The New York Times: There is chaos in the world… and Trump isn’t responsible for it

The New York Times published an article by Aaron Benanav summarizing the features of the chaos in the world, the underlying cause of the economic recession, the reasons for the decline in the pace of global economic growth, income levels, and manufacturing in recent decades, and the ways to escape this recession.

Benanav begins by offering a summary of the turmoil in the world.

While US President Trump is upending the fundamentals of global trade with punitive tariffs and redrawing America’s alliances, democratic countries are facing a wave of anti-government sentiment.

Governments are losing elections or barely holding on in the face of discontent.

Even non-democratic countries like China are facing social unrest and economic instability.

Benanav offers several theories to explain this global state of affairs.

Some argue that rapid social change, particularly around issues such as immigration and sexual identity, is fueling a cultural backlash.

Others argue that elites have mishandled the Covid-19 pandemic or are out of touch with their people, creating an anti-establishment sentiment. Still others argue that social media and its algorithms have made it easier to spread misinformation and conspiracy theories.

However, Benanav argues that there is a deeper force behind this global turmoil: economic stagnation.

He argues that the world has been experiencing a prolonged slowdown in economic growth since the 1970s, and that this situation worsened after the global financial crisis of 2008.

The world has become stuck in low growth rates, productivity is declining, and the workforce is aging, all of which has left the economy at a standstill.

Benanav gives an example in this context, stating that the economies of the G20 countries used to grow at a rate of 2 to 3 percent per year, meaning that income levels doubled every 25 to 35 years.

Today, growth rates range between 0.5 to 1%, meaning that incomes double every 70 to 100 years, a pace that is too slow for people to feel any progress in their lives.

In Benanav’s view, when people don’t assume that their standard of living or that of their children will improve over time, trust in institutions erodes and discontent increases.

Benanav offers reasons for this slowdown in economic growth, one of which is the global shift from manufacturing to services, which has disrupted the primary engine of economic expansion: productivity.

The second reason is declining population growth rates, and consequently, a shrinking workforce.

This means smaller future markets, discouraging companies from expanding.

Furthermore, the declining proportion of working-age people within society means fewer taxpayers supporting retirement programs, increasing retirement and healthcare costs, forcing governments to raise taxes and increase debt.

Benanav reviews several proposed solutions, the first of which is that artificial intelligence may be a way out of the stagnation trap.

According to Benanav, AI could improve efficiency and stimulate growth in labor-intensive sectors, such as healthcare and education, however, the gains from AI remain limited, and that the pace of development in this technology is slowing down rather than accelerating.

Others argue that revitalizing the industrial sector under strict tariff protection is the recipe for restoring the economy’s vitality.

This, according to the author, is the Trump administration’s bet, but he again casts doubt on such propositions.

The industries that were hoped to revitalize the economy now employ relatively few workers, unlike before.

Another group of theorists believes that the solution lies in increasing the population, either by encouraging people to have more children or by encouraging immigration.

However, the author believes that with Trump assuming the US presidency and the intensification of anti-immigrant calls, this solution seems a fantasy.

Benanav offers in his article, two reasonable approaches to dealing with the global recession:

The first is for countries to increase spending despite budget deficits, hoping to stimulate growth, especially if directed toward public investment.

The second approach, in the author’s opinion, involves redistributing wealth and income.

Governments can impose higher taxes on the wealthy and redistribute income to the rest of society.

This task, albeit arduous, will improve demand and strengthen markets at both the local and international levels.

However, Benanav believes this must be accompanied by other measures to improve the quality of life for people in society, such as restoring ecosystems and rehabilitating infrastructure.

Benanav concludes by saying that all of these solutions won’t automatically lead to global stability, as new political conflicts will emerge as this new future takes shape, but it seems worth a try.