What is so promising about 2019 is that we are half way through without an economic collapse: time to start peeking at what 2020 might bring. Yet, what is so disconcerting is the continual absence of a silver economic bullet taking us right out of Great Recession (2008-11) pains and spillovers. We continue to wait, debate, and contemplate about some Santa Claus descending with a wand to cure our ills. Of course, we continue to wait, more out of eagerness than desperation, but Godot is not coming. Signs of growth push us to empty our piggy-banks and splurge. Ultimately, though, nothing yields: a stubborn recovery still not delivering a decade later, and governmental stimulants in industrialised countries becoming more institutionalised.
Accumulating Nouriel Rouhini's 8 (eight) dynamics behind this stalled global plight pushes us more into pessimism than optimism (World Economic Forum, "This is what 2019 could hold or the global economy," Newsletter, February 12, 2019). They prohibit accurate predictions or glossing, some spot-on, others hollow, but mostly camouflaging extant rays of hope (which may not turn the world out of its gloom, but are all we have representing progress).
The first picks on the US Federal Reserve for hiking interest-rates. If this stems from unemployment levels plummeting, as indeed they have done, inflationary pressures have not as yet pinched pocket-books. Unlike before, when there existed an inverse relationship between the two indicators, today's major feature is the displacement of full-time work by part-timers. With the Great Recession and the advent of Fourth Industrial Revolution discarding routine jobs, part-time jobs have not been adequately fitted into measurement equations. Though we see just the tip of this iceberg now, the consequences ripple across the global economy. Waiting for the full force to sway may tighten not only our belt but also the noose around the neck. Rouhini, indeed, identifies a culprit, but without delving deep enough to lay it bare, or even examine potential alternatives. Some of those alternatives involve "emerging countries" that, together, may rock the global economy much more conspicuously than ever before: there are just too many of them to let the future hang by a US economic thread.
What Rouhini does more convincingly is to spell out the ricocheting effects of China's slowdown. This would be devastating on private investment, sputtering as this dynamic has been for the last decade or so. China's economy may be on the mend, but so glacially that no one dares to more than whisper the fact. Importantly China is referenced, not the United States, as had been almost a 70-year itch. Yet, the fragility of the Chinese economy anchoring its global counterpart is visible. Nevertheless, the China-US trade-off is grinding the global economy to a halt: post-Cold War US investment depended so much on China that today's tariff-spat makes it a question of which side blinks first, China from evaporating investors, or the United States from thwarting inexpensive Chinese exports. This proverbial straw might break the back of the global recovery camel, but introducing low-wage production clips private investment domination.
Rouhini's third factor is related: the absence thus far of any trade agreement between these two powerhouses. President Donald J. Trump often hints of a big one ensuing, but its deterrent is also brewing: the 2020 presidential election campaign demands an anti-China stance to rock and roll. Trump rode to the pinnacle in 2016 partly due to a strong anti-China pitch, yet lowering his guard now, when he needs it more, might hurt more than help, especially as the United States has done better than many other industrialised countries in weathering the economic clouds. Besides, since tariff threats keep heating up, it seems long-term truce is being trumped by short-term pains: one feels China's jugular posturing, with the United States relishing still that fading assumption of its own economy making the world spin.
Shifting from the pinnacle of global economic power, the fourth questionable dynamic cannot but be Brexit, the hallmark of nationalism challenging collective regional preferences. Without a clear-cut Brexit resolution only reinforces the global economic sputtering. As with each of the three previous dynamics, a little gesture here or a concession there could work wonders, but no one country wishes to be the saviour (or, in game-theoretical terms, the "sucker"). Were it not for the growing strength of populism, the European Union could have ramped up the ante against Great Britain, while amid a leadership crisis, Britain cannot push the Brexit mandate home. The results: denied markets and stifled investments accenting the global flu from the European cough. Some corporations have abandoned Britain, others show European interest, but Europe's own leadership crisis makes Angela Merkel's swan song the Europe Union's too.
Another dysfunctional arena Rouhini points out is US domestic politics. This has less to do with electoral politics as it does the frequent recent brushes with governmental shutdowns, tax-cuts not catalysing the economy, and the hangovers of the Mueller Report. As with Brexit in West Europe, since populism lies at the root yet again, perhaps analysing mindsets and belief systems may be the subjects worth more scrutiny than market transactions. These change far less frequently than market transactions, confirming a future pall of gloom. Yet, some silver linings are not brought into Rouhini's equation: they may not have the Houdini touch, but ignore, they could wreak more damage in the wrong places than all Rouhini dynamics put together.
The sixth, seventh, and eighth possible roadblocks include the steep indebtedness of US firms, oil-price collapse against shale production weakening stocks and markets, and the growing apprehension in middle-income or emerging countries of the gloomy global setting. Indebtedness today comes when the government is too poor to pay. Oil price-hikes makes one last stand, if not against shale, then the simultaneous sophistication of alternate energy, such as solar and electricity (such as in a gigantic industry: automobiles). Add the spotty atmosphere, mindsets, and prospects, and fear, as the saying goes, only instils more fear.
Reflections have been made upon them, but what the world economy now needs is to unveil hopes. Emerging economies must come out of the shadow of both the United States and China, the successively dominant global economic player. Free-riding upon these economic super-powers to a large extent (though their nationalistic origin should not be ignored), an abundant army of emerging countries have enough weight to throw, but only by collectivising their efforts can they indelibly shift the global economy towards those hopes. This is the toughest call, for them to collectivise, but countries like India, and a number of Latin countries, not to mention African, have taken up that onerous challenge. The next few years of the global economy may depend as much on how they band together to throw their weight, in spite of formidable nationalistic pressures, than on what the superpowers to do each other. Europe may be caught in between: not strong enough to challenge China or the United States, but without the sinews of growth and the economic momentum to keep pace with these emerging countries.
They did not emerge like the rising sun: it is hard to do so with low-wage production. Yet, there is noise to make, be heard, and angle the global economy if only collective action is ramped up.
Dr Imtiaz A Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.
