He worked in the Obama Administration, is a professor emeritus at the Stern School of Business at New York University, where he lives. He founded and runs Roubini Macro Associates. He served in the White House and in the United States Department of the Treasury. He is one of the most widely read and popular American economists of our time. They called him Doctor Catastrophe for having anticipated the financial crisis that the world experienced in the first decade of this century. “Megathreats: Ten Dangerous Trends Threatening Our World and How to Survive Them”, a book that spans “from the worst debt crisis the world has ever seen, to inflation, the rise of populism, the rise of a new superpower competition between China and the US, the normalization of pandemics, the climate crisis, the impact of artificial intelligence
is to be dr. Catastrophe or Dr. Realist in Identifying These 10 Mega Threats That Are Ahead of Us? Some of them are already on the horizon, or already happening, so is anyone being pessimistic or more realistic?
I’m not being a Doctor Catastrophe, I’m not talking about science fiction. I’m not talking about aliens invading Earth or asteroid scenarios. There are hundreds of books written on climate change, wars between great powers, pandemics, economic and financial crises, from a more political or economic angle, and I try to show how these trends are interconnected. I would say that I can give you ten examples of how each of these threats is materializing today, not two or twenty years from now. The world has not been so at risk since World War II. There is a new concept in the Global Risks Report of the World Economic Forum that speaks of ‘megacrisis’ or ‘polycrisis’. Personally, I have not seen anyone talk about trends that do not exist, although people have different opinions about how slow or fast the crisis train is going, what are the possible solutions to these trends, how likely or unlikely they are. I’m talking about things that really affect us. To look at this and say “no, those threats don’t exist” would be someone living on another planet.”
He said, ‘I could give you 10 examples.’ Please give me one or two…
Last summer, we had droughts from Pakistan to India, most places in Europe, of course, the Middle East, sub-Saharan Africa, from Colorado to California, where there’s been a drought for four years. One third of all vegetables, two thirds of all fruits and nuts in the US are produced in California. Farmers forced to sell property rights to meat industry Most American trail food prices skyrocketed worldwide long before Russian invasion of Ukraine due to lack of resources , the collapse of agriculture, food prices and food inflation. I feel the pain of the working middle class with the need to pay more for food, but in many parts of the world food inflation is family famine, already faced by hundreds of millions of people. When you take these droughts, the land is so dry that when it suddenly rains, we go from extreme droughts to massive floods like we saw, for example, in Pakistan where hundreds of people died or even in Germany or the US or America. America, we have gone from one extreme phenomenon to another. Hurricanes are becoming more frequent. I could go on and on with examples.
Some of them are somehow related to what is happening in Eastern Europe with the war in Ukraine. How do you deal with this conflict right now?
If we look beyond the war in Ukraine, we have a geopolitical depression with revisionist powers, like Russia or China, Iran or Korea… easily Pakistan… And then we have the economic, geopolitical, economic security model that the US .has been writing in the West since World War II. The Cold War between China and the US is evident and Russia’s war in Ukraine is not a Russia-Ukraine war, it is a proxy war between Russia and NATO. We can discuss whether this conflict will be frozen or directly involves NATO. A conventional conflict between the United States and Russia would be unconventional. Two weeks ago, I read a long article that said that World War 3 could start with Russia and Ukraine. It was written by Mr. Kissinger, he was not just any lunatic. It’s a posibility. For all we know, Russia could disintegrate, as the Soviet Union did, with each going its own way; That’s possible. The collapse of Russia is not in the West’s interest, because that could be a signal for China to do something, because in the game going on in Asia, China has reciprocal disputes not only over Taiwan, but also with six or seven other different countries. with Japan, Indonesia, Vietnam, South Korea, Malaysia. These are the types of geopolitical threats that are occurring today. From what we know, Iran will soon become a nuclear state and Israel will have to decide something about it; there are Shia-Sunni proxy wars all over the Middle East, you know, Syria, Iraq, Yemen, Libya. Gaza is also a failed state, even if it is not a state, among other conflicts.
How should Western European countries or governments deal with these threats? I mean, for example, in a small country like Portugal, is there anything that governments can do to deal with these megathreats that you identify?
