Geopolitical Alpha

Chapter 5The Economy and the Market

“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now, I want to come back as the bond market. You can intimidate everybody.”

— James Carville, Clinton campaign strategist, 1993, as told to the Wall Street Journal

My first experience of macroeconomic and market constraints came early, at seven years old. It was 1989, and Yugoslavia's last prime minister, Ante Marković, was trying his best to hold the country together. He was dealing with more than the rising nationalism in the constitutive republics of the country: Marković was at the center of a classic EM balance-of-payments crisis.

In Chapter 1, I explained how Yugoslavia was a Cold War knight navigating the chess game of capitalism versus communism: it was an entire country levered to geopolitics. Belgrade managed its promiscuous foreign policy while sitting astride the NATO–Warsaw Pact rift. Not only did Yugoslavia make friends in the East and the West, but it also provided the Global South with engineering knowhow, which Yugoslavia exported for lucrative foreign currency contracts.¹

Unfortunately for Yugoslavia's balancing act, a succession of external shocks destabilized the economy. The oil crisis of the 1970s hit Yugoslavia, an oil importer. Then came the 1980s, when competition from South Korea bit into the profit margins of its engineering outsourcing business. Finally, the textile industry faced competition ...