Financial Times: Why World Economy Feels Fragile

The livelihoods and routines of more than 7 billion people depend on a stable global economy, and there are always reasons to worry, including long-term structural and cyclical challenges, explains Martin Wolf for the Financial Times. Global growth has slowed, led by a slowdown in the Chinese economy, but central banks and global markets can and do adjust to cyclical changes. While severe worldwide recessions are rare, the markets should heed long-term structural changes and trends regarding productivity, debt, inequality and automation that fuel populism and pessimism. “The biggest negative risk is that it would be impossible to mount a co-ordinated and effective response to a severe global economic slowdown,” Wolf writes. “One obvious positive danger comes from the possible unmanageability of the past accumulations of private and public debt. Another danger is that a breakdown in the global political order creates severe economic disruption on its own, perhaps through a collapse in trade, perhaps as a result of another geopolitical event.” Central banks hold limited tools for responding to a severe or prolonged crisis. Political instability only heightens the sense of crisis. – YaleGlobal