To set the scene, Brusuelas recounted that the emergence and rapid growth of a global economy in recent decades has seen American companies move parts of their operations overseas to lower-cost manufacturing sites in Vietnam, Indonesia, Mexico, and elsewhere. “Since 1986, the United States government essentially turned over the macro management of the economy to the Central Bank. It did a pretty good job, but because of what happened over a decade ago [with the recession], we had to put in place significantly ultra-unorthodox policies. We’ve come to the end of the rope there.
“Going forward, in response to the wave of populism, you’re going to see the rise of fiscal authority and the subordination of monetary policy to fiscal policy. The debt-to-GDP [gross domestic product] ratios in the United States are going to explode much like what you’ve seen in Europe and in Asia. As a board member, you need to begin looking at your financial conditions. Part and parcel of populism is the economic inequality that’s driving these trade policies. To me, people have lost jobs. They’ve fallen behind,” he said. And, capitalism is a perfect scapegoat for their malcontent, he added. No matter where one leans on the political spectrum, the current political administration won’t last forever, and yet the societal shifts spurred by changing demographics and growing income inequality that brought it to power will remain.
When a 25 percent tariff was imposed on steel imports in March 2018, imports did indeed decrease—but so did domestic steel prices as production ramped up in anticipation of supply chain disruptions. One director asked whether a change in political power would usher in a rollback of tariffs. In Brusuelas’s estimation, it depends on which candidates get their party’s nominations and ultimately who wins the next presidential election. “If it’s Joe Biden, the priority is going to be given to rebuild global relationships,” he opined. “If it’s Elizabeth Warren, it’s a different deal when it comes to economics and trade. She’s very close to Trump in terms of economics and trade policy.” Specifically, Warren’s trade plan, released in July 2019, espouses a protectionist bent similar to the current administration.
Attendees also considered that a change in administration would have implications for the energy industry. Combined with, sustainability and carbon mitigation trends, this sector stands to be buffeted. One director noted Warren’s campaign trail promise to ban fracking and new leases for offshore drilling and on publicly held lands. “Most of us in the room understand that’s not sustainable,” he said. “But I have kids and they have friends, and they think that this all sounds really good, so I don’t want to minimize what Warren is saying because I think it sounds reasonable to many others.” As a result, electrical power and emerging technologies that promise alternatives to fossil fuels will continue to alter the industry.
Attendees discussed how business leadership needs to change to meet these and other challenges.