At least there were only four horsemen of the apocalypse. But reflecting today’s rampant inflation, Nouriel Roubini now identifies 10 so-called megathreats, spanning various economic, financial, political, technological and environmental disasters. “Sound policies might partially or fully avert one or more of them, but collectively, calamity seems near certain,” Roubini jauntily concludes. “Expect many dark days, my friends.”
Readers of a nervous disposition may want to file this book in the bin before they turn a page. Those braced for an ice bath of pessimism may profit from its gloomy insights about the state of the world. Roubini’s warnings may be alarmingly scary, but they are also disturbingly plausible. One only prays that policymakers have better solutions than the author unearths.
Roubini certainly has form in predicting calamity and investors have learnt to ignore him at their cost (as he quips, he’s graduated from “being a Cassandra to a sage”). The Turkish-born American economist was labelled Dr Doom for warning of a housing crash ahead of the global financial crisis of 2008. But he cavils at this nickname because, he claims, it fails to recognise that he examines the upside with as much rigour as the downside. “If I could choose my nickname, Dr Realist sounds right.”
Little reassured, the reader confronts an avalanche of coming catastrophes.
On his specialist subject of economics, Roubini warns in Megathreats that the debt crisis of our lifetimes lies ahead. The entire world resembles the financial delinquent that is Argentina that has defaulted on its debt nine times since its independence in 1816. By the end of 2021, global debt, both public and private, exceeded 350 per cent of the planet’s gross domestic product. The Mother of All Debt Crises (Roubini capitalises the phrase to emphasise the point) looks inevitable either this decade, or next.
Every possible remedy to this looming debt disaster brings its own perils: the paradox of thrift, the chaos of defaults, the moral hazard of bailout, the wealth or labour taxes that kill investment or hit the most needy, the inflation that wipes out creditors. “Choose your poison,” he writes. The latest infatuation with modern monetary theory, keeping interest rates low while piling up more debt, will only lead to a different form of reckoning.
As if explicit debts were not enough to worry about, implicit debts are even more alarming. Even the richest societies are not rich enough to deliver on all the promises made to the swelling ranks of pensioners. The Organisation for Economic Co-operation and Development has estimated that unfunded or underfunded government pension liabilities in the top 20 economies amount to a staggering $78tn. “Implicit debt is a major time bomb and a severe megathreat.”
Roubini doubts that our current crop of central bank governors are up to the challenge. Outstanding economists, such as the Federal Reserve’s Ben Bernanke (who has just been awarded the Nobel Prize) and the European Central Bank’s Mario Draghi, have been replaced by the current crop of lawyers and regulators. The strong likelihood is that they will do nothing to stop stagflation — the painful combination of stagnant growth and rising prices — that will make the 1970s look like a warm-up act. That will only lead to a Great Stagflationary Debt Crisis (note those capitals again).
Further currency meltdowns and economic instability will follow. The financial weakness of Greece and Italy may yet trigger a collapse of the European monetary union. Financial turmoil will also lead to more protectionism and the reshoring of industrial production. That will accelerate deglobalisation and the further fragmentation of our interconnected world.
Naturally, Roubini takes a dismal view of the impact of artificial intelligence, which is already leading to dangerous concentrations of corporate power, widening social inequalities and the spread of disinformation that undermines democratic politics. Such is the power of AI that it will destroy swaths of white-collar jobs and lead to mass technological unemployment. “I do not see a happy future where new jobs replace the jobs that automation snatches. This revolution looks terminal,” he writes.
The fight for technological supremacy between the US and China will further aggravate existing geopolitical tensions. That could well trigger a war between the two rival superpowers. Roubini airs the view that Washington’s previous embrace of China might count as the worst strategic blunder by any country in recent times because it accelerated the rise of a deadly, authoritarian rival. “China will become the largest economy in the world, there’s no doubt about that — it’s only a question of when,” he writes.
By this point, you might be able to guess Roubini’s conclusions about the climate emergency. All economic or technological fixes that stand any chance of addressing the scale of the problem (think global carbon taxes or direct air capture) are either politically impossible or prohibitively costly. The one million or so refugees who entered the EU in 2015, causing a massive political backlash, is only the prelude to the vast migrations of peoples to come. And Roubini suggests that with only 17mn people in Siberia, Russia’s far east may well be colonised by the Chinese, fleeing the consequences of climate change.
What, if anything, can be done to counter these megathreats? Not much, Roubini miserably concludes. Only seven pages of his book are devoted to a more Utopian future. While it is hard to dispute much of Roubini’s analysis, it would at least have been worth noting that humanity has experienced, and endured, many terrible times in the past. The world was not a happy place in 1941 but the global scourge of fascism was ultimately defeated. Great crises have often galvanised collective action that was unpredictable at the time.
The one possible Hail Mary pass Roubini sees is technological innovation leading to a surge in economic productivity and environmental improvement. Strong, inclusive, sustainable economic growth of more than 5 per cent a year could check many of these dangerous trends and enable us to afford universal basic income.
This reviewer was glad to see that one of his own articles on the promise of nuclear fusion energy provided some comfort to the author. But even on the most optimistic of assumptions, plentiful, cheap and green fusion energy remains decades away. “For anything resembling a happy ending to happen, computers poised to displace us must come to our rescue,” he writes. Despite the dangers, we had better bet on AI.
Megathreats: The Ten Trends That Imperil Our Future, and How to Survive Them by Nouriel Roubini, John Murray £20/Little, Brown $30, 320 pages
John Thornhill is the FT’s Innovation Editor
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Source: Economy - ft.com
