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Political and Economic Predictions for 2022

2022 - covid-19 - El American

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While 2021 was a continuation of the pandemic, 2022 seems to begin a post-pandemic age, to which consumers and voters are looking forward to moving on. Here are several political factors to look for next year:

“Normal times” are here

The omicron variant seems to have changed the public perspective on COVID. The highly transmissible yet less virulent variant will explode the number of cases with the upside that the rate of hospitalizations decreases significantly. If the early data holds and COVID becomes far less consequential (closer to the Flu), once the spike in cases decreases, normality (say 2019 life) will be back to non-restrictions or mandates by mid-2022.

COVID seems never to leave just as many other viruses that come back yearly, but with the healthcare system holding. Returning entirely to life as it was in 2019 seems like a long shot, mainly as there will be a shocking public cognitive dissonance after living over twenty months in an environment of fear, exacerbated by the media (social and traditional) and reduced confidence in our public institutions. How we choose to live will determine if normality is back. 

1970s inflation is back

Prices are rising and already above pre-pandemic levels. The increase in government spending respective to their GDP rose significantly during the pandemic to support the public but most likely will not claw back in 2022, as is usually the case with most “temporary” government programs. More importantly, the public trust in the government’s ability to control inflation is already starting to decrease, which triggers more consumer spending.

Some mainstream media outlets experts believe it is purely a supply chain and energy prices phenomenon that would “solve itself” next year. Aside from the fact that governments establish the conditions for higher energy prices, as it is in the US, is mainly higher government debt (higher than any point in the 20th century, including WWII), what’s causing inflation. At the same time, high spending administrations, such as those in the US and Canada, have no incentive to cure inflation, as inflation is another way to increase “taxation without legislation,” as Milton Friedman would say. Inflation is a national monetary phenomenon, and governments will not stop printing money in 2022.

US Elections: Culture vs Environmentalism

2022 mid-term elections will establish the rest of the Biden’s administration ability to govern and shape policy. Each party would hold to their most potent political issue. The incumbent Democratic party will rally behind climate change in a post-pandemic world. Once the pandemic becomes endemic, high spending programs will need a banner to propose legislation to convince the public that such measures are required. The Republican party, on the other hand, will most likely concentrate on cultural issues such as education and the influence of Critical Race Theory in academia, teacher unions and school curricula.

Law and order will be the banner of the GOP after increases in crime rate in the central urban districts since the backlash of movements such as “defund the police”). Usually, the incumbent party loses seats during mid-term elections. However, Republicans control most seats up for grabs in the Senate elections. It is plausible that the GOP wins the House and the Senate retained by the Democrats. Whatever the results, it will be interesting to measure the Republican party’s willingness to remain with the Trump-era style of politics and policies or move on to a “post-Trump” Republican party. At the same time, the Democrats will have to decide if the liberal or progressive wings of the party dominate their compass heading into the 2024 presidential election.

Latin America’s second pink tide

In the early 2000s, left-wing governments rose across the region culminating in the 2010s surge of conservative administrations. Now is the 2020s, and politics is a pendulum. After the Boric victory in Chile, the eye turns to Brazil and Colombia. The Sao Paolo Forum will likely win again, particularly after years of Bolsonaro unapologetic rule. Colombia is a bit more difficult to predict: it seems that a new generation of voters that grew up in the Uribe era are looking to vote out the establishment, even if it means going back to governments that resemble the pre-1990s period of instability in Colombia.

Travelling again

If the sentiment around Omicron holds, travel restrictions will likely diminish early in the year, mainly reducing themselves to rules on quarantining and perhaps vaccine mandates. COVID antigen test will probably remain in 2022, while the more expensive PCR requirements will most likely become a political liability if it turns out the new variant becomes far less consequential. Cheaper airlines alternatives will rise later in the year, concentrating on economy travelers, as business travel will most likely diminish due to technology and cultural disruptions lived for the past two years.

Remote work is here to stay

The industrial revolution changed the perspective on work, as new opportunities required workers to “go to work” for capital, technology, and productivity reasons. The pandemic most important leftover is most likely the remote and hybrid models of work. The past two years forced companies, universities, and governments to accommodate work from home, and some taboos around productivity and technology capability are gone. In an economic environment that is becoming harder to hire, competition on labor will most likely adapt to offer options to employees. At the same time, legislation will become a headache as the talent pool available becomes less constrained by geographical location and more deprived by a fiscal willingness to establish standard taxation. 

Predicting the future is a risky endeavor, and most likely, no outlet could have seen the last two years of pandemic life. As optimists, we see the opportunity that a class of empowered citizens who lived through the pandemic’s worst moments, felt the impact of government decisions in their life (for better or worse), rises and starts to act accordingly in the future. We wish this uplifting spirit to all our readers. See you in 2022. 

Carlos is an economist with studies in business and political science. He currently lives in Canada, where he is a portfolio analyst for the oil sector // Carlos es un economista con estudios en negocios y ciencias políticas. En la actualidad vive en Canadá, donde es analista de portafolios del sector petrolero

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