The world at the beginning of 2018 presents a contrast between its depressing politics and its improving economics. Might this divergence continue indefinitely? Or is one likely to overwhelm the other? And, if so, will bad politics spoil the economy, or a good economy heal bad politics?
As I argued last week, we can identify several threats to a co-operative global political order. The election of Donald Trump, a bellicose nationalist with limited commitment to the norms of liberal democracy, threatens to shatter the coherence of the west. Authoritarianism is resurgent and confidence in democratic institutions in decline almost everywhere. Meanwhile, managing an interdependent world demands co-operation among powerful countries, particularly the US and China. Worst of all, the risks of outright conflict between these two superpowers are real.
Yet the world economy is humming, at least by the standards of the past decade. According to consensus forecasts, optimism about prospects for this year’s growth has improved substantially for the US, eurozone, Japan and Russia. The consensus also forecasts global growth, at 3.2 per cent next year (at market prices), slightly above the rapid rate of 2017. (See charts.)