A battered world economy faces a “polycrisis”
The World Economic Forum just released its annual Global Risks Report, and it’s not looking good. The WEF surveyed top business leaders and experts from around the world, and they highlighted a long list of interconnected economic threats that will be competing for the world’s attention and resources in 2023, from the global cost of living crisis and the war in Ukraine to climate change.
The report warns these threats could feed off of and compound one another, creating what the WEF calls a “polycrisis.”
There have been a lot of recent shocks to the global economy, and the way economists talk about them is starting to get a little scary.
“We currently are in the midst of a polycrisis, if you will,” said Saadia Zahidi, who contributed to the WEF’s report. “With food and energy crises unfolding at the same time as a geopolitical conflict, at the same time as an economic downturn.”
“So boy, it presents a pretty gloomy picture about where the world is and where it’s headed,” said Eswar Prasad, a professor at Cornell.
If all that didn’t raise your blood pressure, he said these crises are feeding into each other.
For example, the war in Ukraine is fueling global inflation. Meanwhile, Prasad said “in general, short-term pressures and problems” — think food and energy shortages — “tend to overwhelm consideration of problems where the real costs are going to show up in the longer term.”
Like the worst impacts of the climate crisis.
In 2023, Prasad said efforts to get the cost of living in check could come at the expense of urgently needed climate investments. But one limitation of the WEF’s report is that it’s based on poll responses from late summer and early fall.
Since then? “Inflation in the United States has peaked. It has peaked in Europe,” said Jacob Kirkegaard with the Peterson Institute. “Because of that, I think identifying cost of living crisis as the most urgent issue is wrong and overly alarmist.”
He’s optimistic 2023 will be marked by deflation in the global economy. That’s barring another global disaster. And, of course, after the last three years, we can’t exactly bank on that.
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