May 18, 2017 | By Ivo H. Daalder

This Week's Reads - The Global Economy: Calm and Steady in the Storm

Each new day seems to bring a new crisis. Long-standing democratic norms and institutions, once presumed stable and rooted, now appear perched on shaky ground. Amid all the new reasons to worry, however, one hopeful story has been largely overlooked. By many measures, the global economy is steadily rebounding.

“The economic upswing that we have expected for some time seems to be materializing,” announces the latest World Economic Outlook from the IMF. The global economy is projected to grow 3.5 percent this year, and 3.6 percent next year. Nor is the growth limited to emerging countries catching up with the West. Europe’s economies are growing again, and seeing unemployment rates at their lowest levels since early 2009.

In the United States, too, there are reasons for optimism. The unemployment rate is at its lowest point in a decade. On Main Street, consumer sentiment is strong, while new bankruptcies and foreclosures are down. On Wall Street, the S&P 500 and NASDAQ have both been notching record highs. The CBOE Volatility Index, which tracks the sense of looming instability in US stocks, has been low as of late. The prevailing belief has been that markets will remain calm over the near term.

There is nothing sudden about the recovery. The positive trends have been building for months, even years. At the moment, the American economy is in its third-longest period without a recession since the Civil War.

Of course, a battalion of caveats can be marshalled against these optimistic-sounding numbers. Youth unemployment in Europe, which is more than 40 percent in Greece and Spain, is a particular concern. Many Americans have stopped looking for work altogether, and are therefore not counted in official figures as part of the labor force. Household debt in the United States is climbing again as well, with student debt alone increasing from $480 billion to $1.31 trillion in the last decade.

Yet none of these caveats are sufficient to suggest the economic momentum in the global economy is not real. Today, the most urgent concern is not that the optimistic data are wrong, or that the data are measuring the wrong outputs while obscuring systemic weaknesses. Rather, the greater concern is that the benefits of the economic gains are not distributed evenly — thus increasing the gap between rich and poor. And the other concern I hear all too often from business people and economists is that political leaders will not be able to implement the reforms necessary to sustain these trends going forward. Indeed, this week's downturn in the markets suggests a growing worry that political turmoil in Washington is increasingly threatening the prospect of instituting much-needed reforms.

Protectionism, inequality, and ossified bureaucracy and politics threaten the global economy, as several articles in This Week’s Reads detail. If leaders fail to address these and other core issues, then the positive economic momentum of the present could soon come to an end.

If Macron Doesn't Reform Swiftly, He'll open the Gates for Le Pen in 2022

Anne Dias/The Huffington Post

Emmanuel Macron, recently chosen as the next president of France, has made history by winning the election with the support of a party that is scarcely a year old. However, his battle for control of France will continue into parliamentary elections in June. If Macron’s movement cannot succeed in gaining some kind of majority, the likelihood that he will be able to pass any serious reforms drops, while the likelihood of a more radical candidate succeeding in the next election increases. Whether his supporters are somehow able to succeed despite their political inexperience or he is able to forge alliances with the remnants of existing political structures, Macron still has several avenues to success. With luck, he may even be able to bridge the divide with the center-right, achieving the political “recomposition” which has always been his goal.

Why Trumponomics Won’t Make America Great Again

The Economist

“Trumponomics is a poor recipe for long-term prosperity,” concludes The Economist after interviewing President Trump at the White House. “America will end up more indebted and more unequal.” In one of the most extensive descriptions yet of his plans for the economy, Trump advocated for further tax cuts and deregulation, as well as for renegotiating trade deals, all in an effort to reach a prized three percent annual growth rate in the American economy. The Economist authors are skeptical of such measures and goals. “Even if it produces a short-lived burst of growth, Trumponomics offers no lasting remedy for America’s economic ills,” the publication states, listing, for example, new technologies and automation disrupting the US workforce as a bigger long-term concern than the trade deficits that preoccupy the current administration.

Behind China’s $1 Trillion Plan to Shake Up the Economic Order

Jane Perlez and Yufan Huang/The New York Times

Bridges and tunnels in Laos, power plants in Pakistan, train lines in Serbia, all of these projects are currently underway thanks to a tsunami of Chinese workers and money washing across Eurasia. The ambitious geopolitical initiative, known as “One Belt, One Road,” includes more than $1 trillion in infrastructure spending across more than 60 countries. With the bold new agenda, Chinese President Xi Jinping is looking to revive his country’s economic growth, which has begun to slow in recent years, as well as to address real needs in developing countries. Yet, as one commentator notes in the article, “Xi will struggle to persuade skeptical countries that the initiative is not a smokescreen for strategic control.”

