One must never underestimate the role of the political economy and its influence on a business strategy. Government and regulation are the directors of the global economic theatre. The interconnectedness of which means that decisions in one part of the world have a rippling effect on the other.
There are copycat actions by other governments and measures of trade retaliation and protectionism. There is a perception that the lowering of standards in one region or country means it is allowed in another region or country. All create risks for business and the economy.
In twenty years working as an analyst, strategist and specialist in integrated communications politics have played a consistent thread throughout. Whenever I have translated strategies into stories and advising of the world's leading brands in Europe and the Middle East (KSA & UAE), my strategic starting point is the political economy.
The first critical step is to send up a weather balloon to size up the government and politicians, the ideologies and the influencing factors. Then it is to decipher the linguistics and the meaning of their words. The translations and what the resultant impacts will be on people and the economy. (In this arena watch Steve Bannon and his talk of ‘economic nationalism’ - not too difficult to pick apart)
When looking at any national or international shift or change in policy the intellectual thread is always the same. It follows the same set of questions: What do they mean? What is the impact? Who benefits and who loses out? Where are the connections at a micro and a macro level?
The policy decisions and the shifts between the left and the right of politics are the changes that influence an economy. Trump's tax cuts in the US and decision to slash the budget for the EPA and Health Care will have severe impacts on the economy, environment and the people. Some will do better, and some will do worse. The deconstruction of ‘Obama Care’ is a risk and will come back and haunt Paul Ryan and the Republicans when a total of 468 seats are up for grabs in the 2018 congress elections.
The 2014 decision by the KSA government to hold production levels for oil while the price was going downwards had an interconnected impact across the GCC region on both economy and investment. It also led to the launch of the 'Vision 2030' strategy to future-proof the Saudi Economy. Which in turn comes with significant changes to socio-economic balance and 'way of doing things' in the country and indeed the region.
The decision by David Cameron to throw a popularity vote on EU membership which ultimately led to the 'Brexit' vote has resulted in political paralysis and lack of direction of the UK government. It has put Scottish Independence back on the map. A decision which has thrown the future of UK trade and investment into chaos but also impacts the economy of Ireland trapped in the Atlantic.
The Modi government's dramatic move in India to scrap 500 ($7.60) and 1,000 rupee notes, an attempt to claw back money from the black economy, had a significant impact on the financial flows and the real estate market in Dubai and the UAE.
These are just some examples of the interconnected impact of political decisions on the economy and business. It also the ripple effect of a government making a decision in one place changing the economy in another. This is why keeping the head up and understanding the changes in the political economy are critical when designing a strategy.