Project Syndicate The Year Ahead 2020: (De)Reconstruction

Chief Economist of the ING Group AS I POINTED OUT IN 2018, economists who continue to ignore the far-reaching disruptions that are underway do so at their peril. The years since the global financial crisis have exposed fundamental flaws in mainstream macroeconomic thinking. We are living in a world of deep structural instability and uncertainty, in which policymakers have had no choice but to look for new policy tools. As in previous years, the major central banks struggled to hit their inflation targets in 2019, even amid low or declining unemployment. After moving toward monetary-policy normalization, the US Federal Reserve has since switched gears, cutting its policy rate. Meanwhile, the European Central Bank has launched another round of asset purchases to accompany interest-rate cuts. And yet, the long-term effects – politically, economically,…

AS IN THE DECADE FOLLOWING THE 2008 financial crisis, another economic crash could have far-reaching political consequences. The future of liberal democracy already appears at risk. In the US, the report by Special Counsel Robert Mueller, which revealed ample evidence of Trump’s attempts to obstruct justice, and of his presidential campaign’s delight at the help it received from a hostile foreign power, was duly forgotten within weeks. Yet in the ensuing months, new evidence of Trump’s abuses of power continued to pile up. With Democrats in the House of Representatives having now launched a formal impeachment inquiry, continued partisan gridlock in Washington, DC – potentially leading to yet another government shutdown – seems all but assured. In the United Kingdom, Boris Johnson’s arrival in 10 Downing Street soon put a deeply…

University Professor at Harvard University BOTH THE BAD NEWS AND THE GOOD news is that economics and politics will start 2020 in a parlous state. The global economy could fall into recession, and the risk of major political or even military confrontation is higher than it has been since the end of the Cold War. From a more optimistic perspective, with expectations very low, it will not take much to generate positive surprises that could lead to a virtuous circle of economic improvement and less toxic politics. Start with the economics. The International Monetary Fund has coined the term “synchronized slowdown” to refer to our current predicament: growth is decelerating in 90% of the world economy and is expected to be slower overall than at any time since the financial crisis. It…

University Professor at Harvard Law School TRUMP’S RISE TO POWER HAS ALSO raised questions about some of the Constitution’s most solidly entrenched provisions. His victory in 2016 highlighted the dangers posed by the Electoral College in the face of changing demographic realities, and now his presidency is testing the viability of the impeachment process to cope with a demagogue who has captured the machinery of an entire political party and controls one chamber of Congress. Some have argued that the Trump presidency represents no more than a mere “blip” in American history. Justice Ruth Bader Ginsburg believes that historians will view our current moment as no more than “an aberration.” Others have suggested similar notions, characterizing the question of Trump’s long-term impact on American politics and society as up for debate. The…

2019 Nobel Laureate in Economics 2019 Nobel Laureate in Economics THE INTERNATIONAL MONETARY FUND, the Asian Development Bank, and the OECD have downgraded their growth estimates for India in 2019-20 to around 6%, which would be the lowest since the beginning of the decade. Others claim that even this is optimistic and project much more dire narratives. For example, Arvind Subramanian, until recently the Indian government’s chief economic adviser, has argued, based on triangulating evidence on various economic indicators, that growth may sink as low as 3.5%. In China, GDP growth has slowed from 14.2% in 2007 to 6.6% in 2018. The IMF projects that it might fall to 5.5% by 2024. Rapid growth there and in India have lifted millions out of poverty, and the slowdown is likely to impede progress on…

Former Chairman of Morgan Stanley Asia HISTORIANS HAVE BEEN QUICK TO point out that the mounting tensions between the US and China lack the ideological component that many believe was the defining characteristic of the first Cold War. That may be true, but so what? The possibility of a protracted conflict between the world’s two largest economies, whatever its cause, should not be taken lightly. Nevertheless, even if there is a permanent fracture between the US and China, the $87 trillion global economy is unlikely to split into two blocs in 2020 and beyond. The reason is simple: bilateral action cannot divide a tightly linked multilateral trade system. Today’s global economy is far more integrated than ever before. Despite a protracted slowdown of world trade growth in the aftermath of the 2008-09 global…