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Paradise Lost?

14 Sep 2010

Shane Fitzgerald

 

Global gurus in their respective fields (political risk and economics), Ian Bremmer and Nouriel Roubini have a fascinating and troubling joint article in September’s Institutional Investor magazine. Their analysis presumes a vacuum of global leadership which will cause the world to move rapidly from its American-led unipolar moment not to the multipolar system which many anticipate but rather to a nonpolar and chaotic future.
 
 In their own words, “the U.S.-led unipolar order, Western political and economic dominance, and consensus among the world’s power players in favor of free-market democracy are all gone. And they’re not coming back.”
 
After reviewing the rise and implications of state capitalism as an alternative model for development, the authors conclude that the world economy is “moving into truly unknown territory.” Yet on their final conclusion they seem quite certain:
 
The reopening of the fire hoses of credit and capital that occurred during the bubble years will happen again and intensify the boom-and-bust cycles. Driven by ever-more- desperate policymakers in the U.S., Europe and Japan, these cycles will both shorten and magnify. Political, policy and regulatory uncertainty will increase, and as a result, financial crises will become more frequent and costly, while risk aversion, volatility and uncertainty will rise. The illusions of the Great Moderation — a phrase coined by Harvard University economist James Stock to describe the two-decade period that started in the late ’80s, with its quasireligious embrace of market efficiency and infinite American power — will have created the era of the Great Financial Instability. And nothing could hasten the decline of American influence more than another self-inflicted catastrophe of global market capitalism.
 
 
Read the full article on one page here.
 
 

As an independent forum, the Institute does not express any opinions of its own. The views expressed in the article are the sole responsibility of the author.


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