“(De)Reconstruction,” the theme of the special reports on these pages by Project Syndicate, published exclusively in South Africa by the Mail & Guardian, captures the global turmoil as we enter a new decade. While longstanding geopolitical arrangements, political norms, business models, and even mainstream economic theories are under strain or unravelling, efforts are under way to create a new foundation for global peace and prosperity.
As I pointed out last year, economists who continue to ignore the far-reaching disruptions that are happening do so at their peril. The years since the global financial crisis have exposed fundamental flaws in mainstream macroeconomic thinking. We are living in a world of deep structural instability and uncertainty, in which policymakers have had no choice but to look for new policy tools.
As in previous years, the major central banks struggled to hit their inflation targets in 2019, even amid low or declining unemployment. After moving toward monetary-policy normalisation, the United States Federal Reserve has since switched gears, cutting its policy rate. Meanwhile, the European Central Bank has launched another round of asset purchases to accompany interest-rate cuts. But the long-term effects — politically, economically, or otherwise — of a decade of unconventional monetary policies have yet to reveal themselves fully.
More broadly, social and political upheavals, technological change, rising inequality in countries, and a climate crisis all demand that economists challenge their own assumptions, and that businesses rethink how they operate.
For its part, the Business Roundtable, an organisation of chief executives of leading corporations in the US, announced in August that its members now favour abandoning shareholder primacy and are shifting to a multi-stakeholder model of corporate governance.
And a growing number of companies are making commitments to reduce their carbon footprints, with many coalescing around the target of net-zero carbon emissions by 2050.
But it remains to be seen if they can translate ambitious words into effective action.
Much will depend on the broader policy context, and whether global-governance institutions can reclaim the mantle of effective multilateralism.
While populist governments around the world have continued to run up public debts to pay for handouts to their supporters, traditional liberals, Greens, and others are pushing back.
How these political contests play out will depend both on the economy and on debates over identity; how our long-term economic prospects fare will depend on our politics.
With the Trump presidency, Brexit, the Sino-American battle for technological supremacy and other global frictions, we have left one world behind. But we do not yet know what will come next. This will become clearer in 2020. — ©Project Syndicate
Mark Cliffe is chief economist and head of global research of the ING Group