The era of markets ended in 2019. What comes next?

Earlier this week at the Davos World Economic Forum, I dined with other attendees at the Hotel Schatzalp, a former sanatorium featured in Thomas Mann’s novel The Magic Mountain.

It felt oddly appropriate. In Mann’s 1924 work, life in a tuberculosis sanatorium reflects a deep sense of an outside world in motion. The political and economic structures that had dominated Europe in the 19th century had recently been decimated by the First World War. No one was quite sure how to articulate the new era. Phrases like The Roaring Twenties had yet to emerge and the Great Depression was still a few years away.

A century later, a similar fear is going on. The elite leaders participating in Davos generally built their careers in the West on the assumption that the trifecta of globalization, free-market capitalism and democracy were self-evident good things destined to continue to spread around the world.

But since 2008, a series of rolling shocks, such as the great financial crisis, rising populism, US-China tensions, and the Covid-19 pandemic, have attacked all three ideas. Some Davosians think – or desperately hope – that this is a temporary phenomenon. However, I suspect not. The challenges facing the world today seem structural, not fleeting.

So a question for the early 2020s is how to articulate this new political economy. “Are we in 2008, 1979 or something else?” asked one of my companions in the Schatzalp, referring to stagflation. Or as Sven Smit, head of the McKinsey Global Institute puts it: “We are on the eve of a new era. But we don’t really know what that is, or even what it should be called.”

As befits an organization that gets paid to deliver PowerPoint presentations, McKinsey has already turned this fear into charts. This week it published a report saying that since 1945 the global political economy has been marked by three major “eras” – and breaking points.

The first was the so-called post-war boom that took place from 1945 to 1971, a time of technological advancement, rapid growth, and relative geopolitical stability. This was accompanied by a fairly paternalistic corporate culture and heavy government intervention. The second period, the Era of Contention, lasted from 1971 to 1989. It contained “characteristics that resonate with today,” the writers state, including “an energy crisis, a negative supply shock, the return of inflation, a new monetary era, rising multipolar geopolitical assertion, resource competition and declining productivity in the west”.

However, the collapse of the Soviet Union in 1989 ushered in the era of markets, a time when deregulation, capitalism and globalization were championed all over the world. Most business and political leaders today consider this state of affairs the norm. But McKinsey believes the phase ended in 2019, fueling the current atmosphere of uncertainty.

What comes next? The honest answer is that no one knows. What is clear is that we are moving towards a more multipolar world, rather than the American-dominated order. The bad news is that this goes hand in hand with increasing protectionism, conflict and outright war. But a multipolar world also gives “a voice to nations that didn’t have it before,” as Nandan Nilekani, co-founder of the Indian company Infosys, told me in Davos. Sources of innovation and growth are becoming increasingly diverse.

The relationship between business and society is also shifting. A world threatened by climate change, pandemics and war is one in which the state is likely to intervene more aggressively in business. “I don’t think it’s right to say we don’t have markets anymore, but the neoliberal idea of ​​markets is no longer what dominates,” said Laura Tyson, former White House chief economic adviser under President Bill Clinton and now a Berkeley president. -professor. Industrial policy is back in fashion. The same goes for protectionism.

What is uncertain is how technological innovations will shape this. As economist Andy McAfee points out, innovations such as artificial intelligence will deliver productivity gains as well as destroy millions of jobs. There is also disagreement over whether climate change will encourage or hinder more collaboration.

So how might future historians describe the current era? In Davos I heard a few suggestions. The era of disruption was one. The Digital Era, The Climate War of The Digital and Electrification of Everything Era (a mouthful) were others. None feels quite right. So if anyone has alternatives, I’d love to hear them. It could be the title for a new Nobel Prize-winning novel set in 2024.

Follow Gillian on Twitter @gilliantett and email her [email protected]

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