The top threats to the global economy and prosperity in 2023

Watch the event

Event transcript

Uncorrected transcript: Check against delivery


Michael Fisch
CEO, American Securities; Chairman of the Advisory Council, Freedom and Prosperity Center, Atlantic Council


Frederick Kempe
President and CEO, Atlantic Council

FREDERICK KEMPE: So Michael, before I get into conversation with you, which I’m really looking forward to, how typical is that of Dan to give the credit to others when he has just done the most remarkable thing we could possibly imagine, executing on your vision, which we’re going to talk about, calling me the founder, which is a little laughable, because we know you are the founder and you are the founding senior director. And I’m really delighted to be along for the ride and [be given] the credit.

I want to say a couple of things about Dan before you and I get in the conversation because I think you need to know who this person is. We have an intellectual-entrepreneurship model. Inside of him, he has—the intellect and the entrepreneur—he has public-private partnership built into his own body: a defector from communist Romania; finance ministry official who negotiated with the [International Monetary Fund] and World Bank; and then, in the United States, three decades on Wall Street—I think he raised fifteen billion dollars over that period of time, a little bit more than I’ve raised in my career; and then senior official at the State Department, special rep for commercial and business affairs, other jobs. But what really sets him apart is, wherever he goes, he makes a difference.

So Dan, thank you so much for everything you’ve done here.

And now, Michael, let’s get into a conversation. None of us are here, none of you would be listening to us online from fifty-six countries around the world if it weren’t for Michael Fisch and his vision. So I think a really great way to kick off this day would be to have you tell us where it came from. What are the origins of this vision? What motivates you to back this—it used to be a dream. Now it’s a reality.

MICHAEL FISCH: Well, thank you, Fred. And thank you for having me. And you stole some of my words for Dan, which, you know, I’ve known the man for almost thirty years. And he’s going to come back full circle at the end of my remarks. But I’m very, very grateful to Dan, as I am to you and the Atlantic Council, and grateful to be here and so proud of the work that’s being done.

So the origin story here is in 1980, I’m sitting in an early economics class in college, and it’s macroeconomics. And, of course, when you have macroeconomics, lots of numbers in it. Numbers are changing a lot. That makes good graphs and lots of data because, you know, early students aren’t so good at small changes.

And so we were studying a lot of time in South America. And it was amazing to me, you know, Argentina after the coup in 1962 and 1966, you know, Brazil after their coup in 1964, and other countries that did, and the longitudinal and latitudinal data. Every time a country went away from free markets and free elections, it typically trashed the economy. And of course, that hurts the poor and the marginalized. And this idea just stayed with me, and I periodically came back to it and didn’t really know what to do with it.

And then in addition to my work stuff, I became very involved with Human Rights Watch and sat on their board for many, many years, and about a decade ago Chris Stone, who was then running the Open Society Foundation, was answering a question that we’ll get to maybe which are what are the problems of the world and whatnot, and he was up there in a podium as we were on some board retreat and it just—this what I call a Venn diagram came back to me that the best outcomes were, as Dan and you eluded, countries that had free and fair elections—we now call it free and fair markets and respect for law, property rights, human rights—and that that intersection would be the best outcome for the poor and the marginalized, and I had to do something about that.

And so like most impressionable novices in the field, I went back to my alma mater and tried to get them to do something, and so I financed some things, and they hired some fabulous professors who have just done great research. But it just wasn’t the research I wanted to do here.

And then I went to the two top business schools in the country where I have some relationships, and they both loved it and started down the path with one of them and they loved it because they said this is kind of right and no one’s written about it. Like, the research isn’t out there but the idea is statistically, seemingly, valid.

But then things got in the way. A professor that I was close to got diverted. And then two years ago, kind of right now, a man showed up in my living room who I’d known for a bunch of years, for almost thirty years, who was leaving government and that was Dan.

And after we caught up and we talked about this, that, the other thing, our lives, his lovely wife and so on, my kids, he said, so what are you interested in? And so I said, well, you know, this idea is one I’ve had for so long and I really want it to go somewhere and I’m really stuck. And Dan said, hmm, that’s kind of interesting, in a very Dan kind of way. With a smile and with his energy he said, you know, maybe we can do something on this.

And so, really, Dan took this idea and started meeting with a bunch of potential partners because we were always a partnership model. And he met [Matthew Kroenig] and other people here, and then ultimately you. And Dan’s enormous energy, his vision, all of the partners that have joined him—your support, Fred, is critical. That’s it. It’s all Dan. It’s all you.

FREDERICK KEMPE: So one follow-up on that. In this vision, there are indexes. [There are] papers. [There are] partners around the world that Dan introduced. How do you measure success and how should we be measuring success with this center?

