Not all capitalist economists have confidence in their system. TONY SAUNOIS reviews Megathreats by the US economist Nouriel Roubini.
Megathreats: The Ten Trends that Imperil Our Future, and How to Survive Them
By Nouriel Roubini, Hachette UK, 2022, £15
Many bourgeois economists have tended to put a gloss on the deep systemic crisis facing world capitalism. They have often seized upon this or that marginal piece of ‘good’ news to empirically conclude that this or that problem has been fixed – until the next one arises. Now faced with the convergence of a series of multiple crises, economic and political, many have finally been compelled to catch up with what the Committee for a Workers’ International (CWI) has argued – that a devastating situation confronts global capitalism.
At the World Economic Forum (WEF) in 2023, 66% of a group of private and public sector economists thought there was likely to be a global recession in 2023. They echo the pessimism of the ruling class about the future of their system. Two in five bosses of global companies fear their businesses will be unviable within a decade. Following the WEF, the IMF, World Bank, and some commentators have tried once again to argue that things are not so bad, basing themselves on empirical evidence that, for example, inflation has not risen by as much as they originally feared.
Nouriel Roubini is not a Marxist, but as a young man he was drawn to economics through his studies of Marx, before discovering Keynes. He has been consistent in looking deeper into the underlying trends taking place within the capitalist economy and concluded that: “We totter now on a precipice, the ground breaking beneath us…New warning signs look clear and compelling. Economic, financial, technological, trade, political, geopolitical, health, and environmental risks have morphed into something much bigger. Welcome to the era of megathreats; they will alter the world we thought we knew”.
Roubini has on occasion stood out against the ‘conventional wisdom’ of the majority view of capitalist commentators. He was ridiculed when he warned in 2006 of an impending financial crash that hit in 2007-8. Later, in 2021, he cautioned of the threat of stagflation/inflation, before the current global spike in prices.
Previously dismissed as a ‘dissident’ bourgeois economist, dubbed ‘Dr Doom’, many of Roubini’s warnings are now commonplace. Roubini’s latest book, Megathreats: The Ten Trends that Imperil Our Future, and How to Survive Them, is a devastating exposure of global capitalism today, and a warning of what the future holds should it continue. Roubini covers many issues; political, economic, environmental, and geopolitical – and it is not possible to comment on all of them in a single review. Much of what his book contains is not new. Often the economic material is somewhat dense, yet it is illuminating about the scale and depth of the multiple crises global capitalism faces. The publication of such a work by a bourgeois political economist at this conjuncture is very significant. It is a serious attempt at contemplating how economic, geopolitical, political, environmental, and technical trends and events are likely to impact society in the coming years.
Yet it is one thing to diagnose the sickness, and an entirely different proposition to find a cure. As a bourgeois political economist, Roubini remains imprisoned within capitalism and his limited proposed solutions to stave off the “dystopian” world he anticipates offer no lasting alternative or way out of the systemic crisis that exists.
The world, he correctly says, now faces a series of interconnected multiple crises which are converging. The ten “megathreats” that Roubini identifies – debt crisis; private and public policy failures; demographic sea changes; easy money; stagflation; deglobalisation; Artificial Intelligence; the new ‘cold war’ and the environment – are all central aspects of the current crises.
The explosion of global debt is a crucial factor in how the economic crisis will unfold in the coming years. Debt crises have rocked the neo-colonial world in previous periods of capitalist turmoil, especially in Latin America in the 1980s. However, there is a critical difference in this crisis, which will partly shape the era we are now in. That is the massive growth of debt that exists in the major imperialist powers. The US is already the largest global debtor – to the tune of 50% of GDP, or $13 trillion in foreign liabilities.
