|Date: Sep 12, 2018|
|Source: The Daily Star|
|Why the global growth story might be coming to an end|
For those few people left who still believe Donald Trump is unconventional but canny, that there is a method to the madness, the revelations of last week should clarify. Bob Woodward’s new book and The New York Times op-ed written by an anonymous official make plain that behind Trump’s ranting, impulsive, incoherent and narcissistic facade lies a ranting, impulsive, incoherent and narcissistic man.But while the great presidential psychodrama captivates us, let’s remember that there are real things in the real world that continue – trends that will prove important and consequential whether or not they get talked about on television.Perhaps the main reason we are not peering too far behind the curtain is that, in general, things look good. Broadly speaking, the world is experiencing peace and prosperity. The American economy in particular is robust, with strong growth and low unemployment. Why is this? No one is quite sure. But it’s worth keeping in mind that since World War II, growth has been the norm. Martin Wolf of the Financial Times points out that since the early 1950s, the world economy has grown every year and, other than a few exceptions, always at 2 percent or higher. Political issues (short of major war) rarely have much impact on the economy. The American economy is a vast, complex $19 trillion beast that is shaped more by large, structural trends than by a few policy changes in Washington.
The American economy is growing a bit faster than expected. Trump tries to take credit for this nearly every day. And some credit is justified. The widespread deregulation taking place under his administration has probably had the effect of easing constraints on business activity. The sweeping tax cut freed up cash for businesses. The infusion of money, however, is likely to produce only a temporary bump for the country, a sugar high that comes at the cost of a massive increase in deficits and deepening inequality.
The three broader trends shaping the world are peace, globalization and technology. Peace among the major powers allows for the continued surge of economic activity in most of the world. The “rise of the rest,” the growth of once-poor countries outside the West, remains the largest force powering world economics. This globalization and an ongoing technological revolution have allowed growth to persist without the one economic factor that has almost always stopped it in the past – inflation. It is hard for prices to rise when goods and services can be supplied cheaply by a person in some developing country or through automation. The absence of inflation over the last 25 years is still the most remarkable trend that keeps the global growth engine chugging.
But look below the surface and the forces producing these benign circumstances all seem to be increasingly under pressure. America, the world’s leading architect of the international order and stability, seems determined to disrupt it. Trump is at heart an isolationist who constantly questions the value of the alliance structure that has kept the world peaceful and stable since 1945. He seems to want the United States to either withdraw from the world or to turn its international role into a profitable, quasi-colonial enterprise, for example by extracting payments from Europe, Japan and the Gulf states and confiscating the oil resources of Iraq. His administration has been in major trade disputes with America’s top trading partners – the European Union, China, Canada and Mexico.
That leaves the technological revolution that has transformed the world. But here also the trends are not entirely promising for America.
First, the country is living off seed capital. Investments in basic science and research that were made in the 1960s and 1970s continue to undergird American technology companies today. Could Amazon, Facebook and Apple have dominated the world without the internet and GPS, both technologies developed by the U.S. government? The next wave of massive investment in science and technology is indeed taking place – but in China.
And then there is the rising backlash to technology. We are in a very different world than just five years ago. Technology companies are increasingly seen as having monopoly or oligopoly power, crushing competition, ransacking consumer data and then profiting from it, intruding on privacy and being part of an elite that is utterly divorced from the rest of society. The best evidence for this is that Trump, who does have good instincts for where and when to pander, has taken to tweeting against the tech giants with regularity.
Despite the Trump freak show, we are living in peaceful and prosperous times. But beneath the surface, there are currents that could disrupt the calm, especially for the United States.
Fareed Zakaria is published weekly by THE DAILY STAR.
A version of this article appeared in the print edition of The Daily Star on September 10, 2018, on page 7.