MARY LOUISE KELLY, HOST:
Between trade wars, rising inflation and industries going bust, how come it feels like it's all bad news in the global economy these days? The Indicator's Adrian Ma and Darian Woods talked to an economist about one explanation, something he calls the doom loop.
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ADRIAN MA: Eswar Prasad is a professor of economics and trade policy at Cornell University. And when he sat down to write his most recent book about the global economy, he wanted to focus on the positive.
DARIAN WOODS: But the more research he did, the more convinced he was that the future for our global economy actually is quite bleak and actually a lot bleaker than he originally thought.
ESWAR PRASAD: My heart was pulling me in one direction, which was the optimistic thesis, and my head was pulling me in the completely different direction.
MA: So Eswar wrote a very different book than he planned. Out this month, it is called "The Doom Loop: Why The World Economic Order Is Spiraling Into Disorder."
WOODS: So what is a doom loop? According to Eswar Prasad, it's a cycle where economic conditions, domestic politics and international geopolitics feed off each other in a negative way.
MA: And in his book, Eswar provides a number of examples of the doom loop at work.
WOODS: Let's start with globalization.
PRASAD: There are, in fact, huge benefits, but the problem is that these benefits were not very evenly distributed. So this created a class of disaffected people within countries, and there was a sense that the economic and political elite were walking away with many of the benefits of globalization.
MA: Eswar says this economic discontent created by globalization has created an opening for what he calls the politics of resentment. He says you can see it in politicians like Jair Bolsonaro of Brazil, Viktor Orban in Hungary or Donald Trump in the U.S.
PRASAD: And this politics of resentment in the hands of skillful politicians can be a very powerful force. It gives people the sense that they have to blow up the system in order for any change.
MA: And that gives leaders political room to, you know, demonize minorities or start beefs with other countries, which you've probably seen in the news lately.
WOODS: A second example of doom loop dynamics involves institutions - international organizations like the United Nations, the World Bank, the International Monetary Fund. These were originally created to foster economic cooperation between countries.
PRASAD: But what has happened right now is that the United States is beginning to walk away from some of these institutions, especially the United Nations because it feels that these institutions don't serve U.S. interests, narrowly defined, that much anymore. At the same time, the emerging market countries, like China and India, feel that institutions like the International Monetary Fund and the World Bank are really only protecting the interests of the richer countries rather than their interests. So what has happened is that many of these emerging market countries led by China have started setting up their own institutions. So now, rather than having a common set of rules that everybody can agree upon, we have fragmentation, and that is a recipe for instability rather than stability.
WOODS: Let's do one more example, technology.
PRASAD: We are seeing that AI is leading to, you know, some very wealthy people getting much wealthier, and it's not clear how broadly these benefits are going to be shared. So I worry again that for all its promise and for all that technology is giving us in terms of overall progress, under the surface, it is going to create even more tensions that intensify the doom loop.
WOODS: Darian Woods.
MA: Adrian Ma, NPR News. Transcript provided by NPR, Copyright NPR.
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