By the end of 2021, global public and private debt was well over 350% of global GDP. Now it is even higher. Should the average pace of debt growth for the last 15 years continue, it will amount to a global debt of $360 trillion – up $85 trillion from its current levels. Debt levels of such a magnitude are unrepayable. Yet servicing them, especially when interest levels are increased, also becomes impossible, and triggers economic and social upheavals not witnessed for a generation – such as we have seen in Sri Lanka. This will be repeated in a series of countries in the coming period. Pakistan is possibly the next candidate. The United Nations expects 70 countries in Asia, Africa, and Latin America to default in the next few years.
Neither China nor the US will escape from a debt crisis. Although the imperialist countries, unlike the neo-colonial world in Asia, Africa, and Latin America, have the greater facility to manage it and take measures to ‘kick the can down the road’. However, even they run the risk of facing a major debt and financial crisis.
Yet just as the debt question is exploding as such a critical issue, many on the ‘left’ put to one side the demand to refuse to pay the debt, nationalise the banks, and introduce capital controls. This issue is critical, and not just in the neo-colonial world – it is now a factor in imperialist countries as well. Roubini identifies the toxic consequences of the debt bubble but we will search in vain for a solution to it in this work.
Separate, but linked to the debt crisis, is the resurgence of inflation and the cost-of-living crisis, which is now a global phenomenon, and the threat of stagnation. The ruling classes in the main imperialist centres have raised interest rates, ending the era of ‘cheap money’ – the so-called ‘Great Moderation’ from the 1990s to the early part of the 21st century – for now. This is a desperate attempt to control inflation and bring it down to what they regard as a manageable level, at around 2%. The representatives of the bourgeois blame inflation on the Ukraine war. The stagnation and decline of wages in recent decades mean that they cannot blame inflation on ‘excessive wage claims’ as they did in the 1970s/80s. So they search for another demon to blame for the problem.
They brushed over the rise in inflation prior to the invasion by Russia. The spike in gas and oil prices has given a boost to inflationary pressures but it is not the fundamental cause of the problem. It is the monetary policies of governments, and the massive injection of cash by governments and central banks in the imperialist countries, which lie at the root of the problem. The massive increase in QE following the 2007/8 crash – in the form of handouts to the banks but not investment in infrastructure or the economy – and then the pandemic and explosion of trillions of dollars being pumped into the global economy to avert a total collapse are crucial factors in the current upsurge in inflation. These state interventions bought time but at a cost. Other factors like supply chain problems also aggravate the inflationary problem.
In response, interest rates are pumped up to cut off ‘cheap money’ and threaten to push economies into stagnation or recession. The approach of the central banks is to imagine that they can control inflation with a simple turning of the dial to raise interest rates and all will be fine. However, this is not the case once inflation is injected into the economy and becomes a longer-term problem. The ruling classes today are not following a coherent economic programme or policy – a point recognised by Roubini. They have no economic gurus, like Adam Smith or Hayek, as they did in different historical eras. At best they have, on the one side, Modern Monetary Theory (MMT) or versions of it. This is a revamped version of Keynesianism, which is already being partially tested but is not resolving the crisis. On the other side, they raise interest rates, provoking recessionary pressures and cutting the market further along with worsening austerity.
Even with capitalist economic gurus, would they be able to find a lasting solution to the systemic crisis they confront? Today, the ruling classes are reduced to staggering from one crisis to the next, like a drunk trying to find their way home in the dark. Sticking plasters are applied over the fracture, in the form of one short-term policy after the next. Today they raise interest rates; the Fed and other central banks are introducing a further hike in interest rates threatening a global recession in the short term. Tomorrow they can lower them to try and avert the recessionary or depressionary consequences of this policy, giving a further twist to inflation. The problem they will face is that the road eventually runs out and the system is plunged into an even deeper crisis.
Does this mean we face a ‘final crisis’ of capitalism? Such a conclusion would be a mistake. Unless overthrown, capitalism can continue even in a situation of protracted crisis such as it now faces. However, it totters on the precipice of entering an unprecedented protracted era of turmoil and convulsions, where multiple shocks and crises are converging.
