Economists: This “New Abnormal” Cannot Last Forever

by Ryan on June 17, 2013

in Economy

Ian Bremmer and Nouriel Roubini teamed up to write an 8-page piece on what they call the “new abnormal” world economy.

As one can imagine, it’s pretty dense, long, and repetitive at points but the gist is clear:  the corrections needed after the 2008 meltdown weren’t good enough, and the unstable world the international community has created in the last five years cannot go on forever.  Their conclusions are that the US and China are the countries to watch, and that the BRICS nations (Brazil, Russia, India, China, and South Africa) may have more misses than hits.

Perhaps it’s all the hours I’ve spent reading David Stockman’s The Great Deformation, but I tend to see through a lot of the article’s premises. I do agree that our world’s delayed decisions will catch up with us one day, but I differ on the root of the problem.

The real problem seems to be that 20th Century-style Keynesian controls over the economy, as well as the persistence of “state capitalism” (or corporatism, or national socialism, or crony capitalism, or whatever you want to call it), are old ways to deal with new and complex problems.  The problem is not the “economy” in the developed and developing world, it’s our leader’s insistence that they can solve any problem through incessant interventions and controls, tweaking this and tweaking that along the margins.  We’re way past tweaking the margins — this ain’t the 1990s anymore.

Sound money, free markets, and regulations which set a playing field with moral hazards for acting stupid would go a long way in solving the rut we’re currently in.  But here is where I also agree with the authors — only a major earth-shattering crisis can galvanize enough political support to get true reforms accomplished.

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