MICHAEL FISCH: You know, honestly, Dan and the team and you will know that better than me. But for my thinking, the first thing was to prove what I call the null hypothesis. Do the real research to, hopefully, prove that the best outcome for all people, but especially the poor and the marginalized, is economies, countries that are operating at the center of free and fair elections, free and fair trade, and human rights, property rights, that whole legal framework that makes it all hang together. Because rhetoric back and forth is just rhetoric and fighting facts is hard.

So, first, developing the facts. I think with the publishing of the indexes, you know, in May/June last year, I think that’s pretty much proven—you know, a better than 0.8 correlation [between prosperity and] freedom.

But then the second thing is impact. So this is the other thing that came to me over the years. The biggest problem is when a formerly free country loses an election and chooses some other form of government [that doesn’t have] free and fair elections, free and fair trade, and not losing that election especially to rhetoric, and so having an impact in individual countries so they continue to choose the best outcome economically or a different path with the honest facts, not rhetoric of a charismatic politician. And so getting that information out there, which is why [the Acton institute and Atlas Network] and other partners are so critical is, I think, the other way to determine success.

FREDERICK KEMPE: That makes a lot of sense. You know, from our standpoint—and this gets to what Dan was talking about our mission of shaping the global future together. There are three elements for that; the first is shaping, and a lot of organizations like to admire problems, they like to write papers, have events, but we want to shape. We want to move the needle. And so I think this center endeavors to do that. The “together” point, which Dan touched on as well—in our view, the Atlantic Council should never be America alone, from behind or first; it should always be America with partners and allies, just like it’s the center with partners and allies. But the middle part is the part that probably animates the Atlantic Council as much as anything, and that is the global future, which we think is up for grabs.

And so across our sixteen programs and centers, we understand—some of the function of some of them, regional and collaborative, as much collaborative as we can—we understand that this is an inflection point in history as important as the end of World War I, important as World War II, as important as the end of the Cold War. And you have three potential outcomes in the global system. One of them is we take the system that’s created after World War II and reinvigorate it; we reinvent it; we bring in new actors; we take on new issues. The second is it could be [a] much more illiberal system, a little bit more moving away from rule of law, moving away from [an] assurance of rights. And the third is [the] law of the jungle, chaos, the sort of thing we’re seeing with Putin’s war in Ukraine.

And so, you know, just thank you time and time again, Michael, because I think this fits and represents so much that we do at the Atlantic Council and it fits in our worldview and where we see a contest of ideas; we see a contest for who’s going to shape the global system going forward. But you know, when you’re not dealing with the Atlantic Council, when you’re not dealing with other sort of noble causes that you support, you’re in the real world looking at the real economy, the real challenges of the real world, and I’d just love to—you know, leading one of the top investments firm in the United States, I’d love to hear from you how you look at this period of time, particularly economically and particularly 2023. What do you see as the defining issues for the US, for the global economy?

And so in a way drawing ourselves a little bit away from the work of the Center at the moment and getting a little bit more into how you’re understanding the real world of where—I’ve just come back from Davos. Last year we had geopolitical shock, macroeconomic shock, and energy shock all at the same time, and I felt there that there was some uncertainty going into 2023, so I’d just love to hear how you’re thinking about this year and in general.

MICHAEL FISCH: Well, that’s a big topic. I could make jokes that I didn’t know Davos was the real world.


MICHAEL FISCH: You know, I think at the highest level, if I separate it, which is not quite your question, but I think our biggest threats are common threats: air, temperature, disease. And we’ve seen that with COVID-19, and there are people in Africa [for whom] global warming means the crops don’t grow anymore; they are starving. Air is a common good. We can’t have one country polluting massively and not think it affects everyone else. So how we as a society maintain our biosphere in the broadest sense is, I think, the biggest threat we all have. And then if you come down a level to threats that are not that global and—I think we’re seeing, and you mentioned it, Fred, problematic actors represent a real threat to the global economy and to, you know, the poor and the marginalized in different countries.

I mean, I grieve regularly for people in various towns in Ukraine who are bombed out of existence for doing nothing. It just breaks my heart. I worry about the tension between China and Taiwan that has the potential to spin out of control. By the way, going back to Ukraine, you have the threat of nuclear weapons, another bad thing. And even, you know, Iran would be the third kind of problematic actor. So I worry about, as you were saying, the jungle mentality that could creep in without more safeguards, more global alliances, more fundamental respect for the rights of others. So those are kind of the big things that I worry about.

Now, if you get to the small-minded things like how are people, you know, that are lucky enough to have a job and wear a tie going to do good things for their constituents? Interest rates, commodity prices, and global trade, you know, are the big things in 2023. But I like to say these are all macroeconomic notions. And I love—many of my friends are economists. I love them. But economists are usually wrong, and especially at inflection points when we need them to be right. So, you know, you can’t really plan on that. You just kind of worry about it and watch it and try to navigate in the environment that you’re given. But we don’t try to predict that, because we’ll be wrong, because we’re not better than economists.