The system faces an underlying contradiction. Living standards are falling, along with real wage levels but they desperately need new markets. But where to find them is the dilemma capitalism faces. We live in what Albert Einstein lamented as the “economic anarchy of capitalist society”. The blind play of the productive forces, as Marx put it.
US and China
A new world era is opening up, shaped by the relative decline of US imperialism and the rise of China. Roubini recognises this as being crucial. The sharp trend of deglobalisation of the world economy, and debates on this, are shaped by the rise of China. Roubini correctly warns of the trend towards the ‘Balkanisation’ of the world economy and the end of ‘hyperglobalisation’. The massive increase in trade sanctions, tariffs, and other measures, which have taken place, all indicate this. This does not mean, however, that everyone will entirely retreat behind national barriers. The degree of integration of the world economy prevents this. However, more regional trade blocs, and unstable alliances are what flow from it, along with increased trade and agreements within them.
The clash between US imperialism and China is the overarching question in the new world situation. Roubini, like many, characterises this as the “new cold war”. What he fails to register was that the first ‘cold war’ was between two mutually antagonistic social systems – capitalism and the Stalinist systems of a centrally planned economy and bureaucratic Bonapartist regime. There was an ideological clash between the two social systems. The current ‘cold war’ is between western capitalism and modern China – and its allies – with its special form of state capitalism. This special form of state capitalism is derived from the former deformed workers’ state, which had overthrown capitalism and landlordism and introduced state ownership and planning, but with a Maoist bureaucratic Bonapartist regime.
Without the existence of this former regime, China would not have been able to achieve the rate of development that it has in recent decades. This is a crucial factor. The prospect being raised by Modi and others that India could achieve what China has done cannot be realised for this reason. Indian capitalism and landlordism were never overthrown.
The rise of China has been extremely rapid from a historical point of view. However, can it continue? The regime of Xi Jinping faces a growing contradiction, flowing from the character of the state and the special form of state capitalism that it introduced. This form of state capitalism, which followed the original deformed workers’ state, is not the same as the state capitalist companies – enterprises or companies owned by the capitalist state – that, for example, exist or existed in India. Roubini muddles the two in his description of the “pseudo-socialist” economy in India – ie nationalised companies.
The regime in China wants capitalism, but capitalism directed by the party and the state. This has inevitably led to a conflict, as some increasingly independent sections of the capitalist class do not want state or CCP interference and direction. This has been reflected in the recent Chinese Communist Party congress and the measures taken by Xi against sections of the capitalist class under the guise of fighting corruption. The disappearance of Boa Fan, a senior Chinese banker, renowned for making deals in the booming tech sector, illustrates this. Although the Chinese economy has opened up following the Covid restrictions, the rebound is likely to be limited. The rate of growth in the economy of recent decades has slowed down. China has accumulated massive debt – 330% of GDP – property bubbles, and other time bombs that all indicate underlying problems which are now developing in the Chinese economy.
It also, at this stage, lags behind the US and Taiwan in the crucial production of computer chips, which is a major problem for the regime. However, China is ahead of the West in the crucial arena of AI research and development. Whilst acknowledging the problems unfolding in China, Roubini underestimates the potential for a serious crisis to erupt there.
The clash between the US and China is the dominating issue in geopolitical relations in this era. The prospect of the economic war becoming a military collision is not excluded, especially in a clash in the South China Sea, where rising China is in disputes with Japan, the Philippines, Malaysia, and other countries over a series of claims. Beijing also has its eye on reincorporating Taiwan back into China. Many of the powers in the area are undoubtedly preparing for a military clash with China. More military conflicts, as reflected today in Ukraine, will inevitably flow from the emergence of the multipolar world taking shape.
Environment and technology
Two further factors must be incorporated into this new world order. Firstly, the environmental catastrophe that is unfolding daily. This is directly impacting global economic and political processes. What is evident is that capitalism, especially in the era of crisis, is incapable of solving this problem.
