THE BLOG

US in for a Killer and a Chiller and a Thriller?

03/11/2014 13:56 GMT | Updated 31/12/2014 10:59 GMT

Talking about butterflies and bees

Forty years ago on 30th October 1974 the legendary Rumble in the Jungle took place: Muhammad Ali knocked out George Foreman in the eighth round in Zaire in one of the biggest sporting events ever. The US would like to be able to operate on the global stage like Ali did in the boxing ring: "float like a butterfly and sting like a bee."

However, the US now often lacks the stamina, shrewdness and domestic political unity needed to deal out a mean five-punch combination of left and right hooks to deal with opponents and challenges: Russia, terrorists, high debt, immigration, to name but a few.

The coming quarters we will see if the US manages to offer some Ali to the world and deliver on domestic issues like immigration, addressing the Islamic State challenge, standing up to Russia without plunging the world into a new Cold War etc. On 4 November Americans will be heading to the polls to pick a new House of Representatives and replace a third of the hundred Senators. Later in November - on 15 and 16 November - we will witness the G20 Summit in Brisbane, Australia and a deal on Iran's contested nuclear program needs to be reached before a November 24 deadline.

Rope-A-Dope

Ali used a tactic now known as Rope-A-Dope: lying against the ropes, Ali allowed Foreman to hit him, but much of the punch's energy was absorbed by the ropes' elasticity rather than Ali's body. Ali managed to cause Foreman to "punch himself out" and make mistakes so Ali could counter-attack.

It would be fantastic if we would be able to look back in a couple of years to the period after 2008 and conclude that the US copied the Rope-A-Dope tactic and 2015 turned out to be the year that the US finally hit back and took the initiative back again as global leader and as a united country with a strong and cohesive vision and policies.

Who's the greatest?

However, America often acts like a ponderous and unwieldy giant in the geopolitical boxing area lacking the necessary eye-to-hand coordination. The US used to be able to act like Ali did in the ring (although it did not always do so):

• Approaching fights like chess matches.

• Being almost invincible and acting with supreme confidence, just like Ali yelled to Foreman in the 1974 fight: "That all you got, George? That all you got?"

• Bending the rules and getting away with it (just like Ali did when he out-wrestled Foreman, leaned on him and pushed the champion's head down by pulling on the back of his neck).

But the US could and cannot sustain the hegemonic role the way it did in the recent past: other giants stepping into the ring are one cause. Another reason is the political disunity at home, the partisanship that obstructs policy making and the clear lines that divide the country into red and blue parts. The government shutdown last year was one example of this debilitating political climate. The US does not succeed in passing major reforms in areas like immigration and taxes because of the political gridlock.

Midterms: it's the economy stupid - except when it isn't

The midterms next week will not lead to revolutionary change. The Republicans should retain solid control of the House and recent polls have tilted in favor of a narrow Republican Senate majority, with a net gain of seven seats which would give the GOP 52 out of the hundred seats. Obama's Democrats heading for a clunking defeat in the midterm elections next week shows a disjunction between economic performance and political success. "It would upend one of the great clichés of modern politics. These days it's the economy stupid - except when it isn't," writes The Guardian. The American people are insecure and are doubting if growth will translate into many good paying jobs being created and in a broad-based recovery for consumers. On top of this, the world seems more dangerous to Americans with ISIS beheading US citizens and Ebola having entered the country without Washington showing an appropriate response.

If polls turn out to be right, the last two years of Obama's presidency are set to make the last four look like an age of mutual civility and respect. The GOP will try to repeal many laws that the Obama administration has enacted in the last six years. Obamacare will obviously be the first to go if it was up to the Republicans and environmental regulation will also be on the list. If the next two years will indeed be all about the GOP trying to undo what Obama has done, the US will lose even more sense of direction and purpose.

However, I doubt that the outcome of the elections will matter very much to markets despite upcoming issues like the possibility of another debt ceiling-related impasse in the 2nd quarter of 2015. The markets are already discounting a lame-duck president for the next two years and I do not see this changing. We witnessed political trench warfare in the last couple of years and we will certainly see it the next two years albeit possibly in a somewhat intensified manner.

Get up and fight

All in all, the US will not undergo a remarkable change for the better in the coming quarters to years: US economic growth will probably continue without surprising very much on the upside. The G20 meeting in Australia will not herald any major changes in how the world will deal with economic imbalances and disappointing growth and we will also not witness a game changing nuclear deal with Iran. This means that the West will stay down in the near future just like Sonny Liston did in 1965 when Ali shouted at him: "Get up sucker and fight. Get up and fight!" The US will be a giant for years to come but is clearly taking a couple of steps back because of domestic political malady and a lack of strategic vision and strong White House leadership amid the rise of new international players and the reappearance of thorny old rivals.

Bricks and stones

Right after the crumbling of the Soviet Union the US felt like Ali in his heydays:

"I done wrestled with an alligator, I done tussled with a whale;

and cuffed lightning, thrown thunder in jail;

Only last week, I murdered a rock, injured a stone, hospitalised a brick;

I'm so mean I make medicine sick."

Nowadays, the US still deserves and receives much admiration and awe because of its military, political, economic and social levels of development, but in many ways the nation needs a couple of doses of medicine while players from all sides are hurling bricks and stones at it. It will take some time for the US to stand up again and turn the game around.