The world’s developed economies have been wrestling with crisis after crisis since the beginning of this new decade. First, there was the historic health crisis in the form of the COVID-19 pandemic. That spurred the United States and its allies to pursue even more radical monetary policy. Interest rates were pushed to historic lows and markets were kept afloat by more massive asset purchasing programs. However, the U.S. and its allies reaped the harvest of huge monetary and fiscal stimulus in the form of soaring inflation rates in late 2021 and through 2022. In response, the United States Federal Reserve and its central bank counterparts across the developed world pursued the most aggressive interest rate tightening policies sin nearly 20 years.
Earlier this month, the United Nations (UN) published the latest UN Trade and Development Report. The report presents the global economy in a period of significant uncertainty. Higher interest rates and a pullback on quantitative easing have had a negative impact on business investment and overall growth. As the report states: “Today’s global economic landscape is characterized by growing inequalities and divergence of growth paths between key regions.”
Current projections indicate that the world economy is set to grow at a modest pace of 2.4% in 2023 and just 2.5% in 2024. As the report says, the world economy is “flying at ‘stall speed’ . . . meeting the definition of a global recession.” The report goes on to lament the lack of “multilateral responses and coordination measures” to the state of the global economy. Policymakers appear paralyzed and lacking imagination, which is a troubling sign in the face of so many dire questions for the economy this decade.
