The New Cold War
America, China, and the Echoes of History
The first decade of the twenty-first century was a time of unprecedented economic growth. The rich world got richer, and the developing world raced ahead: by 2007, the emerging-market growth rate had hit 8.7 percent, and economists began to speak of “convergence,” when the impoverished “rest” would finally catch up to the West. Then came the fall. Today, with China slumping, energy prices collapsing, and nervous consumers sitting on their hands, growth has ground to a halt almost everywhere, and economists, investors, and ordinary citizens are starting to confront a grim new reality: the world is stuck in the slow lane and nobody seems to know what to do about it. How did we get here? How can we escape stagnation, and why aren’t the old remedies working? And what are the geopolitical implications of this new economic era? These are the questions this issue’s lead package tries to answer. Articles by Larry Summers and by J. Tomilson Hill and Ian Morris kick things off by explaining why, more than seven years after the Great Recession began, the recovery remains so weak. Summers looks at the causes and consequences of secular stagnation and finds a remedy in expansionary fiscal policy. Hill and Morris caution that the road ahead looks even rougher, as central banks have already used every tool at their disposal, leaving the global economy “without shock absorbers.” Ruchir Sharma fleshes out the origin story by highlighting a key problem that’s often overlooked: radical declines in population growth around the world. Nancy Birdsall warns that slow growth won’t just hurt businesses and investors; it could also end one of the most important developments of the last three decades: the steady rise of a global middle class, which has played an essential role in the spread of democracy and good governance. And Robert Kaplan explores the destabilizing effects of slow growth on China and Russia, two great but struggling powers that could soon become even more belligerent and unpredictable as their economies continue to sour. It’s not all bad news, however; Tyler Cowen, Zachary Karabell, and Ruth Porat all argue that it’s not yet time for despair. Reviewing Robert Gordon’s The Rise and Fall of American Growth, Cowen reminds us that predictions about growth are notoriously hard to get right and that breakthroughs, with all their attendant benefits, often arrive when least expected. Karabell argues that slow growth isn’t necessarily so hard to live with—at least not if costs are also stagnating, which they are. Ruth Porat, finally, brings us the view from Google (now Alphabet): a markedly sunnier take that emphasizes the ability of technology and innovation to empower and energize people and make the world a better place for everyone. Let’s hope she’s right.