The era of markets ended in 2019. What happens next?

Earlier this week in Davos World Economic ForumI have dined with fellow attendants at the Hotel Schatzalp, a former sanitarium featured in a Thomas Mann novel magic mountain.

It felt oddly appropriate. In Mann’s 1924 work, life in a tuberculosis sanitarium reflects a deep sense of the outside world in flux. The political and economic structures that dominated Europe in the nineteenth century had recently been destroyed by the First World War. No one quite knows how to express the new age. Phrases like The Roaring Twenties haven’t come along yet and the Great Depression is still a few years away.

A century later, a similar concern is in full swing. The elite leaders who participated in Davos generally built their careers in the West on the assumption that the triad of globalization, free market capitalism, and democracy were good things that would obviously continue to spread across the world.

However, since 2008, a series of cascading shocks have emerged, such as the great financial crisis, the rise of populism, Tensions between the United States and China And the covid-19 pandemic, they left all three ideas under attack. Some Davos residents believe – or desperately hope – that this is a temporary phenomenon. However, I don’t think so. The challenges facing the world today appear structural rather than ephemeral.

Thus, one of the questions posed in the early 2000s was how to craft this new political economy. “Are we in 2008, 1979 or something else?” one of my buddies at Schatzalp asked me, referring to stagflation. Or as Sven Smit, president of the McKinsey Global Institute, says: “We are on the cusp of a new era. But we don’t really know what this is, or even what it should be called.”

As befits an organization that gets paid to deliver PowerPoint presentations, McKinsey has really turned that concern into diagrams. This week I published a report arguing that the global political economy has been marked by three great “eras” – and breakpoints – since 1945.

The first was the so-called post-war boom that occurred from 1945 to 1971, a time of technological advancement, rapid growth, and relative geopolitical stability. This was coupled with a somewhat paternalistic institutional culture and high levels of state interference. The second period, The Age of Discord, lasted from 1971 until 1989. This contained “traits that resonate with today,” the book argues, including ” energy crisisnegative supply shock, and back inflationA new monetary era, rising multipolar geopolitical assertiveness, competition for resources, and slowing productivity in the West.

However, the collapse of the Soviet Union in 1989 ushered in the age of markets, a time when deregulation, capitalism, and globalization were advocated around the world. Most business and political leaders today consider this state of affairs to be the norm. But McKinsey believes the stage is over in 2019, fueling the current atmosphere of uncertainty.

What’s Next? The honest answer is that no one knows. What is clear is that we are heading towards a multipolar world, rather than a system dominated by the United States. The bad news is that this goes hand in hand with altitude protectionismconflict and direct war. But a multipolar world “gives a voice to countries that didn’t have this before,” Nandan Nilekani, co-founder of India’s Infosys, told me in Davos. The sources of innovation and growth are becoming more diverse.

The relationship between business and society is also changing. A world threatened by climate change, epidemics, and war is one in which the state is likely to intervene more forcefully in business. says Laura Tyson, a former chief economic adviser in the White House under President Bill Clinton and now a Berkeley professor. Industrial policy is back in vogue. So is protectionism.

What is uncertain is how technical innovations will shape this. As economist Andy McAfee notes, innovations like artificial intelligence will unleash productivity gains and destroy millions of jobs. There is also disagreement over whether climate change will stimulate or hinder further cooperation.

How can future historians describe the current era? In Davos, I heard some suggestions. The era of dislocation was one. The digital age, the climate war or the digital age and the electrification of everything (mouth) were all other things. Nobody feels quite right. So if anyone has alternatives, I’d love to hear them. It may be the title of a new Nobel Prize-winning novel set in 2024.

Follow Jillian on Twitter @tweet and email it at gillian.tett@ft.com

Continued @tweet On Twitter to catch our latest stories first

Leave a Reply

Your email address will not be published. Required fields are marked *