Under the impact of crisis and deglobalisation, governments have rolled back on some environmental agreements. China and the UK have reverted back to increased coal production. Investment to try and hold back rising sea levels etc is far too costly. Without a global plan, any measures taken will only prove to be palliative. A global plan in an era of deglobalisation, with rising protectionism and retreat behind regional and national boundaries, is an even less viable prospect than in a period of relative capitalist stability and equilibrium.
The other crucial development that is going to impact the economy and every aspect of society is the breakneck advances and development in AI, robotics, Nano computers, etc. Leaps forward are taking place and further developments are inevitable. Yet the speeds of recent advances are striking. Inevitably, any development will not be in a straight line. Setbacks and failures are part and parcel of any advance in science, technique, politics, and other social spheres. Did the first attempt at building an airplane succeed? “Failure is success in progress” remarked Albert Einstein.
Vast investment in this area is being undertaken by major companies, with intense competition between both nations and companies. Global investment in this sector is anticipated to reach $232 billion by 2025. Intense competition is also taking place amongst major corporations. Google’s parent company, Alphabet, recently launched ‘Bard’, as a competitor to Microsoft ChatGPT. Probably launched prematurely – it has cost Google $100m – as shares crashed. However, the general speed of AI advance has dramatically increased.
AI and other technical and scientific leaps are being rolled out in all economic spheres. How far capitalism in different countries will be able to invest in these techniques and apply them is uncertain. However, it is different from previous advances in technology and science in that, when applied, they created new workforces for those they displaced. AI and other developments do not. This will affect big sections of the middle class, in particular. A massive loss of jobs is threatened by new AI. The disruption, unemployment, and social problems arising from this will aggravate the problems facing capitalism, not resolve them. Marx warned that “capitalist production develops technology, and the combining together of various processes into a social whole, only by sapping the original source of all wealth – the soil and the labourer”.
Long term, the development of AI and other scientific developments can possibly have implications for the evolution of humankind. Does evolution end with Homo sapiens as we know them today? Such a conclusion would be unscientific. How this will develop is uncertain and is for the future. Yet what are the possible consequences should AI advance to a point where Homo sapiens and AI incorporate? Such questions, posed by Roubini, and before him by many others like Alan Turing, will arise in the long term. Such speculation may seem fanciful but the issues posed are complex and are already beginning to emerge. Darwin, Einstein, Marx, and many others were ridiculed when they began to raise their ideas.
The crucial question is can capitalism be trusted with such developments, even if it can apply them? Capitalism will be unable to apply the benefits of AI to the mass of the population. A global plan and democratic control by the working class are essential to ensure advances in AI etc, are introduced with all the safeguards necessary to benefit humankind as a whole.
Megathreats identify the toxic, putrefying trends at work in the era of a protracted series of crises in capitalism. It is an alarming, frightening prospect that Roubini lays out for the future under capitalism. The urgency to break from capitalism, to see an alternative socialist future and struggle for it, is the conclusion to be drawn from this book.
Diagnosing is one thing. The cure is something else. Roubini offers some solutions – growth, greater global cooperation, the use of computers to “save us”, and the introduction of a universal benefit scheme. The latter is not excluded in some form, in some countries, yet it will not be sufficient to resolve the underlying crises. Imprisoned within capitalism, Roubini cannot see an alternative outside of its prison walls. The future offered is either a dystopian nightmare or one where some measures are taken so we “stumble but don’t collapse”, says Roubini, “even if it is far from ideal”. In other words, mitigate against the worst carnage and accept something worse than that which exists today.
Roubini concludes, with justification, that should capitalism continue: “Megathreats are careering towards us. Their impact will shake our lives and upend the global order in ways no one today has ever experienced. Fasten your seatbelt. It’s going to be a bumpy ride through a very dark night”.
The task facing the working class and Marxists is to shine a light through the darkness and raise the prospect of a new society that breaks out of the consequences of the Megathreats posed by capitalism. The need for a vision of a new global socialist alternative, and a movement able to achieve it, is more urgent and essential than ever.