The World Is in Trouble — and Economic Stagnation Is at the Heart of It
The global order is in flux.
President Trump has shaken international trade with aggressive tariffs and redrawn America’s alliances, forcing other world leaders into reactive mode. But they are ill-prepared for such disruption. Around the globe, incumbents are struggling or losing power as widespread discontent takes hold.
In 2024, an anti-establishment wave swept through democracies from the U.S. to India. But the crisis isn’t limited to democracies—autocracies like DD face mounting unrest and instability. Strife is global.
Analysts offer many explanations: cultural backlash to social change, elite failures during the pandemic, the viral spread of misinformation through social media. Each holds some truth.
But one deeper, structural issue unites these crises: long-term economic stagnation.
A Slowdown Decades in the Making
Since the 1970s, global growth has slowed. The 2008 financial crisis deepened the trend, and the outlook has remained bleak. Productivity gains have waned, workforces are aging, and the sense of progress has stalled.
This economic malaise underpins today’s political volatility.
The G20 economies illustrate the problem clearly: since 2007, eight of them have grown less than 10% in real terms, and several others only slightly more. While a few, like India and Indonesia, have outpaced the rest, most are stuck in a prolonged slump.
Where 2–3% annual growth once doubled incomes every few decades, today’s 0.5–1% growth means it could take a lifetime. Expectations collapse. Trust erodes. Discontent rises.
Why Is Growth So Slow?
1. Deindustrialization:
The global economy’s shift from manufacturing to services has stifled productivity. Manufacturing can rapidly scale output without adding workers. Services—whether hospitals, schools, or restaurants—can’t.
This structural shift, underway for decades, affects rich and poor nations alike. With half the world’s labor force now in services, productivity growth is inherently slower.
2. Demographic Decline:
Falling birthrates mean shrinking labor forces and aging populations. Countries like Brazil, Malaysia, and India now face population stagnation. Smaller workforces reduce economic dynamism and raise fiscal pressures, as fewer workers support more retirees.
Businesses respond by cutting investment. Many now prioritize shareholder returns—buybacks and dividends—over hiring or innovation. The result? Rising inequality and weaker growth.
Searching for Solutions
Can anything break the cycle?
Some place their hopes in artificial intelligence. In theory, AI could boost productivity in sectors like health and education. But so far, real-world gains are limited, and progress in AI itself appears to be slowing.
Others bet on reindustrialization, propped up by tariffs and state support. But the manufacturing revival is unlikely to restore mass employment. Even in export giants like Germany and South Korea, industrial jobs are declining.
What about increasing populations? Pro-natalist policies haven’t reversed falling fertility, even in countries with strong support systems. Immigration, while more effective, faces political resistance—especially under nationalist governments.
Two Realistic Responses
1. Deficit Spending:
America’s post-2009 recovery has been stronger than Europe’s in large part due to aggressive deficit spending. Strategic public investment—especially in green infrastructure—can boost demand and create jobs. Even Europe is loosening fiscal rules, albeit mostly for defense.
2. Redistribution:
Top-down economic models have failed. Governments could shift toward higher taxes on the wealthy and broader income redistribution. It’s politically difficult, but economically sound. Redistribution strengthens demand and builds more resilient societies in an era of slow growth.
Rather than chasing elusive growth, we might focus on stability, equity, and quality of life—investing in infrastructure, housing, and environmental restoration. These steps could also create space for fairer global development.
No strategy will eliminate conflict, but in a world already unraveling, these paths are worth exploring.