Although a war is unlikely to break out anytime soon, the escalation of hostilities between the world’s second and third largest economies is concerning. According to Cambridge’s Centre for Risk Studies, under the worst scenario, conflict would lead to a global recession lasting between 18 months and four years, and tens of trillions of dollars of global output will be lost.
This is not to say that war will break out any time soon, or even that it is especially likely to. But conflict is entirely plausible, and its impact would be felt in economies around the world. Global firms, most of whom rely on Southeast Asia at some point in their business model, should recognise the possibility.
Why A China-Japan Conflict Will Cause A Global Economic Catastrophe | Economy Watch
So if I shouldn’t be all that worried about war, then why the article in the first place? In reality, the mere existence of an article like this means I should indeed be worried.
‘Market analysts and economists at some of Wall Street’s biggest, most-influential banks also seem to be coming around to the view that the US and other developed countries may be losing their ability to grow quickly.’
Here’s the argument, in a nutshell: For some reason—perhaps related to demographic changes tied to the baby boom generation—the US economy has been losing its gangbuster growth potential for a while, perhaps since the 1980s. The economy has had good runs, but those stretches were enabled only by the emergence of debt-driven bubbles—like the housing market during the pre-crisis period—to keep the economy burbling above its natural tendency.
Summers isn’t the only one sniffing around this notion. Market analysts and economists at some of Wall Street’s biggest, most-influential banks also seem to be coming around to the view that the US and other developed countries may be losing their ability to grow quickly.
The US economy may never be the same after the Great Recession – Quartz
I’ve been talking about this for a few years. The US has moved in with Japan and will never get going again. These two are being joined by Europe and soon China. Unless a full blown depression is allowed to happen, an extensive build-up of bad ideas, bad decisions and corruption will prevent rapid expansion of the economy forever.
Coming to terms with the Asian century means coming to terms with the biggest change in the global distribution of wealth and power since the Industrial Revolution. This change is driving nothing less than a revolution in the Asian regional order.
For the West, it means having much less power over how that order is conceived and maintained. For Asian countries it means that for the next few decades by far the most important new power will be China, as its economy not just overtakes America’s but grows to perhaps twice the size. For Asian countries, it also means learning again to live with powerful neighbours without the comforting intermediation of preponderant Western power. For Australia, it means both of these things. No wonder it is not proving easy.
… So the Asian century will not belong to any one country. It will be a time either of systemic rivalry and frequent conflict or of carefully cultivated compromise and cooperation between the region’s major powers.
And this means, finally, that coming to terms with the Asian century means coming to terms with the risks it presents and the options available to avoid them. …
The new security order | East Asia Forum
China does not respect the rights of individuals. As a tremendous amount of wealth and power are shifted in its direction, there is an excellent chance that this shift will not go well. If the shift were between two democracies then that would be different, but it’s not. One should not expect smooth sailing on into the future.