Last weekend saw 2018’s first big conclave of the global economic policy-making elite at the Spring meeting of the International Monetary Fund’s governing board in Washington, DC. The world’s central bankers, finance ministers, and investors gathered to hear the global financial watchdog’s latest update on the state of the world economy.
The news was positive. World GDP growth is forecast to be just under 4 percent both this year and next – stretching the global expansion into its eleventh year. China and India, the great juggernauts of the emerging world, should grow at around 6.5 and 7.5 percent respectively. The US – the largest economy in the world – will start to benefit from President Trump’s opening of the fiscal floodgates, and as a result, seems set to break the 1991-2001 record for its longest postwar expansion. Even in Brexit-beleaguered Britain, the unemployment rate has just hit its lowest level since 1975.
Yet rather than reveling in this bonfire of the economic record books, expert opinion in the US capital – like the public mood across many much of the West – was strangely full of foreboding. Amongst the general public, statistics such as those just quoted seem curiously at odds with the lived experience of a joyless recovery hallmarked by austerity and uncertainty. The experts themselves have more faith that the numbers reflect reality. But amongst the professional forecasters too there is a nagging sense that the good times cannot last – that there is another downturn just around the corner, and that the longer we go without a recession, the more likely it is that there will be one next year.
Are these fears of false progress and impending doom misplaced, or are we indeed living in a fool’s paradise? Where does this mismatch between perception and reality come from? The answer is to be found, I think, in two critical features of the global recovery since 2008.