Anybody Worried?

The pillars of prosperity have crumbled, and it's not clear they can be rebuilt

Not for nothing has this been dubbed the “dangerous decade.” Already, a global pandemic, Russia’s invasion of Ukraine and the return of inflation have shaken the 21st century global economy to its core.

After the shocks of 2022, a recession for large parts of the world in 2023 seems a safe bet. Tougher to gauge, and more frightening, is the long-term impact of money itself being repriced and the assumptions that underlie more than 30 years of global economic history being overturned.

Plentiful cheap labor, low energy and transportation costs and a generally peaceful era for geopolitics all helped turbocharge the globalization of supply chains and drive economic growth around the world in the decades after 1990. Whenever one of those pillars wobbled, there was cheap money to keep the party going, especially in the years after the 2008 financial crisis. The three major central banks—in the US, the eurozone and Japan—have kept their key interest rates below 5% since 2001. For most of the past 10 years, rates have been close to zero and certainly well below the rate of inflation.

In less than three years, each of those supporting pillars of globalization has been knocked away. Workers are scarce and increasingly expensive in the US, Europe and the UK. Oil prices have more than tripled since 2020, and the global cost of energy jumped 50% in 2022 alone.

War has come to Europe with Russia’s invasion of Ukraine, and President Vladimir Putin and President Xi Jinping are openly challenging the post-Cold War order and Western liberal values. In response, the major powers have declared war on Russia’s economy—and the US has begun openly pursuing policies designed to slow China’s rise.