The Vision of a Closer Europe is Retreating to the Core

Tony Barber/Financial Times

While the European Union’s recent crises have left it battered, there is already talk of the new, stronger Europe that will emerge from these trials. What, precisely, will this stronger Europe encompass? While previous visions of a European Union were more expansive, the modern union is quite condensed. Gone from this vision are Russia and Turkey, whose leaders have set them at odds with leaders in many European capitals. With the exclusion of the Balkans and the start of Brexit, Europe’s sphere continues to diminish. Whether or not Europe emerges triumphant from recent struggles, “it will be a smaller Europe than the one most of us see when we look at a map.”

When America Fails to Lead, the Whole World Suffers

Stewart Patrick and Megan Roberts/CNN

As the Trump administration battles internally whether to support or withdraw from the Paris Climate Agreement, the consequences of American indecision are thrown into stark relief. The United States has tilted toward populism and many countries are following its example. With the international community turning inward, worldwide cooperation has taken a significant blow. According to a report by the Council of Councils, a consolidated body of 29 think tanks from 25 countries, anti-terrorism is the only thing that the international community improved in the past year. Everything else, especially trade, has received a shockingly poor score with little hope of improving soon.

Russia's Oval Office Victory Dance

Susan B. Glasser/Politico

In the midst of an investigation into his campaign’s potential dealings with Moscow, President Trump greeted Russian Foreign Minister Sergei Lavrov at the White House. Lavrov, who had been barred from entry into the White House for four years by the Obama administration, stepped triumphantly back into the Oval Office last Wednesday. US diplomats who worked with him found Lavrov to be both aggressively nationalistic and generally mean-spirited, Glasser writes. While this reputation has led to a serious diplomatic rift for previous administrations, Trump’s businessman-like approach may be precisely the inroad that the Russian diplomat has been looking for.

Which American Dream?

Michael Lind/The Smart Set

The American Dream has been an essential concept in US politics for more than a century. However, there is little consensus on what the American Dream actually constitutes. While attempting to answer this question, Michael Lind simplifies matters by splitting the idea in two conflicting halves: an improved quality of life for all citizens and the promise of advancement for anyone able to work hard enough. Expressing a dim view of the prospects of happiness in a meritocracy, Lind concludes that an America that pursues quality of life instead will be better for it.

America First? No, Says Former Secretary of State Condoleezza Rice

Walter Russell Mead/The New York Times

Former Secretary of State Condoleezza Rice has taken up a new form of democracy promotion. Her new book, Democracy: Stories From the Long Road to Freedom, has just been released, and it is reviewed by Walter Russell Mead in the New York Times. The timing is important, writes Mead: “Rice’s continuing defense of the democracy agenda will be much noted among Republicans seeking to come to terms with the implications of President Trump’s 'America First' approach to the world.” While not referring to Trump directly, Rice confronts the hard-nosed realpolitik that seems to animate much of the current administration’s foreign policy rhetoric. Nor does she shy away from lingering critiques of democracy promotion abroad, including during the Iraq war. “Both supporters and skeptics of democracy promotion will come away from this book wiser and better informed,” Mead concludes.

Donald Trump, Recep Tayyip Erdogan and How Democracies Die

Gideon Rachman/Financial Times

The meeting this week between U.S. President Donald Trump and Turkish President Recep Tayyip Erdogan is an occasion to reflect on the similarities between the two leaders, writes Gideon Rachman in the Financial Times. Both have stoked nationalist fervor, Rachman writes, and both have relied heavily on family and close associates to govern. More worrying, both have expressed their disdain for, and at times acted out against, the press, with Erdogan’s government going even further by imprisoning scores of journalists. However, Rachman writes, the two presidents may not even get around to comparing domestic politics as the recent decision by the United States to arm Kurdish militias in Syria is strongly objected to by the Turkish government.

The Comey Firing Reminds Us of a Bigger Danger

Fareed Zakaria/The Washington Post

“I have tried to evaluate Donald Trump’s presidency fairly,” writes Fareed Zakaria in the Washington Post, noting how he has praised the administration when Trump has appointed competent people and pursued sensible policies. Yet, Zakaria writes, the recent actions of the president, not least firing FBI director James Comey, reinforce the importance of the media as a check on executive overreach. While journalists must cover the administration evenhandedly, he writes, “they must also never let the public forget that many of the attitudes and actions of this president are gross violations of the customs and practices of the modern American system — that they are aberrations and cannot become the new norms.”


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