The end of 2012 will mark a once in twenty year overlap of a presidential election in the US with a leadership transition in China. France chooses its president in the spring of next year, Germany its chancellor later in 2013. Unfortunately, election year pressures threaten to complicate an already very difficult and unpredictable policy dynamic, particularly as the European crisis goes from bad to worse.
The US, Europe and China all have huge decisions to take over how their economies and societies are to be shaped in the future. If existing or new leaders emerge from the upcoming elections with a clear mandate, perhaps we will see the kind of structural reform that will help growth and stability over the longer term. But if the overhang of elections exacerbates paralysis around difficult policy decisions, it will create huge potential for amplification at the worst possible time. Even under the best scenario, 2012 promises to be a year of even great politically induced volatility than 2011. Read more