Conversations here at the World Economic Forum might begin with the global economy, but sooner or later they turn to Donald Trump. The Republican primary contest has gotten everyone’s attention. Some remain entertained, but many of the people I’ve spoken with are worried. As one European chief executive said to me, “We’re moving into a very difficult world. We need grown-ups in charge.”
That sense of a “difficult world” is palpable. There is more anxiety in the air than at any time since the global financial crisis. The worry is reflected in the world’s stock markets, which have collectively lost trillions of dollars since the start of the year. People still believe that the worst will not come to pass. China will not crash; the United States will not fall into a recession; Europe will not come apart. But in recent years, the conventional wisdom has been wrong on many issues.
Roger Altman, former deputy treasury secretary, pointed out to me that few experts predicted that oil and commodity prices would collapse or that growth would slump in China and crater in Brazil, South Africa and other emerging markets. No one saw that, even as the United States achieved nearly full employment wages would not rise, inflation would stay stubbornly muted and interest rates would remain low. And no one predicted the rise of the Islamic State or its ability to inspire terrorist attacks in countries far outside the Middle East.
Altman wonders whether we have arrived at the moment predicted in Alvin Toffler’s 1970 book “Future Shock” when the global system is so complex and changing so fast that it outpaces any ability to analyze and understand it.
Many of the trends now afoot, interacting with each other, could move faster and further than people realize. As the stock market falls, businesses and consumers get worried and pull back, spending less and saving more. A fall in oil prices is generally good for all countries except the major petroleum producers. But a fall this far, this fast could produce a credit crisis and a deflationary spiral.
And technological innovation is not a silver bullet to achieve broad-based prosperity. It is clear that dramatic improvements in technology, especially software, do not translate easily into wage increases for the average worker. We’re even seeing high-tech products cannibalize each other. The digital camera was once the way of the future, destroying old-fashioned film. But camera sales have collapsed as phones have more than enough camera power for most people.
I don’t know where it all goes. But in periods like this, open systems like the United States’ will do better than closed ones. America often looks dysfunctional because its problems are on display and debated daily. Everything — economic strategy, monetary policy, homeland security, police practices, infrastructure — is out there and open to constant criticism.
But this transparency means that people have information, and it forces the country to look at its problems, grapple with them and react. Although it’s a messy, sometimes ugly process, the U.S. system takes in a lot of diverse, contradictory information and responds. It seems dysfunctional, but it is actually highly adaptive.
Closed systems often look much better. China, with its tightly centralized decision-making, has been the envy of the world. People across the globe have marveled at the government’s ability to make decisions, plan for the future and build gleaming infrastructure. And when China was growing, we were amazed by the efficiency of the system. But now that growth has stalled, no one is sure why, what went wrong, who’s to blame and whether it is being fixed. A black box produces awe when things go well. But when they don’t, that opacity causes anxiety and fear.
The biggest question about the world economy right now is: What is going on inside China’s black box? The country is, after all, the second-largest economy on the planet and the engine that has powered global growth in recent years. Its remarkable opacity is not simply about economics but about politics and governance in general.
These days, U.S. politics is showcasing turmoil, rage and rebellion. But that’s ultimately a strength in these fast-changing times. People are angry. The economy, the society and the country are being transformed. That politics reflects these changes is a strength, not a weakness. It allows the nation to absorb, react, adapt— and then move on.
At least that’s what I tell foreigners and myself — with fingers firmly crossed — as I watch the craziness on the campaign trail.