When the world’s business and political leaders gathered in 2018 at the annual economic forum in Davos, the mood was jubilant. Growth in every major country was on an upswing. The global economy, declared Christine Lagarde, then the managing director of the International Monetary Fund, “is in a very sweet spot.”
Five years later, the outlook has decidedly soured.
“Nearly all the economic forces that powered progress and prosperity over the last three decades are fading,” the World Bank warned in a recent analysis. “The result could be a lost decade in the making — not just for some countries or regions as has occurred in the past — but for the whole world.”
A lot has happened between then and now: A global pandemic hit; war erupted in Europe; tensions between the United States and China boiled. And inflation, thought to be safely stored away with disco album collections, returned with a vengeance.
But as the dust has settled, it has suddenly seemed as if almost everything we thought we knew about the world economy was wrong.
firsmode on June 21st, 2023 at 13:01 UTC »
Why It Seems Everything We Knew About the Global Economy Is No Longer True
While By Patricia Cohen
Patricia Cohen covers the global economy and is based in London.
June 18, 2023, 3:00 a.m. ET
When the world’s business and political leaders gathered in 2018 at the annual economic forum in Davos, the mood was jubilant. Growth in every major country was on an upswing. The global economy, declared Christine Lagarde, then the managing director of the International Monetary Fund, “is in a very sweet spot.”
Five years later, the outlook has decidedly soured.
“Nearly all the economic forces that powered progress and prosperity over the last three decades are fading,” the World Bank warned in a recent analysis. “The result could be a lost decade in the making — not just for some countries or regions as has occurred in the past — but for the whole world.”
A lot has happened between then and now: A global pandemic hit; war erupted in Europe; tensions between the United States and China boiled. And inflation, thought to be safely stored away with disco album collections, returned with a vengeance.
But as the dust has settled, it has suddenly seemed as if almost everything we thought we knew about the world economy was wrong.
The economic conventions that policymakers had relied on since the Berlin Wall fell more than 30 years ago — the unfailing superiority of open markets, liberalized trade and maximum efficiency — look to be running off the rails.
During the Covid-19 pandemic, the ceaseless drive to integrate the global economy and reduce costs left health care workers without face masks and medical gloves, carmakers without semiconductors, sawmills without lumber and sneaker buyers without Nikes.
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Calverton National Cemetery in New York in early 2021, where daily burials more than doubled at the height of the pandemic.Credit...Johnny Milano for The New York Times

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Caring for Covid patients in Bergamo, Italy, in 2020. Cost-cutting and economic integration around the globe left health care workers scrambling for masks and other supplies when the coronavirus hit.Credit...Fabio Bucciarelli for The New York Times

The idea that trade and shared economic interests would prevent military conflicts was trampled last year under the boots of Russian soldiers in Ukraine.
And increasing bouts of extreme weather that destroyed crops, forced migrations and halted power plants has illustrated that the market’s invisible hand was not protecting the planet.
Now, as the second year of war in Ukraine grinds on and countries struggle with limp growth and persistent inflation, questions about the emerging economic playing field have taken center stage.
Globalization, seen in recent decades as unstoppable a force as gravity, is clearly evolving in unpredictable ways. The move away from an integrated world economy is accelerating. And the best way to respond is a subject of fierce debate.
Of course, challenges to the reigning economic consensus had been growing for a while.
“We saw before the pandemic began that the wealthiest countries were getting frustrated by international trade, believing — whether correctly or not — that somehow this was hurting them, their jobs and standards of living,” said Betsey Stevenson, a member of the Council of Economic Advisers during the Obama administration.
The financial meltdown in 2008 came close to tanking the global financial system. Britain pulled out of the European Union in 2016. President Donald Trump slapped tariffs on China in 2017, spurring a mini trade war.
But starting with Covid-19, the rat-a-tat series of crises exposed with startling clarity vulnerabilities that demanded attention.
As the consulting firm EY concluded in its 2023 Geostrategic Outlook, the trends behind the shift away from ever-increasing globalization “were accelerated by the Covid-19 pandemic — and then they have been supercharged by the war in Ukraine.”
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A view of the destruction in Bakhmut, Ukraine, in May.Credit...Tyler Hicks/The New York Times

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Ukrainians lined up to receive humanitarian aid in Kherson last year. Trade and shared economic interests weren’t enough to prevent wars, as once thought.Credit...Lynsey Addario for The New York Times

It was the ‘
Successful_Ride6920 on June 21st, 2023 at 11:00 UTC »
Really enjoyed the article, thanks for posting.
BlueEmma25 on June 21st, 2023 at 09:31 UTC »
Unpaywalled Version
Submission Statement:
Yup.
This article from the New York Times offers some useful perspective on how the world built by neoliberalism and globalization since the collapse of the Soviet Union in 1991 is unravelling before our eyes, particularly with respect to the three tenets of accepted economic orthodoxy mentioned above: that open markets are optimal, that trade liberalization benefits everyone, and that economic efficiency should be prioritized over other considerations in determining business and trade policy.
Faith in the ability of free markets to efficiently allocate capital was shaken by the 2008 financial crisis and the realization that free markets can offer no solution to a problem like global warming. Trade liberalization contributed to mounting wealth inequality and diminished prospects for many workers in Western countries, fueling the growth of right wing and populist political movements. COVID exposed the dangers of maximizing supply chain efficiency at the expense of robustness and security. And the Russian invasion of Ukraine put another nail in the coffin of the quaint idea that greater economic interdependence will prevent wars.
As is often the case in a period of transition it is easier to see where we have been than where we are going. We can see that the bold prediction Francis Fukuyama made in 1992, that the fall of the Soviet Union marked the final triumph of Western liberal democracy and capitalism - "the end of history" as he melodramatically styled it (following Hegel) - has not been born out. Integrating China into the global economy for example did not lead to democratization and more freedom. Indeed today there are growing doubts about how secure democracy is even in Western countries where it has long been taken for granted.
We don't know for sure what the future holds, but it seems safe to conclude now that it will be significantly different than the future many confidently predicted a generation ago.