finds us finds us cautiously optimistic. There is a now a more realistic attitude in business and political circles. Gone is the hysterical optimism that preceded the 2008 crash and the equally hysterical pessimism that followed it.

Even politicians seem to be growing up. President Obama’s deal with the Republicans on extending the Bush tax cuts gives hope that a bipartisan approach to America’s problems may be possible. The British government is taking mathematics seriously at last. The Germans are imposing discipline on the euro. Several potential crises – in Dubai, Greece, and Ireland – passed without panic. These are all encouraging signs.

The next year will be tough for many, but most will see slow improvement. That said, any predictions must end with the one that is always proved right: expect the unexpected.