Sleepwalking on Mount Megathreat is not recommended

Where interest rates were once very low—or even negative—they have risen sharply over the past year, raising the cost of borrowing and raising the risk of a debt crisis. The era of hyper-globalization, free trade, offshoring, and just-in-time supply chains has led to a new era of deglobalization, protectionism, re-shoring (or “even ‘buddy-shoring'”), safe trade, and ‘equitable supply chains’. has entered the era of ‘in-case’ supply-chain redundancy.

In addition, new geopolitical threats are increasing the risk of both cold and hot wars and further balancing the global economy. The effects of climate change are becoming more severe, and at a much faster rate than many people expect. Pandemics are also likely to be more frequent, fiercer and costlier. Advances in artificial intelligence, machine learning, robotics and automation are threatening to produce greater inequality, permanent technological unemployment and deadlier weapons with which to prosecute unconventional wars. All these problems are fueling a backlash against democratic capitalism, and empowering populist, authoritarian and militaristic extremists from both the political right and left.

what I have called ‘megathreats’, others have called ‘polycrisis’, which financial Times has recently named it as its buzzword of the year. Meanwhile, Kristalina Georgieva, managing director of the International Monetary Fund, talks of a “confluence of disasters”. He warned last year that the world economy was facing “perhaps its greatest test since World War II”.

Similarly, former US Treasury Secretary Larry Summers argues that we are facing the most acute economic and financial challenges since the 2008 financial crisis. and in his latest global risk reportThe release comes just before the World Economic Forum (WEF) gathered in Davos this month to discuss “cooperation in a fragmented world”, warning of “a unique, uncertain and turbulent decade ahead”.

Thus, whatever one’s preferred terminology, there is broad agreement that we are facing unprecedented, unusual and unpredictable levels of uncertainty. In the near term, we can expect greater volatility, higher risk, more intense conflict, and more frequent environmental disasters.

In his great inter-war novel, the magic mountainIn , Thomas Mann portrays the intellectual and cultural climate – and the madness – that led to the First World War. , His story unfolds in a sanatorium that was inspired by one he visited in Davos, the same mountain resort (Schutzelp Hotel) where WEF-related events are now held.

This historical connection is very appropriate. Our current age of megathreats is similar to the tragic 30-year period between 1914 and 1945, which far outstrips the 75 years of relative peace, progress, and prosperity that followed World War II. It is worth remembering that the first era of globalization was not enough to prevent a descent into world war in 1914. That tragedy was followed by a pandemic (the Spanish flu); the stock market crash of 1929; the great Depression; trade and currency wars; Inflation, hyperinflation and deflation; financial crisis and massive defaults; And the unemployment rate above 20%. It was these crisis conditions that underpinned the rise of fascism in Italy, Nazism in Germany, and militarism in Spain and Japan, which culminated in WWII and the Holocaust.

But as dire as they were 30 years ago, today’s megathreats are in some ways more ominous. After all, the inter-war generation didn’t have to deal with climate change, AI’s threats to employment, or the inherent liabilities associated with social aging (since social-security systems were still in their early days, and most elderly people received died before receiving his first pension check).

Furthermore, the World Wars were largely conventional conflicts, whereas now conflicts between major powers can increasingly move in more unconventional directions, potentially ending in a nuclear apocalypse.

So we are facing not only the worst of the 1970s (repeated negative aggregate supply shocks), but also the worst of the 2007-08 period (dangerously high debt ratios) and the 1930s. Huh.

A new ‘geopolitical depression’ is raising the prospect of cold and hot wars that could very easily overlap and spiral out of control. As far as I can tell, no one convening at the Swiss skiing resort of Davos today is writing a great novel of the current era of megathreats. Nevertheless, today’s world increasingly evokes the sense of foreboding that one gets when reading Mann. Too many of us complacently indulge in such summits and ignore what is happening in the real world below.

We are living like somnambulists, dozing and deaf to the rising alarm. We better wake up before the mountain starts moving. ©2023/Project Syndicate

Nouriel Roubini is Professor Emeritus of Economics at New York University’s Stern School of Business and author of ‘Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them’.