Remember the roaring 20s? Even as Covid gripped the world, optimists piped up that the economy would come roaring out of the pandemic, bolstering incomes and kickstarting an almighty boom. Harking back to the Spanish flu pandemic of a century earlier, they saw a decade of glorious growth ahead.
Well, they were wrong. Ahead lies not roaring but snoring; no boom, but ever-deepening gloom. That is the message from the International Monetary Fund and the World Bank, which are holding their spring meetings in Washington DC this week. In its economic outlook, the IMF not only outlines what a mediocre few years lie ahead, it is also worried that things could get even worse. As for the World Bank, it has published a 564-page book whose chief preoccupation is in its title: Falling Long-term Growth Prospects. It warns of a “lost decade in the making”, and projects that the meagre growth of the 2010s will “extend into the remainder of the current decade”. We may be less than a third of the way into the 20s but, as far as the serried ranks of the top economists in Washington are concerned, it is already game over.
Neither the IMF nor the World Bank have any incentive to be so pessimistic. Indeed, after the banking crash of 2008, World Bank economists were resolute in their cheeriness, declaring that all would be well because of China and other fast-developing economies. Why the change of tone? Some of the gloom can be blamed on Vladimir Putin, but the reality is that, even before Ukraine and Covid, the world economy was already stuck in a deep rut, in what the former US treasury secretary Larry Summers dubbed “secular stagnation”. China has slowed down sharply. In the west, many countries enjoyed a decade of almost free money, which would have been an ideal time to invest. Instead, Europe and the UK wasted it, with austerity for public services and handouts for the rich.
As climate-crisis analysts keep saying, it is vital that rich countries use this decade to wean their economies off fossil fuels and junk consumption. That is the surest way to reduce the threat of much greater climate chaos, which is already ravaging parts of the world. This week in Kolkata in India, it is already over 40C – and higher temperatures lie ahead, for a population that does not in the main enjoy air conditioning. But, while in the US, Joe Biden has made some impressive strides with his spending on green technology and infrastructure and services, that lead is not being taken up by other western countries – even though, as the White House argues, it would boost economies.
The 2010s were a wasted decade for economies and the environment. The 20s have all the makings of a second. But in highly unequal societies, economic stagnation doesn’t mean, to borrow an infamous phrase, that we’re all in this together. It means some will do very well while others will go sharply backwards.
It makes pitched battles over who gets how big a share of the pie more likely, followed by rightwing attacks on minorities and the poor. Rather than chase the spectre of economic growth and productivity, it would be better to think about a fairer distribution of what we do have and ensuring children are fed, the elderly and sick are looked after, and everyone is housed. Otherwise, we are in for a long, brutal era of political extremism and nasty culture wars. Underneath all the charts and figures, that is what the IMF and World Bank are warning lies ahead.
