Growth and fragility in a world economy under strain, with Martin Wolf

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“We are in the middle of this huge and unpredictable change in the global order,” says journalist Martin Wolf, Associate Editor and Chief Economics Commentator at the Financial Times. In a world marked by rising geopolitical tension and increasing economic fragmentation, understanding the forces shaping the global economy has never been more critical. In this episode of Do Better Podcast, Wolf joins us to talk about the global economy challenges the world is facing.

As part of the 15th anniversary of EsadeGeo, Esade’s Center for Global Economy and Geopolitics, Wolf offers a wide-ranging assessment of the economy at a moment of profound transition. Hosted by Professor Angel Saz-Carranza, EsadeGeo’s director.

1. Long-term shaping forces of the global economy

• Demographic changes that result in a world that’s rapidly aging. Societies in China and Europe, could face constrained growth, strained public finances, and reshaped labor markets.
• Ongoing technological progress based on digital technologies, especially driven by AI and computing. The massive decline in the cost of renewable energy could open the door to a potential energy revolution.
• The rise of emerging undeveloped countries, with India being the fastest-growing economy in the world. This trend is also visible in Asia as a whole, which right now represents half of the world’s population.
• Finally, global growth has expanded almost every year since the Second World War.

2. Short-term economic situation

With a global economy that has proven more resilient than expected, Wolf talks about a moderate but steady growth, with a rapid expansion in India and a slower but steady growth in China. Nevertheless, this trend rests on the uncertain foundations of global cooperation.

3. Growing fragilities in an uncertain world

Would the world be ready to face a financial crisis like the 2008 one? The global economy is more vulnerable now.

• Trade is at risk. It is more open than ever, which makes it highly exposed to a renewed wave of protectionism. Trade wars could trigger a serious escalation that would result in global destabilization.
• Financial vulnerabilities. Public debt levels are high (rivaling post-Second World War levels), but financial markets show signs of an “irrational exuberance”.
• Diminished crisis-fighting capacity. Compared to 2008, governments and central banks have less room for manouver. Less fiscal and monetary firepower, which adds to weaker international cooperation.

4. Europe, surrounded by predatory superpowers

• The United States’ policies, tariffs, forced investment commitments, and demands for access to foreign resources echo 19th-century imperial practices.
• China has a clear aim to dominate global manufacturing. Its model threatens to hollow out the industrial capacity in advanced economies, such as Europe or Japan.
• Europe. Both the US and China threaten the stability of the EU, challenging its autonomy and influence, especially in technological sectors and policy regulation.