2022: A look back
In 19 days from today, we will say goodbye to the year 2022 and usher in 2023. As it is often said, time flies when you are having fun! Really?
Well, the big question here is: How much fun have you had this year? For me, as l often do at the tail end of the year, I am going to take a walk down the path we have travelled so far this year, perhaps with a bit more reflection on other economic cycles in history to assess my journey in 2022. To set off, let me just recollect how l started the year in the first place.
Advertisement
My first article for this column in 2022 was published on January 8 with the title: Uncertain certainty? In that piece, I tried to explain why you must “get right into it because perfect conditions are rare”.
“Welcome 2022! It is just a week into the New Year, but l am sure you would be able to provide some guidance on what we should expect this year, wouldn’t you?
“I bet you would. I am sure all your sentences would have some strong inferences to the pandemic and how its containment in the coming months was key to the outlook for growth. Of course, certainly this is the common-sense approach, because we are in the second anniversary of the COVID-19 pandemic, and yet there are still doubts as to whether we would be able to effectively deal with the scourge once and for all,” was my opening paragraph in the January 8 edition.
I stated further in that edition that: “There are never perfect conditions so be resolute and don’t drift off course in 2022 just because the narrative seems to be repeating all the time - and not in the line you expected. The conditions you have no control over should not bother your sleep.
The best way to deal with all the problems that you see today, be they health, economic or social, is to have a purpose-driven life. You must commit to living on purpose so that it becomes difficult foryou to just stray off course because of a shift in some key assumptions that you had made.”
All of these statements were based on events of the past year - 2021 - and how they held sway over global economic activities in 2022.
In 2021, thanks to researchers, scientists, medical and public health experts, the vaccines developed brought some relief in the fight against the pandemic, but a new variant - Omicron - was still threatening, with concerns that it could affect global growth prospects in 2022.
In effect, “the challenges will come [in 2022], but we will surmount them! Our human, market and economic resilience should see us through these difficult times too”. Ah, okay, so I said all that at the start of the year and was still optimistic about the prospects of the global economy in 2022? Sure, just read on for the reasons.
Well, today, I can also talk about the challenges of 2022 too. We are not out of the woods yet, but it is still safe to say that the coronavirus pandemic has not been as devastating as it was in the previous year. Though there are still media reports about China’s strong containment measures today occasioned by a “zero COVID-19” approach that is still a far cry from what we experienced in the previous years.
So with low-key COVID-19, major events in 2022 are largely influenced by a war in Europe and the highest global inflation rates in 40 years, which, in large part, is due to the rapid reopening of the world economy after the restrictions introduced in 2020/21 to contain the pandemic. These have posed challenges for all of us.
But as a student of economic history, what we have experienced in 2022 is not too surprising to me. Economic history is littered with stories about large fluctuations in both economic activity and prices in different periods. Stories about boom and bust cycles are common.
Yes, at the moment, the narrative about the global economy is about price increases at rates not seen in decades, with talk about the unpleasant memories of the 1970s and early 1980s.
But ain’t we in a better situation today than in the 1970s?
As Lars Rohde, Governor of the National Bank of Denmark, said on December 5: “The combination of strong demand, accommodative economic policies, disrupted supply chains and energy markets has resulted in high levels of inflation. Concurrently, Russia's invasion of Ukraine has further pushed up energy and food prices. So we know the reasons this time around!”
As I explained in the April 11, 2020 edition of this column, it is not always easy to spot and explain all economic situations. “The truth is that even though we have seen periods, such as the global financial crisis of a little over a decade ago that had some greedy and unethical market players causing Wall Street problems to affect the main street, by and large, the cycle of good times and bad times goes unexplained or is not easily spotted,” I wrote in the April 11, 2020 edition.
Thus, “It is partly for this reason that ‘sunspot theory’ by the 19th-century British economist William Stanley Jevons became one of the first intellectual efforts to understand the rhythms of market economies. Jevons’s cosmological explanation of the boom-bust cycle was based on an 11-year cycle of sunspot activity identified by astronomers of the day, which in his view, influenced the earth’s climate and, therefore, as it had impact on crops, the knock-on effect was the economy - here again the crop yield determining economic expansion and contraction. Subsequent to Jevons’s cosmological explanation of the boom-bust cycle, other economists have pointed to causes more firmly rooted on earth and, specifically, in the doings of the planet’s most enterprising species: humans,” I stated further in the referenced edition.
In times past, in fact before the industrial revolution, the world was not technologically advanced like it is today, so agrarian economies depended on natural forces to determine whether the harvest in a particular season would be a bumper harvest or that there would be famine due to the poor nature of the harvest. Weather patterns or the general climatic conditions were beyond the understanding of many farmers.
Well, beyond the 19th century attempt to explain economic cycles by Jevons are other works by other economists such as John Stuart Mill, Clément Juglar and Nikolai Kondratieff. And as has been agreed in academic circles, all the subsequent theories shared the notion that there were predictable rules and principles, akin to the laws of nature that explained economic cycles.
So what am I saying? Simply put, 2022 may not have gone down the way you had expected, much the same way that the pandemic brought markets down yet again, after signs of strong recovery following the global financial crisis, which came to a boil in 2008. But this should not be the time for despair, as markets have shown over the years that they have the resilience to bounce back quicker than any other form of intervention.
The market correction will happen. And by the way, there are still opportunities that lie hidden in today’s market too. Be bold, when others are fearful.