On 12 December, Thomas Lhuillier, Managing Director of Banque Richelieu Monaco, welcomed Jean-Marc Daniel, renowned for his incisive and enlightening analysis of the contemporary economy. A graduate of the École Polytechnique and a specialist in the history of economic thought, he spoke to Alexandre Hezez, Group CIO &Strategist of Banque Richelieu, and Nicolas Rajner, CIO of Banque Richelieu Monaco. We spoke to Jean-Marc Daniel.
2024 is a major election year, with polls in the United States, India, Brazil and Bangladesh, and over 4 billion voters. Could these elections create global economic instability?
Absolutely. These elections reflect a rise in uncertainty in a world where economic concerns are already prevalent. In the United States, for example, a key figure could mark a return to protectionism, a trend that can also be seen elsewhere. In Romania, a leader who was unknown just a few months ago built his electoral success on protectionist promises and criticism of inflation. This is not an isolated phenomenon: in Sri Lanka, a Marxist-Leninist candidate capitalised on similar frustrations.
Take the example of customs duties: they are, in reality, indirect taxes. When a Chinese product is taxed at 100%, it is not the Chinese government that pays the bill, but the American consumer. In the long term, this strategy erodes purchasing power rather than protecting it.
You also mentioned a major demographic challenge.
We are living in a period of glaring demographic imbalances. In Japan, 30% of the population is over 65, while by 2050 half of humanity will be living in sub-Saharan Africa and India. This poses immense challenges in terms of solidarity between regions and generations.
Take Nigeria, for example. By 2050, it will be the most populous country in Africa and one of the youngest in the world. Yet during its president's recent official visit to France, this strategic opportunity was largely ignored. We need to change our perspective and recognise that the economic future will be played out more in Nigeria than in Pennsylvania, if I can put it that way.
Let's talk about global debt. With levels of public debt exceeding 100,000 billion dollars according to the IMF, how can we get rid of this economic burden?
Global debt is indeed reaching worrying proportions. In the United States, servicing public debt costs $1,000 billion a year, or a third of France's GDP. In France, the debt exceeds 3,200 billion euros, a figure three times greater than the combined debt of all African countries.
The real challenge for over-indebted developed countries like France and the United States is the gradual loss of their economic sovereignty. A growing proportion of their assets - whether real estate, businesses or other strategic resources - is now held by foreign investors. France, for example, is the country with the largest foreign ownership of real estate. This raises a fundamental question: to what extent does an indebted country still control its own destiny?
For emerging countries, the issue is different. Their debt is often denominated in dollars, which exposes them to increased currency volatility. This places them in a situation of dependence on their creditors, especially when the latter are very demanding, as China is. This asymmetry makes negotiations even more complex.
You mentioned the role of the dollar as the dominant currency. Can it retain this status?
Yes, and for several decades to come. The dollar is supported by two pillars: the economic power of the United States and its military strength. Historically, the dominance of a currency is based on these two factors. Take the example of sterling at its peak: it was inseparable from the Royal Navy.
Some argue that US monetary expansion will eventually lead to uncontrolled inflation. However, until now, the United States has been able to maintain confidence in its currency. And as long as it has 17 aircraft carriers and the Federal Reserve, it is hard to imagine any significant challenge to its hegemony.
Finally, let's look at innovation and artificial intelligence. Can this technology be a lever for economic growth?
Artificial intelligence (AI) is generating a lot of enthusiasm, but its real economic impact remains to be proven. The fundamental question is whether AI is an innovation, i.e. a technology that genuinely improves people's lives, or a mere invention, fascinating but with no concrete application for the economy.
Three points are worth highlighting. Firstly, as with any innovation, there is resistance. This goes back to the days of the Luddites, those workers in the nineteenthᵉ century who destroyed machines they saw as a threat to their jobs. Secondly, the added value of AI is difficult to measure, as it relies on the manipulation of information, an area less tangible than industrial or energy innovations. Finally, there is an environmental cost to consider. AI requires increased energy consumption, often fuelled by fossil fuels. In 2023, for example, global coal consumption reached an all-time high...
In conclusion, what advice would you give to economic and financial decision-makers for 2024?
I would tell them to remain pragmatic. We live in a rapidly changing world, where economic models need to be reinvented to meet social, demographic and environmental challenges. The future belongs to those who can build bridges between mature and emerging economies, while integrating technologies in a thoughtful and sustainable way.
