Toward a lost decade
About 30 years ago, after the collapse of the Soviet Union, ideas about the “free market” and its magical powers were becoming almost depressingly dominant. The narrative went that the market, free from “regulations” (essentially the forces of capital freed from society), promoting free competition and opening the way for innovation everywhere, would bring prosperity and liberal democracy everywhere in the world. It was “The End of History,” as political scientist Francis Fukuyama wrote in his 1989 book.
Today, 30 years later, the world economy is entering the worst five-year period of recent decades. We might even be looking at a “lost decade,” as the International Monetary Fund and the World Bank warned a few days ago.
The global economy is entering a five-year period that seems to be the worst that humanity has seen for about 30 years, since the 1990s, said IMF Managing Director Kristalina Georgieva. And if there are no changes in the essence of the policies that are practiced and the priorities that are set (which is probably highly unlikely), it is likely that the next 10 years could be “a lost decade for growth” for the whole world, and not only some parts of it, as has happened before, said World Bank President David Malpass.
The global economy is entering a five-year period that seems to be the worst that humanity has seen for about 30 years
In Greece, we learned what a lost decade means – although our memory is somewhat short. But what does it mean for the entire global economy to lose 10 years of growth? According to a recent study by the World Bank, “Falling Long-Term Growth Prospects,” it means, among other things, that: a) the goal of reducing poverty to 3% of the world’s population by 2030 will not be reached – practically it has already become unattainable; b) dealing with the climate crisis risks becoming unattainable as well; c) declines in the growth rate of employment and wage labor income will fuel social tensions/conflicts; and d) debt crises will test the world’s poorest countries – as well as their creditors.
On Monday, a few hundred meters from the White House, the World Bank and International Monetary Fund spring meetings got under way, opening a week of discussions on the global economy. The meetings were opened by a discussion between Georgieva and Malpass. The former does not hide her concerns that financial instability could spread beyond the well-known banks in the US and Switzerland, while the latter persistently highlights the danger of a phenomenon reappearing from the old days, the 1970s, but perhaps with new dimensions, depth and long-term consequences: stagflation.
The mood is heavy. The war in Ukraine and its consequences on economies, societies, politics and the strengthening of authoritarianism in the heart of Europe; geopolitical fragmentation into blocs of great powers with spheres of influence, which hinders international coordination; persistent inflation – largely profit-driven; the tightest monetary policy that has been practiced internationally for 40 years, which is an effort to kill inflation but risks dragging economies into recession. The global economy seems to be synchronically entering a very difficult period, beginning with a relatively difficult 2023. It would not hurt to remember all these things during some break in our – otherwise – beautiful pre-election frenzy.