FREDERICK KEMPE: Yeah, the dismal science. Since you’re not an economist, I am going to ask you to predict 2023. You’re right. Davos isn’t the real world. But there are a lot of people there who are managing risk. There are a lot of people there who are looking out at the world.

I’ve seldom seen a situation where you’ve just come out of this really shocking year—worst war since World War II, really future of the global system and Europe at stake, I think, over Ukraine’s victory. There’s so much more at stake in this than Ukraine itself.

But looking at 2023, there was this strange ambiguity between optimism and pessimism, some people feeling, well, worst-case scenarios were avoided last year. Ukraine hasn’t fallen to Putin. Inflation didn’t get totally out of hand and seems to be coming back [down]. The world economy didn’t totally tank. And so there was this worst-case scenarios were averted.

But there was also, looking at 2023, not really knowing which way this is going to bend, optimistic or pessimistic. And this is the world in which you operate. And I’m just wondering how you’re—are you looking at this year as an optimist, a pessimist, something in between?

MICHAEL FISCH: Well, we like to say proudly, Fred, we’ve predicted seven of the last three recessions. So you always think it’s going to be worse.


MICHAEL FISCH: You’re taking action. You’re prepared for problems. And you’re thrilled when they don’t occur.

You know, just looking back—and, you know, hindsight’s always 20/20—when we as a country dumped $4.5 trillion into the economy during COVID-19 in terms of support for state and local governments, support for companies in terms of payroll protection, and support for individuals in terms of income security, we didn’t know, but we were telling our portfolio companies, the CEOs that run them, that they should be planning for inflation, because you can’t dump $4.5 trillion into an economy and not have inflation, like it just has to follow.

And so whether—on the old definition, we would already have been in a recession. And on the new definition, they haven’t called it, and we may be coming out of it and [avoiding] it. But economically, certainly the men and women running businesses in this country—all of our portfolio companies are US-headquartered—they’re acting like we’re in a recession or going into a recession. And if I look across the budgets of roughly thirty businesses we’re invested in, on average—which is, you know, a great exaggeration—there’s a wide range—managements are expecting, you know, 5 percent revenue increase, 10 percent profit increase.

I think that would be awesome if they can achieve that this year. I think there are threats to that. There are demand issues. You know, again, lower-income consumers in this country are under tremendous pressure. If you look at Walmart’s releases, massive shift from consumer products—generally branded consumer products, which tend to be higher—you know, brand-name ketchup, brand-name mustard—to store brands.

And that’s a sign that while people are spending, it’s on energy, gasoline, and housing. And they’re being squeezed on discretionary—if you want to call [it] discretionary—but how you spend those food dollars. So that’s a sign of problems in the economy in the real world in the lower socioeconomic levels. And so I hope—I hope we avoid a recession. That’ll mean less suffering. Or, we’re coming out of a recession that people haven’t really felt in large measure in a terrible way. But I worry about that.

FREDERICK KEMPE: Let’s link that to your work, to Dan’s work in the Atlantic Council, this optimism/pessimism question. If you look at Freedom House measurements, they would say, and do say, that we reached sort of peak democratic freedoms spreading around the world in 1993, and we’ve been in sort of a recession since 2006. But yet, here our indexes and numbers show that you need democracy, freedom, and that’s linked to prosperity. It’s not—it’s a more sustainable path from what our research is showing. A more sustainable path and a readier path. And you were talking about some of the issues with the marginalized and the poor in your last answer.

Is there a reversal in store? Could there be a new wave of democratic change? You know, the indicators would show this is a better way to go forward. The indexes would show this is a better way to go forward. How do you feel in terms of—and we can show the facts—but how do you see the trajectories?

MICHAEL FISCH: I worry about them like you do. It may give him too much credit, but some would say Putin is one of the most problematic figures of the latter half of the twentieth century, because he, on a broad scale, showed how you can hijack a… democracy. And a lot of other problematic countries have followed that. I won’t name them, but they’re kind of obvious out there. And once you’ve lost that, it’s easier to hold onto power and it’s hard to reverse that domino.

I mean, the tragedy that the Russian people are going to experience, and are experiencing, because of the global sanctions, you know, the cost of the Ukraine war, might cause, you know, some change in the government there. But it doesn’t reverse [easily]. And so not losing that first election is really good, and then waiting out a change.

Because I think you’re right, it’s very—it’s hard to be optimistic that more countries have become free in the last decade, and easy to become pessimistic. And reversing the train, if you lose that first election, is hard. And that’s why the work that Dan and the center [are] doing, and you’re supporting, is, I think, going to be fundamentally critical to so many people.

