“There is no turning back to the world we once knew. It no longer exists.” That ominous warning is contained in A Map of the New Normal: How Inflation, War, and Sanctions Will Change Your World Forever, the fifth and latest book from former CIBC World Markets chief economist turned bestselling author Jeff Rubin.
Rubin admits A Map of the New Normal started as a different book with a different title.
“Originally, Penguin Random House approached me to write a book called Is There Light at the End of the Tunnel. And it was really about the economic legacy of lockdowns, like the work-from-home movement, which has endured well beyond any public health rationale,” he said.
“But three or four months into the exercise, events superseded it. Russia invaded Ukraine, the West responded with crippling sanctions, and both my publisher and I agreed there was a bigger story to write.”
That bigger story was how COVID-19 set off a tectonic shift in the global world order – accelerated by flashpoints like the Russian invasion of Ukraine, the war between Israel and Hamas in Gaza, and China’s ongoing sabre-rattling in the Taiwan Strait.
“The main battlefield isn’t even military. The main battlefield is economic sanctions,” he said.
“When you sanction [Russia], the world’s top grain exporter, and when you sanction the world’s number one energy exporter, there are consequences on the price of substitute supply. And sanctions are, by any other name, economic warfare, and that’s where the war comes home to you. And all you have to do is go in a grocery store or fill up your tank, and you suddenly find yourself on the front lines of that war.”
Rubin lays out how, for the first time in more than a century, the West is “angling with opponents who have ample economic resources to fight back.” He refers to the BRICS countries specifically – Brazil, Russia, India, China, and South Africa.
“There’s a new emerging order. And some of the economic heavyweights in the new world economy have aligned themselves with America’s principal adversaries, Russia and China, and are calling for changes in the way the world is run,” he said.
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“It’s important to recognize who these countries are. The four fastest-growing economies in the last 20 years were in this order: China, Russia, India, Brazil, and the fifth fastest, Saudi Arabia, which just joined BRICS. By comparison, the U.S. economy was the 12th fastest.”
Rubin warns the West is in danger of being left behind. Indeed, in some ways, you could argue it already has been.
“There’s a lineup around the block of countries who want to join BRICS, including Mexico,” he said.
“If all of these [countries] are accepted, BRICS will soon have GDP much greater than the G7, over half of the world population, roughly half of the world’s oil reserves, two-thirds of the world’s natural gas reserves. In short, it will be a power to be reckoned with.”
He also explains how offshoring, once the key to globalization, has been supplanted by friend-shoring.
“Friend-shoring means trading with your friends, not your enemies, decoupling from China,” he said.
“The problem is that all of America’s friends are like us or Australia or Western Europe, they’re high-wage economies. So, if all of a sudden, all those things that for decades, we relied on the cheap labor of China to provide us with, are going to be made at home that’s going to be at a multiple of the cost.”
Rubin says there is no better example of that than your smartphone.
“China is the factory of the world. China can live without Apple. But can Apple live without China,” he asked.
“Let’s just say, for example, that suddenly Apple can’t access its supply chain in China. Ninety five per cent of iPads, iPhones, and Mac computers are made in China. Foxconn, its major supplier there, ironically, a Taiwanese firm, pays about $1.50 an hour for labour. Let’s say all of that got repatriated to Cupertino, California, where Apple is headquartered. The minimum wage in California is $15.50 [an hour]. ‘Do you still think you could afford to buy an iPhone?’ is the question I would pose to you.”
Rubin’s book provides a fascinating, if frightening, look at the world of tomorrow. We should start paying attention today.
A Map of the New Normal: How Inflation, War, and Sanctions Will Change Your World Forever is published by Allen Lane.