The importance of politics in today's economic situation

• Today political battles weigh on economic policy making even in the world's richest economies.
• Both, the growth of emerging markets and the determination of political officials around the world to avoid the social upheaval that the global financial crisis might generate have injected politics and political motivations into the performance of global markets on a major scale.
• Post cold war, the belief that governments could micromanage national economies and generate prosperity seemed dead. Globalization became a household word with the emergence of massive private corporations in Japan, America, and Western europe.
• Over the past several years, an era of state capitalism has dawned, on in which govts are again directing huge flows of capital with profound implications.
• State capitalism : economic system is which governments manipulate market outcomes for political purposes.
• But state capitalism also stems the rise of globalization, because it hampers the flow of ideas, information, people, money, goods and services across international borders.
• The world's 13 largest oil companies are now controlled by govts : Saudi Aramco, Gazprom, China National Petroleum Co., National Iranian Oil Co, etc.
• State corporate activity is fueled in part by the emergence of a new class of SWFs.
• Because political factors unique to each state will determine the response to each domestic economic slowdown, countries with relatively strong political fundamentals will have a better shot at a quick recovery.