Can you tell me of at least one case in history where a society perceived a serious threat looming in the future and took action on it on the basis of data and rational arguments? With the best of goodwill, I can’t. Societies react to threats using a primeval stimulus-reaction that may be aggressive or defensive, but that’s almost never rational.
Curiously, our society, that we call sometimes “The West,” was the first in history to have a chance to do something rational to avoid the destiny awaiting it much before the threat was clearly visible. It was in 1972 when the newly developed digital computers were coupled with a powerful analytical tool, “system dynamics.” The result was the study called “The Limits to Growth” that foresaw how the gradual depletion of natural resources coupled with increasing pollution (that today we call “climate change”) would cause the whole Western economic system to collapse at some moment during the first half of the 21st century. The study also suggested rational solutions to avoid collapse: reduce consumption, stop population growth, manage pollution, and the like.
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BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict
The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.
But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.1
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.
The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.
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