Upsides and Downsides in the Global Economy and Financial Markets

The outlook for the global economy and financial markets is mixed. The positives and upside include a pick-up in global growth after years of a new mediocre, profitable corporate firms, better business and consumer confidence, more optimistic investors with markets in risk-on mode, the rise of emerging markets, new technologies and innovation. The downside, however, are several: uncertainties about Trumponomics, the risks of European and Eurozone dis-integration, the potential for a hard landing of highly indebted China, the sluggish global growth and productivity in a world of high private and public debts, the frothiness in financial markets and the risks of assets and credit bubbles fed by easy monetary policies, the backlash against globalization and geopolitical risks. Markets are now bullish, but the economies are still sluggish. Roubini argues that a new policy framework is needed to minimize the downsides and maximize the upsides.

Globalization, Technology and Their Discontents

There recently has been a populist backlash against globalization in its many manifestations: free trade, migration, technological innovation and supra-national governance. This backlash is also associated with the rise in income and wealth inequality and the concerns that large parts of populations have seen their jobs and incomes threatened by the various elements of globalization. At the same time robotics, AI and automation may over time threaten lower skilled blue collar workers, as well as white collar jobs and wages even more than trade and migration. How severe is this backlash and its political manifestations in the form of the rise of populist leaders? Are protectionism, trade wars and sharp restrictions to migration the new norm or can globalization be improved and saved? Is the future of AI utopian or dystopian for workers? What are the appropriate policy responses to make sure globalization benefits most - rather than a few? Roubini provides a roadmap and answers to these questions.

Key Economic Challenges of Our Times

While the short-term outlook for advanced economies and emerging markets is mixed, there are longer term economic challenges that most countries face. Potential growth and productivity growth are low in spite of new industries of the future and innovation while structural reforms to boost growth are politically challenging. Private and public debts are a burden on growth, but appropriate productive fiscal policies such infrastructure spending, can boost both the supply and demand side of growth. Unconventional monetary policies are still the norm in most advanced economies, maybe necessary but with side effects. Globalization and technological innovation have benefited the world but also disrupted jobs, firms, sectors and entire economies as there are winners and losers within and across countries; thus, the populist backlash against it. Demographic changes and more healthy longevity provide opportunities but also fiscal risks - given unfunded health care and pension schemes. Roubini argues that we live in a world of change, risks, disruptions and uncertainties that need to be managed properly to ensure global economic prosperity and financial stability.