Costs of Global Uncertainty: Project Syndicate

Global economic activity is on decline as investors and businesses confront uncertainty. The US-China trade war contributes to the hesitation, as trade partners ponder the costs and benefits of global economic connectivity and players retreat toward old patterns. For example, China’s state-owned enterprises, a target for complaints from the United States and elsewhere over subsidies, have an expanded role, explains Michael Spence for Project Syndicate. Economists recognize that structural reforms are required in major economies, including China, the US and Europe, but major challenges like subsidies, job growth in the face of automation, debt, inequality and populism limit what political leaders can do. “The global economy is undergoing a major transition, owing to the rise of emerging economies, especially in Asia, and the digital transformation of business models and global supply chains,” Spence writes. “Services constitute a growing share of global trade, and the search is on for new sources of comparative advantage.” Companies and governments cannot predict if the many trends will lead to another global economic crisis, Spence concludes, and for the time being, most exercise caution, which carries its own costs. – YaleGlobal