Jerome Powell, chair of the U.S. Federal Reserve, at a press conference in Washington, D.C., January 2020
Liu Jie / Xinhua / eyevine / Redux

Crises can drive change, but sometimes it takes two crises to cement a transformation. Alone, the Great Depression ushered in the New Deal, roughly tripling U.S. federal spending as a share of output. But it took World War II to push federal spending much higher, solidifying the role of the state in the U.S. economy. If federal interventions such as the creation of the interstate highway system felt natural by the mid-1950s, it was the result of two compounding shocks, not a single one.

American history offers many such examples. Alone, the Vietnam War might have triggered a decline of trust in the government. It took the compounding shock of Watergate to make that decline precipitous. Alone, the collapse of the Soviet Union would have enhanced U.S. power. It took the strong performance of the U.S. economy in the 1990s to spark talk of a “unipolar moment.” Alone, technological advances would have fueled inequality in the first decade of this century. Globalization reinforced that fracturing.

Today, the United States and other advanced countries are experiencing the second wave of an especially powerful twin shock. Taken individually, either the global financial crisis of 2008 or the global

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  • SEBASTIAN MALLABY is Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations.
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