Strongmen and the Global Economy Looking Weaker

The strongman is in, democracy is out, and markets are strong despite trade tensions. So says popular wisdom among Western elites these days.

But what should we make of two strongmen who looked particularly vulnerable this past week— Venezuelan President Nicolás Maduro and Turkish President Recep Tayyip Erdogan—and the global market dip on August 10 caused not by new trade skirmishes but fundamental concerns about the Turkish economy?

Maduro survived an attempted assassination by drone IED last Sunday, while Erdogan has presided helplessly over the worst depreciation of the Turkish lira in a generation. Questions are being asked about what’s in store for both leaders and their countries in days and weeks ahead. This is particularly surprising for Erdogan, who less than two months ago scored an election victory that further consolidated his power as Turkey’s one-man state.

Maduro and Erdogan of course both have been the targets of past coup or assassination attempts as well. And both men have a growing list of external as well as internal enemies, real and perceived. Maduro publicly pinned the latest assassination attempt on outgoing Colombian President Juan Manual Santos (considered a CIA cutout). Erdogan has long implicated Syria, Iraq, Iran and others in violence within Turkey, as well as blaming the 2016 coup attempt on a secret cabal led by the United States.

The risk premium for their personal power, suppression of democracy, and regional ambitions is significant and growing. And while political and economic conditions are quite different in the countries, the number one issue for Turks and Venezuelans alike these days is inflation, especially when it comes to food prices. Each country is politically fragile—and Turkey far more fragile than it seemed to most just weeks ago.

Events in Venezuela didn’t move world markets, but a pronounced power struggle threatening crude exports surely would. And by the week’s end worsening US relations, the tanking Turkish lira, and “hot money” fleeing Turkey caused a notable dip in global markets, also sending the dollar up with big implications for global dollar-denominated debt (already a systemic risk).

The Trump Administration seems content with events, rather than concerned with the regional and global economic implications of this growing fragility (especially shocking in the case of NATO ally Turkey). And while Russia and China are deeply involved in both countries in various ways and seek opportunity where it presents, neither is helping Turkey or Venezuela out of its present troubles.

In short, the seemingly unconnected events in Venezuela and Turkey are simply more evidence of what Richard Haass has called the "new world disorder." Unrelated developments suggest that this supremely uncertain moment is yielding ever more unpredictable outcomes, including unforeseen setbacks to those contributing to the chaos in the first place. And global markets are showing signs they will increasingly respond to political risk factors.