Dr Doom will see you now….
Nouriel Roubini is an American economist and analyst with a reputation for invariably seeing the downside and for having been virtually alone in predicting the financial crisis of 2008. Despite being – his own term – mocked in 2006 as Dr Doom, he rather plays up the moniker in his new book, “Megathreats”. Indeed if dystopia were a country, Roubini would be an honoured citizen.
“Megathreats” is not a book for the faint-hearted. As Roubini analyses the risks and threats facing our world and its citizens, the reader is pummelled into submission as he piles on the negatives and concludes:
“We have run out of excuses. To delay is to surrender. The snooze button invites catastrophe. Megathreats are careening towards us. Their impact will shake our lives and upend the global order…. Fasten your seatbelts. It’s going to be a bumpy ride through a dark night.”
Roubini identifies ten trends or key threats. They are not unfamiliar already: from the debt crisis and rising inflation to restrictions on migration and job threats from Artificial Intelligence (AI) to US/China competition and climate change. What makes “Megathreats” different is the sheer unrelenting accumulation of clearly articulated pessimism. Such is the nightmare quality of the analysis that the reader may not welcome it as a wake-up call but rather want to switch off the alarm and take refuge under the duvet.
Rubini writes as an economist and as an American who is an investment adviser and together those perspectives shape his narrative. Unsurprisingly he is at his strongest when he chases the financial data. As he demonstrates, the Covid crisis stretched public finances but the problems of loose money and accumulating debt (private as well as public) predated it: “Advanced economies with ample resources have let risk run amok”. Assumptions generated during the years of the “Great Moderation” when interest rates were stable have been replaced by gathering stagflation under the “Great Recession” now affecting the world economy. Globalisation offered great promise and real achievements, not least for low-cost economies which saw poverty levels decline; but offshoring and technology transfers have had unintended consequences in the United States and Western Europe fuelling public resentment and helping generate populist politics.
As Roubini shows well, a pattern of deglobalisation (which he deplores as economically inefficient) is provoking a new set of pressures. Efforts – notably in the US – to reshore manufacturing will reduce opportunities in lower-income countries and spark migration flows northwards. In reaction and notwithstanding labour shortages and ageing populations in the advanced economies, populist pressures will more insistently demand restrictions on migration and protection of domestic markets.
Where Roubini is most persuasive is in his contention – which he shares with the IMF – that it is the confluence of the various trends and challenges he identifies that is generating the darkest clouds on the road ahead. Unprecedented levels of debt in both advanced and lower-income countries, fierce competition between the US and China, financial strains from US currency weakening, alongside demographic pressures and global climate change, are, Roubini argues, creating a “coming Great Stagflation”.
To such pressures Roubini adds geopolitical crises. This is where his analysis seems weaker. He admits that military matters, including what he calls “hot” wars, are outside his area of expertise. Though he includes a “new Cold War” among his “Megathreats” and refers a number of times to the disruptive impact of Russia’s invasion of Ukraine, he talks more about economic competition between China and the US than about risks of conflict between them. Roubini asserts that there is a putative alignment on the horizon between China and the global outriders of Russia, Iran and North Korea; but there is little or no serious examination of that possibility. In his principally US-focussed study, Europe gets a look-in but other regions are hardly on the stage. “Migrations” has glancing encounters with India but little on the rest of Asia, on the strains in the Middle East or on Latin America and Africa. Most conspicuously, he has virtually nothing on the renewed threat of nuclear conflict or on the heightened risk of civil nuclear accidents.
Most disappointing of all is the thinness of Roubini’s examination of possible responses to the “Megathreats” he has signposted. Indeed at times he seems to suggest that there may be no solutions to some of the threats, just a hoped-for mitigation of some of their worst effects. Only 40 of the 273 pages of text are devoted to the question of whether “this disaster” can be averted. Even then his most specific advice is addressed to “individual and institutional investors” who should “protect at least their financial wealth”. Given the scale of the “disaster” his analysis portends, it seems a curiously offbeat question on which to concentrate the book’s last few pages.
In a music programme on BBC Radio Three a few years ago, a leading economist (and former professional pianist) was asked to talk about his life by reference to his favourite pieces of music. For his final choice, he felt obliged to play Noel Coward singing “There are Bad Times Just Around the Corner”. It is a choice Roubini might well be inclined to applaud.
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