And I have to say one other thing. And it’s particularly the poor and the marginalized. I read some research report that, you know, COVID-19 really affected more people of lower socioeconomic status. And I was like, everything bad always affects people more of lower socioeconomic status. And it’s just so important for those people on the edge that they not fall out of a living wage, the ability to have a better wage, and a brighter future for themselves and their families.

FREDERICK KEMPE: That’s so interesting. And I think maybe that explains—I’ll end this little part with a question for you. But that may explain why in my recent travels you see, on the one hand, a growing consensus in the, quote/unquote, “West,” and US, and allies, and friends of Ukraine that the future of the global system is at stake, with Ukraine preserving its democracy, sovereignty, freedom, and Putin losing his criminal war in Ukraine. Yet, in the global south, that’s not as widely held. The Ukraine war seems very distant there.

So you’ve had forty—roughly forty countries join the sanctions against Putin. But you had 140 not. And particularly, you know, places like India, South Africa—where Putin just visited—Brazil, and elsewhere. And, you know, in—at the World Economic Forum, you had—I never thought I’d hear Henry Kissinger reversing his long years of opposition for Ukraine joining NATO. Not now, but when this is resolved.

Human-rights lawyer—Nobel Prize-winning human rights lawyer Olexandra Matviichuk: This is somebody you would think is all about peace. And she’s saying, the only way to deliver peace and human rights to Ukraine is more modern weaponry, fast. So long-range fires, armor, et cetera. And then we had Boris Johnson here yesterday with Rob Portman—former Senator Rob Portman, are arguing that it’s now a time for a surge.

Is that much at stake over Ukraine, in your view? And where is this split between the global south and the US and its partners on this? Because it’s quite pronounced.

MICHAEL FISCH: You ask great questions. They defy easy answers, Fred. You know, my—and I don’t—there are people, you and others, who have greater thoughts about this than I do. Certainly, I think, if one wants to be optimistic, it is amazing what Russia’s attack on Ukraine has caused. I mean, [Sweden’s] neutrality. The Swedes sending offensive weapons, not just twelve helmets. I mean, it’s amazing. So the recognition that we need a mechanism to contain problematic stronger global forces from wrongfully attacking weaker forces and uniting, you know, the free world, is really a cause for optimism. So I agree, that’s really important.

But I think, to the second part about a lot of the world doesn’t necessarily see it that way, I think, you know, we have to be taking note of that. And it’s yet another wake-up call that the research that the Freedom and Prosperity Center is doing, that’s the work. It’s not our opinion of it, it’s the actual research. Because we can’t be preaching from Washington or other Western global capitols. We have to be, if we’re at our best, providing tools for people to come to their own decisions and make their own determination, and saying it that way.

Because some of those actors are themselves, I’ll call them, thugocracies. So you don’t—you expect that they’re going to stay the course, and perhaps be more inclined to support other aggressive actors, as long as they’re not in their backyard. But there’s the persuadable middle and the rest that we don’t do a great job of capturing the hearts and minds because I think we preach too much and share information, [and] encourage support too little. And we have to be very, very sensitive to that.

FREDERICK KEMPE: I love that answer. I think that’s a good place for me to ask you one short final question, and then pass back to Dan. Because what you’re talking about is sometimes we do too much to preach. Sometimes it’s too much about rhetoric. And I think what we’re trying to do with this Freedom and Prosperity Center, and the Freedom and Prosperity Research Conference, is fact-based argument in controvertible facts, indexes that are based on facts. And if the facts, you know, are in contradiction, then have it out. Let’s talk about it. Let’s have a real open conversation about it. So what do you hope will come from this research conference today? And what do you—what are you going to be listening for most closely?

MICHAEL FISCH: Well, I love that [there are] so many smart people here and on the phone who have access to their own data, and their own hypotheses, and, you know, making their research academic quality, peer-reviewed, and correcting errors. You know, nothing’s perfect. And making it better and better so that it’s an appropriate tool. And we think it’s the best tool. And it has third-party verification. So that’s the first thing, back to the core mission: Have these indexes proved something which is a gift to the world, that is usable?

And the second is, have it be useable. So influence, not by rhetoric but by facts, the debate that countries want to have within themselves. Governments, nongovernmental organizations, civil society, educators, and ultimately the voting population in countries so that this is—they’re thinking about this when they go to the ballot box, which hopefully they get a chance to do in free societies.

FREDERICK KEMPE: Michael, thank you for your vision. I hope we’re going to make this an annual affair, and if so we’ll have this conversation again and see where we are twelve months from now. But thank you for your vision.

Watch the event