Navigating a Sea Change in The Midst of Storms

Welcome to a series where we present key strategic thinkers’ findings. We begin with McKinsey’s ongoing global survey (top of page) for how executives’ expectations ( as of mid-October) have emerged over time. Compare the expectations of executives in four key countries ( US, China, Germany, UK), shown below, at the end of this article.

• Do they mesh with your own observations and perspectives?  
• How might decision leaders’ outlook diverge around the world?  

Think back to the initial disbelief and denial of the pandemic, followed by the shock of a second wave’s extent and complexity. The false optimism sobering into a grim resolve with the growing realization of the Covid19 as an ongoing reality of life- even as we sort out improvisations from adaptations, or perhaps actual phase shifts.   

Economic Recovery and Containment of the Pandemic:

• Will the west reassess its approach as the pandemic crests into second then third waves? How much will it model from China’s more extensive and draconian zonal lockdowns?
• Would the west adopt some degree of China’s more centralized authority model particularly for responding to crises, versus trusting to free-market creativity and initiatives? 
• As the US election outcomes emerge, and with a breakthrough in a vaccine within the near term: how will business and economic expectations and decisions be emerging?  

Our western cultures’ greater individual freedoms and free-market processes have fostered vibrant and entrepreneurial initiatives. The race to a vaccine has now accentuated the contrast in nations’ approaches to government and markets.

Contrast the western emphasis on democracy and free markets, with China’s statist “platform” approach to economic development. China, over centuries of governing vast geography and population, evolved a centralized government and autocratic authority, while allowing individual provinces and entrepreneurs undefined or even loose – but quickly revocable – license. As in centuries before, China has kept its domestic markets relatively isolated from the world.  

How has China tightened its grip on its buffer outpost HongKong with no concern for world reactions? 

Confidence. Consider how China exchanges (Shanghai+Hongkong+Shenzhen ) will challenge US and European financial exchange centers.  Over the past years, the west powers have partnered with – or at least, not challenged - the China Belt and Road program’s success. Nor has China’s blunt expropriation of the South China sea met more than token outcries.

Democratic nations are baffled by how the China population largely trust/comply submissively to the state. At the core is an implicit contract: the individual relinquishes freedoms in exchange for the state ensuring their basic and economic needs.  

So it was, that China could impose comprehensive lockdowns and restrictions; and also have a controlled infrastructure for a comprehensive and coordinated national crisis response.  

Post Pax-Americana? 

The US will have much fences to mend even among its historical allies. It certainly has pushed nations to think more regionally or individually.  

• How much did the US relinquish its world leadership these past several years? 
• Has the US triggered an irreversible post Pax Americana era?  

Are we seeing a major divergence point in world order, as the 10 ASEAN member states along with five other countries (China, Japan, South Korea, Australia and New Zealand) coalesce into a massive China-backed trade deal aimed at cutting tariffs and establishing common rules for trade, e-commerce and intellectual property.

----------------------------------