A lot of the solutions to these problems are not just at the national level, but at the global level, because a lot of these externalities are negative public externalities, climate change, and then there’s security, trade, globalization, economic and financial turmoil. . Portugal is part of the European Union and the Eurozone. It is part of NATO, which has expanded to include two more countries. Thus, in this crisis, Europe has held together until now, in a world with great powers like the United States and China. So some of our national and regional problems can only be solved at the global level, that’s the way it should be. Portugal has benefited enormously from the European Union, with funds, foreign direct investment and now with people from the digital technology sector who come to enjoy life, culture, the climate. Therefore, Portugal is a fantastic example of European integration and normalization.
The eurozone recession that you mentioned, which may be ahead of us, think that it will be a short, small recession mainly due to the war in the Ukraine, and that after there is -eventually- a peace agreement to stop the war, that recession is outdated? Or, on the contrary, will it be a long recession?
I’m not convinced this story is going to be short, for many reasons. First of all, the variants can even have these high prices. Now. the demand for goods like zinc, copper, for example, the price of these things is so high and going up that I don’t think inflation will slow down much. We’re seeing a reduction in labor force participation rates, people retiring before retirement age; the ECB cannot avoid an interest rate of 3% or higher, the borrowing costs for governments and many people will be more painful. I think it is more likely that there will be a prolonged recession with financial stress leading to debt and even collapse, leading to more bankruptcies among nations, economic and financial instability.
You are an American or someone who lives in the United States but was raised in Europe. Do you think that at some point the US will pressure Europe to somehow reduce its ties or its trade with China to keep the Transatlantic Alliance going?
There are a number of dimensions. First of all… the Americans told the Europeans: “Okay, the US supports Ukraine and Europe against Russia.” Number two, the biggest threat facing the North Atlantic, the biggest threat to NATO comes not from Russia, but from China. NATO, QUAD, AUKUS are Western defense alliances to contain China. Economically, the Europeans don’t use the Chinese 5G Huwaei, which is part of the Chinese government, but now the US has restricted semiconductor exports to China, they are also designing TSMC in Taiwan and SML in the Netherlands, and the Europeans who follow these things . The EU is tired of relying on Russian energy and Chinese direct investment, which leaves it in a really bad spot, escalating the cold war between the US and China. This is just one example. Today it is about 5G and semiconductors, but tomorrow it could be about autonomous vehicle systems. Not inside the car, but outside, on the roads it is necessary to have data collected by many sensors to obtain a table of dimensions, in order to ensure that vehicles drive safely and do not collide with each other. At this point, Tesla has collected data from its Chinese drivers, but the idea that the Chinese will allow Tesla, Audi, Volkswagen or Mercedes Benz to operate their own software autonomous vehicles in China is completely out of the question. For the same reason, Europe does not allow Chinese software to run on its own autonomous vehicles over time. Therefore, we must carefully analyze this exposure to China. Western systems seem to be more and more present in the economic, monetary, commercial and financial investment information in the EU, it is not aligning with the Chinese systems. So let’s look at this decoupling, this fragmentation, this autonomization, this increased security, and these multiple supply chains and different blocks. These are the things you need to prepare for, because they are going to happen whether you like it or not.
Looking at the political context, but at the same time looking at the economic outlook, how long do you think the West can continue to help Ukraine as it has done so far?
I think that despite concerns that divisions within the US, with Republicans controlling the home, or even in Europe, we have no choice but to continue to help Ukraine fully. The conflict in Ukraine is the cheapest war the West could wage against Russia. We are involved financially, but compare the costs with Russia or the Central Asian republics, so there is not a single need to stop, NATO troops are not there, it is the Ukrainians who are dying. For a war against Russia like this, it’s actually pretty cheap. People don’t realize that, at the end of the day, if someone like Orbán is still stuck on energy and there’s the issue of food security, what a bargain we’re making. There is no one dead in the West, the US will say that what we are doing in the West is providing security for Europe. American security is not in danger, European security is in danger. So it’s the cheapest war someone outsourced is fighting for the Europeans. And I think the Europeans realize that. Most of them realize this and we will continue to support Ukraine as needed.
Source: TSF
